Page last updated at 06:46 GMT, Monday, 29 December 2008

Swedish town aims to be 'euro-city'

By Michael Buchanan
BBC News, Hoganas, Sweden

Hoganas Sweden
The marina receives many visitors in summer.

As a result of the global economic slowdown, both Denmark and Sweden are beginning to question their decision to remain outside the eurozone.

One small Swedish town has decided to take matters into its own hands and is to become a "euro-city" on 1 January.

The biting North Sea air howls down the main street in Hoganas.

In the middle of winter, when days are short and warmth at a premium, it's hard to believe this is a magnet for tourists in the height of summer.

But a stroll down to the sheltered marina hints at busier times.

I believe the Swedish economy will come out of this recession in a very good fashion- eventually
Anders Borg, Swedish Finance Minister

There are dozens of yachts and pleasure boats securely fastened for winter, ready for the two to three million visitors that the mayor, Peter Kovacs, says visit Hoganas each year.

Attracting tourists

Many come from Germany laden with euros and are forced to exchange their currency for Swedish crowns.

MAP OF HOGANAS

In an attempt to make their lives easier for them, the vast majority of businesses in Hoganas are going to accept payment in euros in the New Year.

The plan was Mr Kovacs', who says there has been overwhelming support from the 8,000 or so people who live in the town.

"It's good for the businesses here to sell in euros because the Germans have euros in their pockets. Also, the people of Hoganas travel a lot and we bring home euros and it feels stupid that we can't use euros in our own shops."

Among the businesses willing to accept the euros is the local bookshop, run by Christopher Palmer.

He says the new currency will take a little getting used to, but has no fears about its introduction.

"I'm a very proud Swede and none of my identity or pride is in the Swedish crown. It's in other, more important, stuff."

Hoganas will of course continue to primarily use the Swedish crown, a consequence of a 2003 referendum in Sweden that decisively rejected the introduction of the euro.

Euro debate

But in recent weeks, national opinion polls have suggested that support for joining is on the rise as the Swedish economy - ranked the best performing in Europe just 18 months ago - has tumbled into recession.

Christopher Palmer welcomes the introduction of the euro
Christopher Palmer welcomes the introduction of the euro

Peter Kovacs says he'd like to see the entire country adopt the euro, and believes such a decision should be made by the government, not through another referendum.

"It's not a question for the people, it's a question for the government," he says.

But the government have no intention of listening to one of their own politicians.

Opposition to the euro remains strong, so another referendum - never mind a government decree - is not on the agenda.

Export fears

And the finance minster, Anders Borg, says he is quite relaxed about the weakening crown, as it helps exporters.

Shopkeepers hope to boost their sales
Shopkeepers hope to boost their sales

The country's economy is heavily dependent on globalisation, having prospered through the labours of such renowned companies as Volvo, Saab, Eriksson, Scania and AstraZeneca.

That exposure to global markets has forced the Swedish authorities to act quickly in an attempt to minimise the effects of the downturn.

A large stimulus plan - worth almost £3bn ($4.5bn) - has been passed, and large interest rate cuts have been made by the Swedish central bank.

Still, the economy is already in recession and heading for 9% unemployment.

Car industry woes

The hardest-hit sector has been the country's auto industry, which accounts for 15% of all exports.

Volvo
Sweden has had to bail out its car industry

Thousands of motoring jobs have been lost in recent months.

Financing for Scania and Volvo trucks has virtually dried up, while the bottom has fallen out of the markets for Volvo cars (owned by Ford) and Saab (owned by General Motors).

The government has been forced to provide a £2bn helpline to the industry and there is visible anger at the plight of Volvo cars and Saab, amid claims they have been mismanaged by their American owners.

"They have been owned by American companies who have not invested in their development," says Rolf Wolff, head of the school of business at Gothenburg University.

"Both are very strong brands and they make very good cars, particularly in comparison with American producers. They have simply been badly managed."

Finance minister Anders Borg says that when the world begins to buy again, Sweden will be in a strong position to sell.

"We have done a lot in terms of investment in research, education and infrastructure. We have also done very important structural reforms, so I believe the Swedish economy will come out of this recession in a very good fashion - eventually."



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