Following Russia's invasion of Ukraine, which prompted Sweden to completely reverse its stance on NATO membership, the country is now beginning to contemplate another historic shift: adopting the euro. Although discussions are still in their early stages, a subtle yet significant change in attitude is emerging as circumstances evolve. In 2003, Swedish voters rejected the common European currency in a referendum, with the core consideration being that the krona provided a buffer for the Nordic region's largest economy. Today, geopolitical concerns add a new dimension to the debate.

Donald Trump's "America First" foreign policy—including threats to purchase Greenland from neighboring Denmark—highlights the vulnerability of smaller economies in an era of great power competition. Cecilia Lunn, a member of the Swedish Liberal Party, stated in an interview at the Stockholm parliament, "Sweden is now a full NATO member, and we are strengthening our defense alongside our EU partners. However, we still have one foot outside because we are not part of the eurozone's monetary cooperation system."

Proponents of joining the euro argue that a unified currency would strengthen political ties and give Sweden a voice in pan-European monetary policy matters. This supplements traditional business arguments such as expanding trade and facilitating direct investment. If Sweden ultimately decides to switch to the euro, it would boost the credibility of the euro at a time when the U.S. dollar's dominance in global trade and as a reserve currency is being questioned.

Swedish politicians took a tentative first step late last month. At a parliamentary meeting convened by Lunn, Finance Minister Elisabeth Svantesson announced support for a study on the pros and cons of joining the eurozone. This move kicked off debate ahead of the September general election, though any assessment will only begin after the polls.

Svantesson, a member of the Moderate Party, stated during the debate, "The world is changing, and the EU is changing. Therefore, we must dare to evaluate, investigate, and analyze what is in the best interests of Sweden, Swedish families, and Swedish businesses."

Central to this shift is a new report by Lars Calmfors. The influential Swedish economist, who led a government commission studying the feasibility of euro adoption before the 2003 referendum, was previously cautious about the benefits, with the commission's report recommending a delay. Now, Calmfors has a more positive outlook. In an interview, he said geopolitical considerations are "completely different from before," a dynamic that increases the value of joining the EU's "inner core."

"This would help Europe strengthen cooperation, which we seem to need," he said. "Reasons include Russia, and of course, a United States that has become increasingly unreliable." Calmfors also emphasized economic arguments, noting that the positive impact of eurozone membership on trade and foreign investment has far exceeded expectations from his research over two decades ago.

He further pointed out that Sweden's economic cycle is increasingly synchronized with the eurozone, reducing the necessity for an independent monetary policy. Additionally, Sweden's low debt level means the government can use fiscal stimulus more robustly if needed to counter economic weakness.

Business leaders have long expressed support. Many complain that the volatility of the Swedish currency exacerbates market turbulence. Christer Gardell, founder of Stockholm-based Cevian Capital and a financier who has repeatedly bought and sold stakes in major Swedish firms like Volvo, previously called the krona a "terrible little currency" and still advocates for a switch to the euro.

"In a written response to Bloomberg, Gardell stated, 'The krona, being small, illiquid, and highly volatile, is a disadvantage for Swedish industry. Joining the eurozone would eliminate this problem.'" Neighboring Finland is also encouraging Sweden (and Denmark) to adopt the euro. Finnish Central Bank Governor Olli Rehn said in an October speech, "Frankly, on our own we are small players, but together, within the eurosystem and the wider EU, we can exert influence beyond our size."

As a founding member of the eurozone, security considerations have always been part of Finland's decision-making. Sharing a 1,300-kilometer (800-mile) border with Russia, Finland's rationale is that the euro strengthens ties with countries like France and Germany, making the economic risks worthwhile.

The EU is crucial for the Swedish economy. Statistics Sweden data shows over 60% of the country's goods trade is with the EU, while trade with the U.S. accounts for only 6.4%. Although major exporters have largely remained silent, Lena Sellgren, chief economist at Business Sweden, the state agency promoting trade and investment, said the organization sees both benefits and drawbacks to euro adoption.

"From an economic perspective, having an independent currency and central bank has long been very advantageous for Sweden and its export industry," she said. "But the rules-based global order we once knew is under pressure, so in the long term, we must consider the best options."

Significant Hurdles Remain However, a currency switch faces major obstacles. Nearly half of Swedes still oppose joining the eurozone, with supporters comprising only about one-third. While the gap between skeptics and supporters has widened slightly in recent polls, it has narrowed significantly compared to a decade ago when three-quarters opposed the euro.

Public support is crucial. Sweden followed Denmark's precedent of holding a referendum, making it difficult for politicians to bypass public opinion now. During the parliamentary debate, Finance Minister Svantesson also made clear that no decision would be made "by circumventing the Swedish people."

A second obstacle is the need for broad political support. Currently, only Lunn's Liberal Party, with about 2% support, firmly backs the euro. Svantesson's Moderate Party and the smaller Centre and Christian Democratic parties only support conducting a study, with their final stance yet to be determined.

The leading Social Democrats, not part of the governing coalition, have not taken a clear position in the debate, while the Green and Left Parties oppose the euro. The far-right Sweden Democrats, currently polling second with about 20% support, were the most adamant in January's debate.

The party's economic spokesperson, Oscar Sjöstedt, stated during the debate, "Our currency is closely tied to national independence. Without our own currency, we must ask ourselves how independent a country really is. The Sweden Democrats will never participate in a process to abolish our national currency; that is our election promise."

Economist Calmfors estimates that, if these hurdles can be overcome, abandoning the krona would take at least four years—including two years to demonstrate a stable exchange rate for the Swedish krona against the euro. But Liberal MP Lunn believes discussions could accelerate. She compares it to Sweden's 2022 NATO accession: before Russia's invasion, abandoning neutrality seemed impossible, yet the situation changed faster than anyone expected. NATO membership was also a long-fought, often lonely battle championed by the Liberal Party.

"We are used to pushing issues before everyone else," Lunn said. "For me, euro adoption is not a question of 'if,' but 'when.'"