Expert: Alarming policy

Equity analyst Peter Malmqvist has described the Riksbank’s policy as “alarming”. He does not believe in negative interest rates as a means of bringing up inflation to target; all it does is to build bubbles in the economy.

“I am against the policy that has been pursued in the past few years. Property prices are rising, there are no homes, and the stock market is going up. All curves in Sweden are pointing upwards right now, apart from the interest rate,” he says, and suggests that the consequences could be grave when inflation starts picking up and the bubbles burst.

Vattenfall seeks early shut down of reactors

Vattenfall announced yesterday that it was seeking to shut down reactors 1 and 2 at its Ringhals nuclear power plant between 2018 and 2020, rather than in 2025 as was previously planned.

Energy prices are falling and Vattenfall CEO Magnus Hall has said he does not see any indication that they will increase in the coming years. At the same time, the utility is facing increasing production costs, and intends to trim 1,000 staff. The cuts will affect staff in Sweden, Germany and the Netherlands, according to the CEO.

Magnus Hall has also said that the decision had been made on a commercial basis and that no political pressure had been exerted. However, he admitted that reactors which ran smoothly would probably not have to close, were it not for the new and higher tax on nuclear power.

The decision to shut down the reactors must be taken by the Ringhals board and presupposes that co-owner E.On will agree to the plans.

Jonas Abrahamsson, E.On manager for the Nordic region, said yesterday that it must first analyse the proposal.

The book value of Ringhals 1 and 2 is around SKr 15 billion. Were the two reactors to shut down, Vattenfall and E.On will be forced to make extensive write-downs.

“We are looking at the financial impact and aim to submit a report on this in conjunction with the Q2 report,” Magnus Hall told the press.

Hall responds to criticism

vattenfall_magnus_hall_600_256The planned divestment of Vattenfall’s German lignite business was one of the key issues on the agenda at the state-owned utility’s AGM on Monday. Left leader Jonas Sjöstedt wondered what environmental requirements were being made of potential buyers, to which CEO Magnus Hall replied: “Our view is that the environmental requirements for brown coal are a matter for the German government, not for Vattenfall”.

Hall denied rumours in the international press that the company is facing delays in the planned sale of its lignite business, following concerns over a proposed coal emissions levy.

“The process is most definitely not on hold. Our hope is that by the end of the year something will be on the table that the government can consider,” he said.

Vattenfall’s vision

Vattenfall faces huge financial challenges at the same time as demands are being made that the business should be sustainable, writes Magnus Hall, CEO of the Swedish state-owned utility, in Dagens Industri ahead of today’s AGM.

Outlining the strategic focus that will make Vattenfall competitive and at the fore of the energy shift, Hall also notes that Germany’s energy mix is a matter for German politicians, it is not a matter for Vattenfall or Swedish politicians. Furthermore, it is uncertain whether the closure of Vattenfall’s lignite business in Germany would lead to a significant reduction in Europe’s carbon emissions. There is a risk that Germany would need to import fossil fuel from its neighbours. Instead, the best way of reducing carbon emissions at EU-level would be to strengthen the emissions trading system, he says.

Government’s hopes may be dashed

In its defence bill, the government is positive to the idea that a new organisation to provide training on JAS Gripen fighter jets could “include new export obligations,” i.e. new deals with other countries. In reality, however, the Swedish Air Force is already stretched.

A recurring problem for the Air Force is one of maintenance. A key concept in this context is that of “accessibility,” i.e. there always needs to be a certain number of JAS Gripen fighters operational.

Major General Micael Bydén, who took over as Air Force Commander nine months ago, tells Svenska Dagbladet: “It’s no secret that we have for a while faced challenges, to put it mildly. Equally, we are keen to deal with the accessibility challenges …”. However, as a result of these challenges, the Air Force has had to put future training requirements on the back burner.

Meanwhile, in related news, as a result of the defence agreement struck between the government and three of the alliance parties, the defence budget will receive a boost of SKr 10.2 billion in the coming five years. However, fresh calculations from FOI, the Swedish Defence Research Agency, indicate that Swedish military expenditure, as a share of GDP, will in fact fall from the current level of 1.5% to under 1.1% in the next five years.

Renewed interest in Gripen

A year after Swiss voters rejected the purchase of 22 JAS Gripen fighter aircraft, the country’s Defence Minister, Ueli Maurer, has told public broadcaster RTS that the situation is becoming urgent. Maurer said Switzerland will have to look at a number of alternatives in 2017 so that a new fighter jet can be found which can supplement the fleet of F-18s, which will remain in service until around 2030.

