Nordea’s plan to move its head office to Finland will be on the agenda when Pierre Moscovici, the European commissioner for economic and financial affairs, taxation and customs, visits Stockholm today. “There may be reason for reflection when one of your own banks moves to be inside the EU banking union,” Mr Moscovici tells Dagens Nyheter ahead of his visit.
With Sweden poised to launch an inquiry into the benefits and challenges of joining the banking union, the commissioner says “the door is always open, but no one is forced to join the euro”.
Alfa Laval was one of many Swedish companies that tried to re-enter the Iranian market after the Joint Comprehensive Plan of Action (JCPoA) deal was struck in 2015, but the industrial company has now announced that it is scrapping plans to expand in Iran. “Doing business in a country such as Iran is not straightforward. The banks are a critical part of the equation; the financial transactions are not simple and require a lot of work,” says Peter Torstensson, vice president of communication at Alfa Laval.
One of the problems is that sanctions are making it impossible to carry out US-dollar transactions.
The business climate in Sweden’s main cities has deteriorated sharply, according to the Confederation of Swedish Enterprise’s annual ranking.
In a survey of some 30,000 companies in the 290 municipalities, Stockholm has fallen to 123rd place, from 22nd place in 2014. Gothenburg ranks in 206th place, a new bottom score for the city, while Malmö, Uppsala, Linköping and Västerås have all hit their lowest rankings since the survey began in 2001.
Carola Lemne, head of the business federation, is concerned, given that the cities are engines of growth.
Johan Trouvé, CEO of Gothenburg’s Chamber of Commerce, believes the main problem is the attitude of the municipality’s bureaucrats. “They don’t understand the needs of the business world,” he says.
In Stockholm the problem is not just one of bureaucracy; a skills shortage, housing problems and inadequate infrastructure are other factors, according to Maria Rankka, CEO of the Stockholm Chamber of Commerce.
Telia is being fined USD 965, around SEK 7.7 billion, for having bribed those in power in Uzbekistan. The company has reached agreement with the American authorities over corruption accusations and has admitted paying bribes of around SEK 2.6 billion.
The sum is in line with expectations and the company has made provisions for it. The sum is made up of a fine of around SEK 4.4 billion and a further SEK 3.6 billion for profits that they are considered to have made from paying the bribes.
CEO Johan Dennelind writes in a press release that the deal puts an end to a sad chapter in Telia Company’s history.
The government has been generous with the budget because of the coming election, according to chair of the Confederation of Swedish Enterprise (Svenskt Näringsliv), Leif Östling, who calls it “a typical Social Democrat election budget”.
Collector Bank’s chair Lena Apler agrees, “You can tell we are approaching an election year They are flirting with families and pensioners.” Meanwhile Rune Andersson, chair of Mellby Gård predicts the economy will overheat and wants to see more austerity.
Leif Östling is not impressed with the budget from a business perspective either. “The business world is getting quite a large number of tax increases over the year.” Former chair of Svenskt Näringsliv Jens Spendrup points out that there needs to be more new business in the country because that is where new jobs are created.
Leif Östling wants a review of the tax system for wage earners, pointing out that it makes it difficult for Swedish companies to recruit from abroad.
Volvo Cars is doubling its investment in its plant in the USA. According to reports in South Carolina, Volvo is increasing its investment from USD 500 million to USD 1 billion. It will also more than double its workforce, from 2,000 to 4,500.
According to the original plans, the plant is to manufacture the S60. The capacity is said to be 100,000 although to begin with 60,000 cars will be built per year, of which 60% will be exported worldwide, except China.
The Financial Supervisory Authority (FSA) intends to ensure that Nordea’s capital requirement remains as high as it is currently, even after the bank moves its headquarters to Finland.
In an interview with Dagens Industri (DI), the head of the FSA, Erik Thedéen, says that the Finland is move is “completely unique”. “It is also the first time a large bank, with exposure to the whole of the Nordic region comes under the jurisdiction of the European Central Bank (ECB),” he adds.
He does not believe Nordea’s move is a sign that Swedish regulation has gone too far. “When you say that our requirements are too demanding, then you are forgetting that these requirements are made in an environment typical to Sweden, which is concentrated and interlinked.”
When the move is made, the FSA no longer has responsibility for supervising Nordea and it could mean a lower capital requirement for Nordea. The FSA has already started talks with the ECB and Erik Thedéen wants to push for the ECB to ensure the current capital levels are maintained.
Several of the country’s leading economists consider there to be a desperate need for new structural reforms, but the government is showing no sign of dealing with the problems. The last real political structural reform was the employment tax deduction brought in by the alliance government in 2006.
In particular economists are worried about the housing and labour markets. Annika Winsth is head economist at Nordea and describes a generation of politicians that are incapable of taking on the major challenges that Sweden is facing just now. She is unimpressed with Finance Minister Magdalena Andersson’s autumn budget. “I think it is inappropriate to push forward with extensive stimulation when we already have the tendency to overheating. Furthermore, becoming bound to permanent increases in spending when you know that worse times lie ahead is risky. Long-term structural reforms would have been desirable,” she says.
Nordea’s CEO Casper von Koskull held a secret meeting on Tuesday with a number of minority shareholders, including AMF, Swedbank Robur and the AP pension funds, in an attempt to convince them that a move of the bank’s head office to Helsinki is in their best interest.
A move will require the approval of at least two-thirds of shareholders at next year’s AGM, but some of the larger minority shareholders are said to be sceptical to the plan. “As a shareholder in Nordea, you have to ask yourself if the value of your investment may decrease with the Finnish tradition of running a company,” says one shareholder who wishes to remain anonymous.
Chinese investment in the EU increased by 75 per cent in 2016 and amounted to EUR 35.1 billion, according to the Rhodium Group. Concerns that China could gain control of assets affecting national security have led heavyweight nations such as Germany, France and Italy to urge a rethink of foreign investments in the EU, and in a speech today, Wednesday, European Commission President Jean-Claude Juncker is expected to lay out plans for a more robust screening of trade.
The Swedish government is opposed to more thorough vetting of foreign investments, with EU Affairs and Trade Minister Ann Linde describing the move as “protectionist”. “I believe the opportunities the WTO agreement gives Sweden and other EU member states are adequate,” she says.
In contrast, Thomas Lagerqvist, chair of the Sweden-China Trade Council, welcomes a discussion on tighter screening, saying: “It is naïve of Sweden to believe there is no risk”.