Sweden Voices Dismay at Havoc Brexit Will Wreak in EU

  • Sweden keeping ‘fingers crossed’ for U.K. to stay in EU
  • Sweden to convene financial authorities on morning after vote

A second Swedish minister is expressing dismay at Britain’s insistence on voting on its future in the European Union, with next week’s referendum set to put at risk the bloc’s future development.

Brexit Watch: The pound, the polls, and the probability of Brexit, all in one place

“It’s worrisome that the issue has even come up,” Financial Markets Minister Per Bolund said in an interview on Wednesday in Stockholm. “The whole process is a problem in itself, as we see it. We keep all our fingers crossed for the Brits to decide to stay in the union.”

Ann Linde
Ann Linde
Photographer: Jonas Ekstromer/AFP via Getty Images

The comments follow similar remarks from Sweden’s EU minister, Ann Linde, who on Tuesday criticized Britain for essentially taking the whole European continent hostage in order to grapple over domestic policy issues.

Sweden, which counts the U.K. as a key non-euro ally within the 28-nation bloc, is ratcheting up its warnings as polls in Britain show growing support for a so-called Brexit. The probability of such an event has increased to 39 percent from 32 percent last week, according to analysis of polls, betting and forecasts by Oxford University academics Stephen Fisher and Rosalind Shorrocks published on Tuesday evening.

Linde said the June 23 referendum was causing “great bitterness” toward Great Britain. Even if Britons vote to remain, it will probably tempt other countries to push for treaty changes and could spark a similar debate in Sweden, she said.

Prime Minister Stefan Loefven told journalists in parliament on Wednesday that he shares Linde’s concerns because if all countries would act like Britain, then the bloc may have 10 years of chaos ahead of it and “that would weaken the EU.”

“We need a stronger, more decisive EU that knows where it’s going,” he said.

A U.K. exit would also limit Sweden’s influence within the bloc.

“It may become harder for us to get support for our views if Britain leaves,” Bolund said. “Now we see worry and turbulence in the financial markets because of this, and it’s also politically problematic as it raises issues about the EU’s development.”

Midsummer Meeting

About $2.5 trillion was wiped off the value of global equities in the past week and the pound tumbled as a slew of polls showed growing Brexit support ahead of a June 23 referendum.

Sweden is taking no chances and will convene all its key authorities, including the central bank and Financial Supervisory Authority, early on the morning of June 24, even though markets in the Nordic country are closed for the Midsummer Day holiday.

“We need to make sure there is staff to handle contacts with banks, and that there are people there to monitor developments in other markets around the world,” Bolund said.

Swedish banks are not so “directly affected” and have built up stability to “manage disturbances,” he said.

Currency Intervention?

Sweden’s National Debt Office will be prepared to ensure that markets function well after the vote, Director-general Hans Lindblad said at a press conference on Wednesday. The agency could for example sell Treasury bills if financial stability is threatened.

‘We will be there to make sure markets work, but we won’t be able to avoid volatility,” he said.

The biggest short-term impact on Sweden of a Brexit would probably be through the krona exchange rate, according to an analysis by Capital Economics. Though recent trends indicate that the krona would probably depreciate in the case of weakened global growth prospects, a rise can’t be ruled out.

With the latest inflation expectations reading only marginally higher than in the second quarter, “any upward effect on the krona would likely be counteracted by FX intervention by the Riksbank,” Capital Economics economist Stephen Brown said in an e-mailed comment.

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