Tense wait for report

With France and Germany pushing for closer cooperation, the European Commission has outlined five scenarios for the future of the EU post-Brexit. Sweden has remained remarkably quiet about the white paper, but at lunchtime today the Commission is to release a report that has the potential to change this.

According a rumour in the German media last week, pressure will be put on Sweden to adopt the euro no later than 2025. The European Commission has denied that this is the case, but Roberg Bergqvist, chief economist at SEB, believes there is a grain of truth in the rumour.

Finance Minister Magdalena Andersson (S) is defiant, saying she will not accept a specific date. “It is up to the people of Sweden … to decide if and when Sweden adopts the euro. There is no other alternative,” remarks the minister, believing that there is understanding in the EU for this stance post-Brexit.

EU warns of house prices

Sweden risks a disorderly housing market correction, warns the European Commission in its annual review of the Swedish economy, reports Reuters. The risk comes from persistent house price growth and that the policy implemented by Swedish authorities has not been sufficient.

The Commission wants to see housing tax reforms, steps to increase the rate of new housing construction and deregulation that leads to a more effective use of existing housing stocks. The Commission recommends gradually lowering the tax deductibility of mortgage interest payments.

Dispute over Nordea’s head office

Both parties could end up losing in the dispute over Nordea’s head office, according to several commentators. Nordea has threatened to move its headquarters out of Sweden as a result of the political decision to raise the fees for the resolution reserve (to aid banks in the case of a financial crisis – ed.).

However, although the government has so far focused on the positive elements of a Nordea move for taxpayers, an anonymous source to SvD points out, “It would make big international news. It could lead to a discussion about the business climate in Sweden, something the government does not want.” On the other hand Nordea risks disappointing customers, as the move could be perceived as a rejection of the bank’s largest market.

Meanwhile, writing in Dagens Industri today, MEP Gunnar Hökmark accuses the government of undermining Sweden’s competitiveness with the new bank tax and says that it is incomprehensible that Finance Minister Magdalena Andersson want to bring in this tax, which is making Nordea, the Nordic countries’ largest bank consider moving.

Growth in danger zone

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.

Andersson: “Jobs and growth at risk”

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.

Ukraine attracting Swedes

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.

Constructive meeting with Malta

Sweden and Malta are to work together on the criminal investigation into Falcon Funds, the pension company suspected of having defrauded billions from Swedish pension savers.

On Wednesday, prosecutor Arne Fors was in The Hague to discuss the criminal investigation with representatives from Malta. Over a billion kronor of pension savings is still missing since the Swedish Pensions Agency reported the fund company Falcon Funds in October.

Arne Fors called it a “constructive meeting” and investigators in Sweden and Malta have a fairly similar view of events in the Malta-registered pension company and which individuals are suspected, according to the prosecutor.

However the Swedish Economic Crime Authority is still waiting for important account statements from Malta that are needed to be able to trace the missing funds.

Minister hints at reforms

GDP in Sweden grew by 1.0% in the fourth quarter of 2016, compared with the preceding quarter, and 2.3% compared to the same quarter in 2015, according to Statistics Sweden.

Growth in exports of goods and services accounted for much of the increase while imports fell slightly. Increased household consumption, public consumption and investments also contributed.

However the increase in GDP per inhabitant was lower: 0.7% from Q4 2015 to Q4 2016, compared with a total increase of 2.3%. “This shows that the rise in GDP is not only a result of the growth in population, contrary to what many people believe,” says Finance Minister Magdalena Andersson. She is satisfied with GDP growth of 3.3% for 2016, above most EU countries.

Andersson highlighted that there is a surplus of SKr 40 billion in the public finances, saying, “This is mainly the result of the government’s work.” She also hinted that if the next GDP forecast is higher then this could create scope for more reforms in the budget.

External experts to review crisis

DN has previously reported that the Swedish-Danish Postnord is in crisis; a picture confirmed when the company presented its losses of almost SKr 1.6 billion for 2016.

Now Enterprise Minister Mikael Damberg has called in external lawyers and financial advisers to decide how the government should move forward with Postnord.

It is mainly the Danish section that has pulled down the business and Mikael Damberg has reviewed the merger agreement. He points out shortcomings such as not having a long-term perspective and setting far too optimistic forecasts. There are also questions about how the merger’s structure was determined, as Sweden provided 70% of turnover but received only 60% of ownership.

Political risk for multi-billion kronor deals

Five deals worth SKr 2.9 billion were struck with Iranian partners during the Swedish delegation’s visit to Iran at the weekend. Scania, led by CEO Henrik Henriksson, signed two new agreements for a total of 1,350 buses. Henriksson described their relationship with Iranian partner, Mammut, as a way of “spreading the Swedish model”.

However the political risks for those investing in the country are high. The business climate is nervous, not least because of Donald Trump and American sanctions.

Karsten Stroyberg, who is responsible for Danske Bank in the region, the only bank apart from SEB that helps Swedish companies in Iran, says, “It is very complicated and very limited… You cannot have any Americans in the company, you cannot have any American dollars or companies in the agreement.”