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.

Anders Borg warns of EU banking union

Anders Borg, former finance minister, is back in the public eye again after an incident in Stockholm’s archipelago in the summer. The high-profile scandal forced Borg to leave several prestigious positions and he has now changed his professional direction towards investment and global analysis. He has also taken on the role of commentator.
A major theme for him is the EU banking union. “For me there are two decisive reasons for why Sweden should not become a member. The first is that, as a non-euro country, we would lack influence. The second is that they have chosen to handle the banking crisis in a way that does not work,” he says.
He also approves of the Riksbank’s decision to keep minus interest rates although would like to see labour and housing market reforms.

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.

Minister threatens to toughen up law

Finance Minister Magdalena Andersson has turned on the financial elite who shop around the world in search of the lowest taxes and is prepared to toughen legislation.

“It is completely unacceptable that people spend so much … time and energy to avoid paying tax,” she says. However, “The problem is that if you are really going to make it difficult to tax plan then you need to go outside the EU and introduce capital restrictions. When companies actively exploit the possibilities, it means tougher legislation makes it more difficult for everyone who runs a company.”

Östling steps down

“What the hell do I get for my money, not much,” were the words uttered by Leif Östling, chair of the Confederation of Swedish Enterprise, when asked by SVT about his tax arrangements in Malta and Luxembourg, revealed during the Paradise Papers leak in November.

He announced yesterday that he would leave his post as chair although would not answer any follow-up questions. The official picture is that he has successfully managed to launch a new power and decision-making structure within the Confederation. However Dagens Industri (DI) reports that a number of representatives from the board made it clear that confidence in him had been lost following his comment.

Another source tells DI that the relationship between CEO Carola Lemne and Leif Östling did not work. “From day one he tried to manoeuvre her out of the way, but failed,” says the source. The struggle between the chair and CEO also reflects a deeper conflict between industrial and service companies. The Association of Swedish Engineering Industries and the Swedish Association of Industrial Employers backed Östling after the revelations while criticism came from Almega – the Employers’ Organisation for the Swedish Service Sector and the Association of Private Care Providers.

There is a general understanding that the Confederation is in trouble and has been described as outdated and slow to change. The change of chair could also lead to a change of CEO, writes DI.

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.

Liberals outline reform of labour laws

At their party conference this coming weekend, the Liberals will be calling for a change in labour laws, demanding that the Last In First Out principle be scrapped. New, flexible rules need to be introduced in order to encourage movement on the labour market and promote company growth, says the party.

It should be easier for employers to terminate employment for personal reasons, a higher number of employees should be excluded from job elimination and anyone who is made redundant should have a right to severance pay.

New amortisation requirement causes division

The Swedish Financial Supervisory Authority, or FSA, said on Monday that all new mortgage holders who borrow more than 4.5 times their gross income must amortise 1 percentage point more of their mortgage per year than is the case at present. It will now be up to the Swedish government to decide what to do.

Opinion is divided, however. Housing Minister Peter Eriksson has openly expressed his doubts but Financial Markets Minister Per Bolund, who is the responsible minister, has warned of the consequences if the proposal is stopped.

The government intends to hold talks with the opposition, but Per Bolund is keen to stress that it will be up to the government rather than parliament to make a decision.

The opposition parties have in principle already said No to the proposal. Elisabeth Svantesson, the Moderate Party spokesperson on economic policy, argues that such a requirement would stop young people from buying a home and could fuel a downturn.