Brussels, 22 May 2002
Commission adopts the 2002 Convergence Report on Sweden
The European Commission adopted today its 2002 Convergence Report, in which convergence progress made by Sweden is examined in accordance with Article 122(2) of the Treaty. As the other two Member States not participating in the euro area, Denmark and the United Kingdom, negotiated opt-out clauses before the adoption of the Maastricht Treaty, this year's Report deals only with Sweden. In order to participate in the euro area, Member States must fulfil legal convergence and the convergence criteria on price stability, government budgetary position, exchange rate and interest rate. The report concludes that Sweden fulfils three of the convergence criteria (on price stability, the government budgetary position and convergence of interest rates) but does not fulfil the exchange rate criterion. Moreover, central bank legislation in Sweden is assessed not to be compatible with the Treaty and the Statute of the ESCB. In the light of this assessment the Commission concludes that there should be no change in the status of Sweden as a Member State with a derogation.
The Commission adopted the convergence report on the initiative of Pedro SOLBES, EU Commissioner responsible for economic and monetary affairs who, commenting on the report, said: ". While the Swedish economy has shown a good performance over the last few years and three of the convergence criteria are fulfilled, I regret that Sweden is not yet in a position to participate fully in EMU. As the Ecofin Council noted in its Opinion on the Swedish convergence programmee of 22 January, I nevertheless expect Sweden to join ERM2 and bring its central bank legislation in line with the Treaty and the ESCB Statute in due course."
The Commission concludes that there are no reasons to change the current status of Sweden as a Member State with a derogation. The main findings of the report are:
Legislation in Sweden was found not be compatible with the Treaty and the ESCB Statute in the last convergence report of May 2000. The relevant legislation has remained unchanged since then. Moreover, developments in 2001 and 2002 have made evident the absence of detailed legislation on profit allocation and extraordinary payments from the Riksbank to the Treasury. Therefore, legislation in Sweden is assessed in the 2002 Convergence Report not to be compatible with the Treaty and the ESCB Statute.
The 12-month average inflation rate in Sweden during the 12 months to April 2002 was 2.9%, below the reference value of 3.3%. The Swedish 12-month average inflation rate has been below the reference value throughout the period from December 1996. Therefore Sweden continues to fulfil the Treaty criterion on price stability.
Government budgetary position
The Council decision of 10 July 1995 on the existence of an excessive deficit in Sweden was abrogated in 1998. The government finances have been in surplus each year since 1998 and in 2001 the surplus was 4.8% of GDP. A surplus is also forecast for 2002 by the Commission services. The government debt-to-GDP ratio fell below the reference value of 60% in 2000 and was 55.9% in 2001. Further reductions in the debt-to-GDP ratio are expected in 2002. Therefore Sweden continues to fulfil the Treaty criterion on the government budgetary position.
Exchange rate stability
The Swedish Krona has never participated in ERM II nor ERM and has fluctuated quite markedly against the euro during the review period. Therefore Sweden does not fulfil the exchange rate criterion of the Treaty.
Long-term interest rates
In the year to April 2002, the long-term interest rate in Sweden was 5.3%, below the reference value of 7.0%. The Swedish 12-month average long-term interest rate has been below the reference value throughout the period from December 1996. Therefore Sweden continues to fulfil the Treaty criterion on interest rates.
Performance of Sweden against the convergence criteria
(b) General government net lending (+) / net borrowing (-)
(c) Average maturity 10 years; average of the last 12 months.
(d) Definition adopted in this report: simple arithmetic average of the inflation rates of the three best performing Member States in terms of price stability plus 1.5 percentage points.
(e) Definition adopted in this report: simple arithmetic average of the 12-month average of interest rates of the three best performing Member States in terms of price stability plus 2 percentage points.
Source: Commission services.