Sweden - Money

In 2000, the exchange rate for Swedish kronor stood at SKr8.4831 to US$1; it stood at SKr7.1333 in 1995 and SKr6.7060 in 1996. In the late 1990s, the Swedish government's budget balance improved dramatically. After a deficit of more than 12 percent of GDP in 1993, there was a surplus by 1998, and large surpluses are expected every year through 2002. Credibility improved with the introduction of new strict budget regulations with spending ceilings, and the establishment of a truly independent central bank, the Riksbanken. The government still has a high consolidated debt, although it declined from a peak of 79 percent of GDP in 1994 to 67.6 percent in 1999 and 62.2 percent in 2000. The Swedish Financial Supervisory Authority has established a close monitoring of household borrowing, fearing that rapid expansion in lending could lead to credit losses. Riksbanken is expected to be successful in meeting its EU-mandated 2 percent annual inflation target in the longer term. The government and the Social Democratic party remain split over whether Sweden should join the European Monetary Union, concerned that Swedish exports could be hurt, although local businesses are eager to join EMU. Many believe it will take another 2 to 3 years for Sweden to adopt the euro even if a decision to join EMU is made.

The respected though insignificant Stockholm Stock Exchange (SSE), formed in 1863, became the world's first for-profit exchange in 1992. In 1995, it merged with the OM Derivative Exchange (formed in 1985 to offer options trading) to form the new OM Stockholm Exchange; it maintains an investment exchange in London. The OM Stockholm Exchange has been one of the most successful in western Europe in the 1990s, and it ended 1999 with its SX General Index at a record high of 5,382, or 66.4 percent higher than in 1998. The dramatic rise in the share index and in the market capitalization were

Exchange rates: Sweden
Swedish kronor (SKr) per US$1
Jan 2001	9.4669
2000	9.1622
1999	8.2624
1998	7.9499
1997	7.6349
1996	6.7060
SOURCE: CIA World Factbook 2001 [ONLINE].

mainly due to the high-tech boom of the late 1990s, and the turnover in Ericsson's and Nokia's shares contributed to almost half of the total figure. Since 1999, the OM Stockholm and the Copenhagen stock exchanges have been part of the Norex alliance, in which all shares listed on both exchanges are traded on a joint electronic system. In late 1999, the Oslo stock exchange also joined Norex, and the stock exchanges of the Baltic states (Estonia, Latvia, and Lithuania) and Iceland have expressed interest in joining. The joint stock exchanges, along with several newly-opened Swedish online brokerages, help broaden the pool of capital available to businesses and make raising capital easier and cheaper while the economy becomes more dynamic, effective, and flexible.

As the OM was facing volatile stock prices and the Internet meltdown was plaguing world markets in late 2000, a number of Swedish companies, mostly from the information technology sector, started fundraising by targeting new share offerings directly to interested institutions, mostly to save time and money, but also to avoid the risk that their public offerings might not be successful, given the growing skepticism about information-technology stocks. Another advantage of direct offering was that it helped companies avoid the large price fluctuations of a new public offering and the administrative costs associated with it.

By 2000, the Swedish government was also considering a legal amendment aimed at making it easier for banks and other financial institutions to securitize (re-place non-marketable bank loans with negotiable securities) some of their own assets. These would include mortgages, to be securitized by selling them to security brokerage firms who would issue them securities (bonds) against the loans, that, in turn, may be used as investment capital. Securitization is essentially a method of freeing up capital from long-term loans.