Sweden’s Saab JAS Gripen, France’s Rafale, and a US fighter jet – potentially the F-35 – are of interest, reports Svenska Dagbladet.

Håkan Buskhe, chief executive of the Saab defence group, has said: “There is likely to be a new procurement process in Switzerland in a few years. Naturally, we will try to be part of the process”.

Faults reported in fighter jets

TV 4’s news programme Nyheterna reports that a problem with the anti-gravity suits used by JAS Gripen fighter pilots has led the Swedish Armed Forces to impose a limit on the altitude at which the jets may fly, and the speed at which turns may be made. The military has apparently been aware of the problem for five years.

Moreover, the displays for the navigation and radar systems occasionally shut down, sometimes simultaneously.

TV 4 also reports that at the F17 base in Rönneby the JAS Gripen instrument landing system (ILS) has frozen from time to time over the past three years.

“It seems as though the air base and the ILS are not as compatible as we would wish,” comments Robert Persson, head of flight safety at the Armed Forces.

Gripen fighter jets are the first to respond in the event of an incident in the Baltic region, and Allan Widman, Liberal chairman of the Standing Committee on Defence, is now calling on the Armed Forces to inform MPs of the situation.

“It is especially important in the security situation in which we find ourselves at this time,” he says.

Saab, the maker of the JAS Gripen, does not wish to comment the reports at present.

EU proposes doubling rescue operations

imagesEuropean Union ministers meeting in Luxembourg on Monday proposed doubling the size of the EU’s search and rescue operations, as the first bodies were brought ashore after what could be as many as 900 were killed in the latest capsize in the Mediterranean.

In October 2013, after 400 African migrants drowned on their way to Italy, the Italian Navy began to patrol large areas of the Mediterranean in order to rescue the migrants who were trying to make their way to Europe in rickety boats. The operation, known as Mare Nostrum, was costly and Italy requested other EU member states to help fund and participate, via the EU border agency Frontex.

Operation Triton was conceived to replace Mare Nostrum (ed.) but has fewer resources and the area patrolled is smaller. According to Frontex, Operation Triton saved the lives of 7,000 people in one year. Italy’s Mare Nostrum saved the lives of 150,000.

“More funds need to be allocated to Triton and Frontex so they can handle the situation. But we also have to stop the traffickers who send people out to sea in these kinds of boat,” said Swedish Foreign Minister Margot Wallström from Luxembourg yesterday.

A blockade of the coast of Libya, from where 90% of the migrants start their journey across the Mediterranean, is not feasible, since it would play into the hands of the traffickers. However, the European Commission proposed on Monday that efforts should be made to capture and smash the Libyan smugglers’ boats.

Italian PM Matteo Renzi has said that it is impossible to return the migrants to Libya, because of the chaos there.

“Everyone is agreed that the EU and the member states must back the head of the UN support mission in Libya, Bernardino Leon, and give him all he help he needs to hopefully get an international coalition government in Libya,” said Wallström on Monday.

EU heads of state and government will meet in Brussels on Thursday to discuss migration.

Björklund critical

Last Friday’s agreement between the government and the Moderates, the Centre Party and the Christian Democrats to raise the defence budget to SKr 10.2 billion for the 2016-2020 period is an important signal to the world, according to Defence Minister Peter Hultqvist.

This is a boost of SKr 2 billion annually but, under the terms of the deal, SKr 1.7 billion will go towards the increased cost of employer contributions, and SKr 1.3 billion will be transferred from the budget for international operations.

In addition to this, politicians have also decided that a battle group of around 200 soldiers and a tank unit will be based on the island of Gotland permanently as of 2018. Furthermore, additional funds will be allocated to Sweden’s hunt for foreign submarines in its waters.

Outlining the terms on Friday, Peter Hultqvist did not rule out the possibility of tax increases to finance the deal.

Liberal leader Jan Björklund has since attacked the terms of the agreement, saying it is a huge disappointment. “Our defence capability is inadequate and that is bad for Sweden,” he said.

The party leader also accused his centre-right alliance colleagues of abandoning their call for an inquiry into NATO membership; instead it was agreed that an inquiry would consider Swedish security policy in relation to the Nordic countries, the USA, the UN, the EU and NATO.

“It will come to nothing; it will be nothing more than a general analysis, which has already been made,” he said, adding that no matter how many billions Sweden spent on its defences, NATO membership would involve greater security.

The fact that a divide has now emerged among the alliance parties is “regrettable but unavoidable,” said Björklund.

“It is unfortunate for the alliance that we are going separate ways, but even more unfortunate for Sweden that our defences are not strong enough,” he remarked.