Carl Hamilton Sept 29 11

Debt, euro and future Prof. Carl B Hamilton M.P., Chairman, Committee on EU Affairs, and Member of Committee on Finance.

03/10/2011

Crisis • To blame – euro or debt?

• Finland (in) and Sweden (out).

Performance.

• Asymmetric shocks, optimal currency area and all that – the wrong focus!

• It’s the debt risks, stupid • Countries, banks or both 03/10/2011

Likartad BNP-utveckling i Finland och Sverige 8 6

BNP utvekcling, %

4 2

-4 -6 -8 -10 책r

03/10/2011

20 10 20 12 p

20 08

20 06

20 04

20 02

20 00

19 98

19 96

19 94

-2

Finland

19 92

19 90

0

Sweden

Two types of problem countries • Insolvent countries.

• What to do?

• The fate of banks, also in other coutries • The county´s future

• Iliquid countries. What to do?

• Exist the money? EFSF.

• Keep up pressure for needed reforms. How? (Later) 03/10/2011

Low growth • No solution of crisis problems without growth?

• No growth without reforms!

• But, what about short term expansionary policies?

OK-countries: expand!

Others: commit credibly to reforms!

03/10/2011

Long run changes of eurozon • More co-ordinated and demading fiscal and financial policies • Budget deficit limits and debt limits; automatic and through EU-Commission • The market must fully determine interest rates • Bank supervison, national and cross borders

• The balance – not budget posts and taxes essential

03/10/2011

Sweden outside – Finland inside • Would have been problems also without the euro – but different ones (reason for snake, EMS, etc) • Trade gains from euro very large, and unexpected • Sweden outside the economic core of Europe. A break with the past.

• Trade, financial ties and commercial policy closer than ever before 03/10/2011