Benefits of joining euro zone outweigh downside for Sweden, new report says

STOCKHOLM, Dec 2 (Reuters) - Sweden should join the 20 countries using the euro as their currency as the potential economic benefits now outweigh the risks amidst increased global uncertainty, a report by the independent Swedish Free Enterprise Foundation said.

Sweden joined the European Union in 1995 but a referendum in 2003 rejected adopting the euro by a majority of 56% to 42%. Over 80% of Swedes voted. 

"As I see it, the arguments for joining the euro have strengthened over time," Lars Calmfors, professor meritus of International Economics at Stockholm University, and one of the authors of the report, said in a statement.  "Sweden should, therefore, adopt the euro." 

Euro membership would lead to increased cross-border trade and foreign investment, while Sweden would also gain more influence in Brussels over the development and integration of Europe's capital markets, Calmfors said.

Bulgaria is set to join the euro area from January, becoming the 21st nation to share the common currency. 

On the downside, the risk that high levels of government debt across the euro zone would lead to costs for Sweden has increased.

Russia's invasion of Ukraine has already led Sweden to join NATO and has also increased the value of deeper integration across the European Union, Calmfors said. 

But Swedes remain to be convinced and the issue is unlikely to be a major one in the general election due in September 2026. 

The Moderates, the biggest party in the coalition, support a new inquiry on the issue but have said membership is a long way off. The Christian Democrats are also on the fence.

Of the three coalition parties, only the Liberals are firmly positive and they could drop out of parliament next year.

The populist Sweden Democrats, the biggest party on the right, are against.

"We need to keep control over our own monetary policy and be able to make decisions that are suitable to our own economic situation, not based on the euro zone's needs," Sweden Democrats' economic spokesman Oscar Sjostedt said in a written comment.

Prior to the election in 2022, the Sweden Democrats had advocated Sweden leaving the EU.

The opposition Social Democrats, Sweden's biggest party, said the issue had already been decided by referendum. 

"We don't see any reason currently to review that decision," economic spokesman Mikael Damberg said.

In May, 32% of Swedes supported adopting the euro with 49.5% against, according to a poll by the statistics agency.

(Reporting by Simon Johnson; Editing by Sharon Singleton)