After several years of dramatic price rises, Sweden is now one of the countries at risk of a collapse in house prices, resulting in GDP growth slowing down.
House prices have risen, in real terms, by over 30% in Sweden and New Zealand in the past three years, accompanied by rising household debt. Now, according to credit rating institute, Moody’s, the two countries are most exposed to falling house prices.
Jens Magnusson, from SEB, says the warnings are correct but that the conclusions can be qualified. He points out that price increases in Sweden do not mainly come from speculation and that lending is distributed so that those with the highest incomes borrow the most.
Moody’s report also points out that Sweden’s social safety net provides a cushion for households but means greater economic exposure if things begin to get shaky.
Russian Gazprom says it now has the go-ahead to build the controversial gas pipeline Nord Stream 2.
Anna Kaisa Itkonen, the European Commission’s spokesperson on energy, says, “We do not like Nord Stream 2 from a political aspect. However, saying that, there are no legal grounds on which the Commission can oppose it.”
A new route to Europe has long been the goal of the Russian state gas company, something that has met widespread opposition. A new pipeline will enable Russia to bypass Ukraine and Eastern Europe, increasing its control over the countries. Martin Kragh, from the Swedish Institute for International Affairs, points out that Russia wants to cut Ukraine out of the European energy equation and tie up Europe as a long-term export market.
Nonetheless, Chloé Le Coq, doctoral student at Stockholm School of Economics, says there are positive factors, for example the opportunity to diversify transport routes for gas to Europe.
There are no winners in the UK’s exit from the EU, according to Finance Minister Magdalena Andersson who wants British guarantees before negotiations can begin on a trade deal.
She also warns for emotional turmoil during the negotiations. “There will need to be adults in the room,” she says pointing out that both jobs and growth are at risk. The UK wants to negotiate a free trade deal alongside the exit negotiations but Magdalena Andersson is sceptical about how realistic this is.
“It is important that the UK meets its financial obligations towards the rest of the EU,” says Andersson, as the UK has obligations of between 50 and 60 billion euro to the EU (between 475 and 570 billion kronor).
The National Board of Trade in Sweden (Kommerskollegium) has calculated that Swedish companies are going to have to pay 2.1 billion kronor in duties when the Brits leave the EU if no new trade deal is in place.
Trade Minister for Ukraine Nataliya Mykolska is in Stockholm to attract Swedish companies to Ukraine. The selling points are low wages, speedy reforms and an EU agreement.
She says areas of priority are food, light industry, timber, furniture and IT. She also sees potential in tourism. She says the government has also worked hard to counter corruption, saying that more has been done in the past three years than in the preceding 25 years.
The government has announced plans to cut taxes for pensioners. The proposal means that seniors over 65 with a pension of SKr 14,000 per month will receive an estimated tax cut of SKr 200 each month. Those with a pension of SKr 19,000 per month will receive a cut of SKr 160. Around 1.4 million pensioners, corresponding to 70% of those aged 65 and over, will benefit from the change.
In the run up to the 2014 general election the Social Democrats promised to close the gap between pensioners and those in gainful employment. Announcing the news on Wednesday, Finance Minister Magdalena Andersson said the cut was a step in the right direction.
The measure, which will be presented in the autumn budget, is expected to cost the Treasury SKr 2.1 billion.
Financial Markets Minister Per Bolund (Green) tells Svenska Dagbladet that the Swedish Financial Supervisory Authority (Finansinspektionen) will be given greater powers to stop those fund companies that charge high commissions for poorly performing funds. “They have no place on the Swedish market,” he says.
In Dagens Industri today Christian Clemens, BRA, Rickard Gustafson, SAS and Bjørn Kjos, Norwegian, address the government’s plans for an aviation tax stating there are more effective ways of tackling emissions than through the “symbolic” tax and present “joint targets for how Sweden can lead the way for more sustainable aviation by 2030”.
The Swedish aviation industry has a joint ambition to halve fossil carbon dioxide emissions from domestic flights by 2030, from 2005 through more effective aircraft and a higher proportion of bio-fuels.
The entire aviation industry, they write, is working to create a market for large-scale bio-fuel production. Investing in more fuel-efficient planes is significantly more effective than bringing in an aviation tax. They believe the proposed tax would reduce accessibility and potential for growth. Under the first year alone it is estimated the aviation tax would mean 7,000 fewer jobs and GDP loss of almost SKr 4 billion. In the best case scenario the tax would bring emissions down by 0.2%. Sweden needs aviation not least to achieve the government’s goal for regional growth.
After Nordea’s threat to move its head office out of Sweden the Moderates have attacked the government. Ulf Kristersson, the party’s economic spokesperson, says, “We are driving companies out of the country with the policy the government is threatening to bring in.” He says Sweden needs more head offices, not fewer.
Nevertheless Finance Minister Magdalena Andersson is not fazed by Nordea’s threat. “If they place their head office in another country then it lowers the risk for Swedish taxpayers in the case of a crash,” she says. She points out that the banking sector is healthy, has high profits and the fees have not created any problems. She also emphasises that Nordea made billions of kronor in profits last year.
The proposal is now out for consultation.
“It is unacceptable that Sweden is entering these negotiations without a clear stance,” write Helena Jonsson, chair of the Federation of Swedish Farmers, LRF, and Sven Erik Hammar, chair of the Federation of Swedish Family Forest Owners in Dagens Industri today of the EU’s negotiations on climate and land use, LULUCF.
Swedish forests absorb 50 million tones of carbon dioxide equivalents, which can be compared to Sweden’s total emissions of 60 million tonnes. Forestry means we can benefit from timber products where if fossil-based products were used instead current CO2 emissions would double.
If the EU Commission has the last word on forest reference levels (annual net absorption of carbon dioxide in the forest) then if felling crosses this reference level the forest will be considered to have net emissions, despite that there is in actual fact net absorption of CO2. They ask the government whether it wants the EU to control Swedish forestry and demand politicians show leadership. The EU directive is a threat to the climate benefits of Swedish forestry.
EU trade ministers gathered in Malta on Friday to discuss the protectionist trend the United States seems to be adopting. The latest news is that the US administration has vowed to prioritize its trade rules over World Trade Organization rules and threatened to withdraw from the WTO dispute settlement system.
Talking to the newspaper Dagens Nyheter, Swedish minister Ann Linde says the EU must take action, if the US chooses to ignore the rules. Despite the risks, countermeasures may be necessary, she says.
Ann Linde expects a reaction from other countries as well, including China. This could result in a trade war, but the minister’s hope is that it will be possible to have a discussion with Washington.