Government plans to sue Danish state

The Swedish government is planning to sue the Danish state over a breach of the PostNord shareholder agreement, reports Dagens Nyheter.

There is a statutory requirement in Denmark that citizens must be able to receive digital post from the authorities. This has led to a 90% drop in letter deliveries in Denmark since 2000 and the Danish subsidiary of PostNord has seen revenues drop accordingly. With more than 3,000 employees entitled to three years’ severance pay in the event their jobs are axed, the carrier could be facing costs of SEK 6 billion. PostNord has asked the Danish and Swedish governments for a capital injection of SEK 3 billion, but Swedish Enterprise Minister Mikael Damberg has said “this is a Danish problem”. The lawsuit is seen as an attempt to force the Danes to back down

Banking union to the fore

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”.

Experts want new reforms

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.

Strengthening ties with Russia

Despite conflicting views on a number of issues, EU Affairs and Trade Minister Ann Linde recognises that both Sweden and Russia share an aim to work towards realising the huge potential in bilateral economic relations.

Writing in Dagens Industri , ahead of her visit to Russia on 12-13 September, the minister points to areas of cooperation between the two countries, including trade, organised crime, culture and student exchange, and underlines the fact that Sweden is the fifth largest direct investor in Russia, discounting tax havens. By way of example, one Swedish company has invested close to SEK 60 billion in Russia since 2001.

Trade between Russia and Sweden amounted to some SEK 48 billion in 2016 and there is potential for Swedish exports to grow. The Russian government’s aim is to invest in energy efficiency and environmental protection, and Linde looks forward to discussing ways to boost cooperation in these, and other, areas with her Russian counterpart.

Nordea: we have not negotiated

On Thursday Nordea held a press conference at its Helsinki, which will next year host key employees who will be moved from Stockholm.

When asked why it was not enough that the Swedish government backed down over the resolution reserve fee, CEO Casper von Koskull said, “Nordea is a bank with four domestic markets. We are also a very large bank. It is therefore difficult to exist under one regulation that is based on one country.” For him it is a natural step to become part of the European banking union and be regulated by the Single Supervisory Mechanism, SSM.

He also comments that there never was any negotiation. “We have not been shopping around.” Instead the bank has carried out a thorough analysis.

Meanwhile Swedbank is in a good position to take over dissatisfied customers who leave Nordea, says Swedbank’s head of press Josefine Uppling.

Prime Minister Stefan Löfven understands that many Swedes are upset. “Here we have a bank that has twice received significant help. The whole reason the bank exists is because of Swedish taxpayers and the thanks for that is: we are moving the head office,” he says.

Temporary factors help push inflation over 2%

The Consumer Price Index (CPI) rose by 0.5% in July. The 12-month rate was 2.2%. Price increases on package holidays contributed 0.3 percentage point to the change, while increased prices on international flights and electricity contributed 0.2 percentage points each.  The underlying inflation rate (CPIF) rose from 1.9% in June to 2.4% in July, its highest level since December 2010.

The Swedish krona strengthened on the news while the stock market fell. The reaction is justifiable given that the inflation rate is over the 2.0% target set by the Riksbank, which could bring forward plans to raise the benchmark repo rate, argues DI.

But, even if the July data may lift the mood at the central bank, it is too early to celebrate. A number of temporary factors contributed to the increase, as did a new way of measuring inflation and tax hikes on electricity.

Fall in global markets a threat to Sweden’s GDP

Oxford Economics has said that a stock market correction could affect global growth; a 10% fall in global markets could have the potential to pull down growth and consumption in developed economies by as much as 0.3%.

The actual impact on consumption would vary from country to country, depending on the circumstances. However, economies with higher market capitalisations would be worst affected by the correction, argued the think tank, noting that Switzerland has an unusually high market capitalisation in relation to GDP. The same is true of Singapore, the United States and Sweden.

Few in parliament own shares

Only 32 of a total 362 politicians have declared shareholdings in listed companies, according to an excerpt from the Riksdag’s financial register. Joakim Bornold, from Nordnet, is surprised about the low figure.

H&M is the big favourite among those politicians who do hold shares. Sharing second place are SAS and the investment company Kinnevik. Furthermore a majority of shareholding politicians are alliance politicians while not a single Left Party politician holds shares.

Only one party leader, Jan Björklund has reported any holdings. The Liberal leader has invested in the bank SEB and in a Sweden fund.

Finance ministerial candidate Oscar Sjöstedt (SD) owns shares in the prospecting company Africa Oil, which Joakim Bornold considers to be controversial. “Africa Oil has, to say the least, a turbulent history and is a company that has been called into question a good deal, which means it is surprising that it turns up in a portfolio of this kind of politician.”

Big banks’ mortgage profits rising

The total net interest for Sweden’s big four banks amounted to around SEK 30 billion for the second quarter – an increase of over one billion kronor since last year. The profits come mainly from mortgages.

“This is a completely unreasonable figure,” says Håkan Larsson, housing economist at the Swedish Homeowners Association. Håkan Larsson says that the development is due to the low repo rate, which has meant there is a huge difference between the interest banks themselves pay and what they offer mortgage customers.

During the same period mortgages have grown in importance for banks. For Swedbank and Handelsbanken, the mortgage share of the group rocketed from 25% in 2010 to 49% and 42% respectively in 2015.

Håkan Larsson points out that the four big banks have very similar interest rates for mortgage customers, calling it a price-fixing cartel. He believes politicians ought to act and the state SBAB bank ought to lead the way by bringing down interest rates.

Many traders going to refuse cash

Two thirds of Sweden’s traders believe they will stop accepting cash by 2030, according to a new, as yet unpublished, report from the Royal Institute of Technology (KTH).

Niklas Arvidsson, lecturer in industrial dynamics at KTH, is one of the authors and predicts that Sweden will be a cashless society by 2030. “It is moving very quickly just now.”

According to the Swedish Trade Federation, 80% of all transactions in retail are currently made by card, and this is increasing constantly.