PostgreSQL broken by UTF-8 [SOLVED]

[sigra]

I changed my locale to sv_SE.UTF-8 and now PostgreSQL is broken. I can not use the tables that have local characters in their names. If I just connect to a database with psql and type ");" I get:
$ psql prov
Välkommen till psql 8.0.15, PostgreSQLs interaktiva terminal.

Skriv: \copyright för upphovsrättsinformation
\h för hjälp om SQL-kommandon
\? för hjälp om psql-kommandon
\g eller avsluta med semikolon för att köra en fråga
\q för att avsluta

prov=# );
FEL: syntaxfel vid eller n�ra ")" at character 1
RAD 1: );
^
prov=#


Note how characters like åäö are shown correctly in the initial information text, but not in the error message. What should I do to make PostgreSQL behave?

Edited:
Executing \encoding utf8 first of all in psql seems to alleviate the problem. To make it permanent I had to do mkdir -p /etc/postgresql;echo "\\\encoding utf8">>/etc/posgresql/psqlrc. The error messsage is printed correctly and tables seem to be mostly usable. But unfortunately tab completion is not working right.

[leifbk]

What kind of encoding did you use when you ran initdb? By default, it will use your LC_ALL setting. See also http://www.postgresql.org/docs/8.2/interactive/locale.html.

For my own part, I created a file /etc/env.d/02locale: