chapter  8
18 Pages

In defence of the Swedish crown: from triumph to tragedy and back?: Eric Stern and Bengt Sundelius

Late August and September of 1992 was a period of great turbulence for the major European currencies, many of which fell like dominoes under intense waves of speculation. Heavy pressure provoked the devaluation of the British pound, the Finnish mark, the Spanish peseta and the Italian lira in quick succession. The National Bank of Sweden, in partnership with the government and the Social Democratic opposition, withstood the onslaught of the international money managers. The most memorable moment of that episode was the afternoon of Wednesday, 16 September, when the National Bank signalled its firm intention to defend the fixed value of the Swedish krona (crown) by raising the overnight marginal intervention rate to the astounding level of 500 per cent, where it remained until Monday, 21 September. The guardians of Swedish financial credibility weathered that storm and maintained their aspirations for the krona’s classification as one of the few remaining ‘hard’ currencies of world finance. Sweden had earned its place in the ‘financial A-team of Europe’ as a result of this major achievement, claimed the triumphant prime minister, Carl Bildt (cited in Hempel 1993:168).