Government’s capital requirements threat to pensions

The government wants to go further than the EU when it comes to capital requirements for some occupational pension insurance plans. This could worsen the returns, by up to 20 per cent, for those who choose safer alternatives with guaranteed returns, write Anna Falck from the Swedish Agency for Government Employers (Arbetsgivarverket), Lena Emanuelsson chair of Saco-S, Swedish Confederation of Professional Associations, Åsa Erba-Stenhammar head of negotiations at the Public Employees’ Negotiation Council (OFR) and Helen Thornberg from the Swedish Union for Service and Communications Employees (Seko).

The EU’s occupational pension directive is to be implemented in Swedish law. The four welcome that the government is going to introduce an independent regulation for service pension companies. However, they believe it is difficult to motivate going further than other countries.

They want the rules to be formed so that the current traffic light system remains at the same level. Occupational pensions are not only essential for individual pensioners but also for society and the creation of capital in society through long-term saving.

Bitcoin is an “absurd” construction

Nordea’s CEO Casper von Koskull has called Bitcoin an “absurd” construction that defies logic although says its blockchain technology is “vital”, in an interview with Bloomberg. “When you look at Bitcoin, history shows that new currencies have come and gone.” He cannot see where Bitcoin fits in in terms of financial crime and rules. “The financial system is only as strong as its weakest link,” he adds.

On Tuesday it was reported that Nordea and several other big foreign banks are investing in a platform for blockchain technology that is to make trade easier and which is to be accessible to their customers across all the Nordic countries. Nordea is becoming a partner in the consortium We.trade, which together with IBM is developing the platform.

It is expected to be launched in the second quarter of 2018 and other banks will be able to join the open platform.

New amortisation requirement

In light of concerns around household debt levels, Financial Markets Minister Per Bolund announced on Thursday that tougher amortisation requirements will be introduced for homeowners as of 1 March 2018. All new mortgage holders who borrow more than 4.5 times their gross income will have to amortise at least 1% of the debt, in addition to the existing requirement.

The new requirement will have the most impact in Stockholm and Gothenburg, where property prices are highest. In Stockholm, 30% of all new mortgage holders will be affected.

Elisabeth Svantesson, the Moderate spokesperson on economic policy, is critical, pointing out that house prices are already falling and that such a measure could lead to a further drop in prices. She calls for major reform of the housing market instead.

Andreas Hatzigeorgiou, chief economist at the Stockholm Chamber of Commerce, believes the new requirement will do more harm than good and curb growth in the region.

Riksbank believes the krona will strengthen

The Riksbank’s forecast indicates the krona will strengthen. The current weakening could be temporary and the market ought not to read too much into recent fluctuations, said first deputy governor of the Riksbank Kerstin af Johnick to journalists in Copenhagen on Tuesday.

She also said that Swedish house prices may cool down somewhat but the Riksbank does not believe there will be a major drop in house prices.

22 years needed to save for property in Stockholm

A new report from Mäklarhuset shows that the difference in how many years it takes to save up for a deposit for a house depends on the city and profession, reports SvD. The report shows that it takes the longest time in Stockholm, Gothenburg and Uppsala. For an auxiliary nurse in Stockholm it takes 22 years to save up the deposit.

Erik Wikander, CEO of Mäklarhuset, says that it is time for politicians to add stimulus to the threats. “When there is no functioning housing market and a balance between owned and rented property, it creates a pressurised situation for young people. The regulations that have been brought in over the past five years have focused on limiting debt. However there needs also to be stimulus so that the entire housing market is used,” says Erik Wikander.

Forecast: government misses target

The government’s budget is putting pressure on state finances and is leading to surplus targets being missed, says the Swedish National Financial Management Authority (ESV).

According to ESV, the surplus in the public sector’s financial savings will fall from 0.9% this year to 0.6% next year as a result of the government’s budget bill, which is expected to reduce tax revenue and increase expenditure. This means the government will not achieve the surplus target of 1% over a business cycle.

Slow wage growth will scupper Ingves’ plans

Central banks around the world are stumped as to why inflation is low and wage growth slow despite the fall in unemployment after the financial crisis. Federal Reserve chair Janet Yellen has even described the phenomenon as a “mystery”.

Sweden’s Riksbank, in particular, has failed to pay heed to one important explanation for the phenomenon, namely the outsourcing of high-skilled services to low-cost countries, claims Lena Hagman, chief economist at employer organisation Almega.

She believes Sweden’s central bank will be forced to delay the planned rise in interest rates and revise down its growth and wage forecasts, saying: “The Riksbank argues that the problem of finding staff will lead to an accelerated wage drift in the affected sectors, as we have been used to in previous economic booms. But that is no longer the case”.

Low productivity warning

Exceptionally expansionary monetary policy and the refugee influx are fuelling the Swedish economy but concealing weak underlying growth potential, according to Mats Kinnwall, chief economist at the Swedish Association of Industrial Employers (Industriarbetsgivarna).

Kinnwall, who is also chief economist at the Swedish Forest Industries Federation (Skogsindustrierna), says low interest rates have fuelled investment into property but other forms of investment are necessary in order to raise growth potential.

“We need a new internet, we need a regime shift,” he adds, noting that global productivity growth is weak

Dispute over council’s independence

A dispute has broken out between a number of Sweden’s top economists and the government, which wants MPs from the Committee on Finance to have a say as to who is to be appointed to Sweden’s influential Fiscal Policy Council (Finanspolitiska rådet).

The council, whose remit is to provide an independent evaluation of the government’s fiscal policy, has frequently criticised government policy.

Professor John Hassler warns that there is a clear risk of politicisation and that the council might as well close down.

Finance Minister and IMF

According to Finance Minister Magdalena Andersson, the International Monetary Fund (IMF) shares a view on several issues with the Swedish government, for example concern over the housing market.

She is also grateful for the IMF’s praise for her economic policy. “We are on the same wavelength when it comes to the need for inclusive growth,” she says.

Magdalena Andersson is to attend the IMF’s autumn meeting in Washington and will visit the White House to meet US President Donald Trump’s international advisor.