Talking to public service broadcaster SVT this morning, Anders Borg, the former finance minister, gave his views on the economic situation in Sweden and in Europe.
When asked about Greece, he made clear that the country needed to be saved so that it remained in the eurozone.
“My advice is that Europe should bail out Greece, even if the country has made a lot of mistakes,” he said.
He predicted that a new drachma would lose 40 per cent of its value relative to the euro if Greece were to withdraw from the monetary union (ed.), that banks would be forced to close for several weeks, restrictions would be imposed on withdrawals and anger would drive people out onto the streets to protest.
“It’s a small, fragile democracy. You cannot drive them into a tumultuous economic situation,” he said.
During the interview, Anders Borg said he expected European inflation and interest rates would remain low for a long time, and that this was a consequence of the ECB’s actions in combination with globalisation and an economic shift that affected consumer prices.
He also admitted that the Swedish government should have done more to stimulate the economy in 2012, when the Greek crisis struck. “We should have introduced some form of tax relief or invested more in the infrastructure,” he said.