EMU and the French Generals: Some Notes on the Swedish EMU Report

Even though the European Commission argues that Sweden will have no choice but to join EMU if it satisfies the Maastricht convergence criteria the Swedish government has a decidedly different opinion. In late 1995, to provide the basis for a broad public debate, the government appointed a committee of economists and political scientists with the task of producing a policy recommendation. In its report, which was published one year later, the commission recommended that Sweden should not join EMU from the beginning but should do so at an, unspecified, later date. According to the report the balance of the political pros and cons is in favour of EMU participation. On the economic side, however, the costs outweigh the benefits in the short run. In the somewhat longer run, however, the political costs of not joining can be expected to increase whereas the economic benefits of staying outside are likely to decrease. Accordingly, in the longer run EMU membership is advisable. In theoretical terms the position of the committee implies a step away from the norm-based/neo-liberal discourse which has dominated Swedish economic policy debates since the early nineties, towards a more Keynesian interpretation, where it is the task of economic policies to stabilise a potentially unstable economy. Accordingly, the EMU report also displays a greater confidence in the governance ability of the Swedish political system. Nevertheless, whereas in Keynesian analyses the responsibility for low inflation and high employment is considered to be shared by the central bank and the labour market partners, the EMU report maintains the monetarist view of an undivided policy responsibility of the central bank for low inflation. In terms of the history of economic policy concept the position advocated in the EMU report might perhaps best be characterised as lying in between Neoclassical and Keynesian positions with the arrow of motion pointing to the Keynesian direction. Looking at the economic policy discussion in Western Europe at present it might seem that Keynes is not dead after all.