The financial crisis is hitting the Swedish economy with full force as the credit squeeze tightens the belt of almost all types of business enterprise, reports Dagens Nyheter today. The recession is the worst yet since the 1990s, and it is predicted that 100,000 jobs will disappear from the Swedish market.
In a report by the Institute of Economic Research (KI), not only will 100,000 jobs leave Sweden but unemployment will rise from 6 to 8 percent. When the Lehman Brothers- one of the world's biggest investment banks hit the rocks in mid-September this year, the KI was forced to revise its recession forecast. The widespread loss of confidence in the banking system made it impossible for the credit system to function. KI revised its August analysis- and the economic forecast is worst than expected.
The GNP or Gross National Product - which measures the value of all production and services of a country, will grow by only 1.2 percent. Even in the forthcoming last quarter of the year and the 1st quarter of 2009, the GNP growth will contract to 0.1 percent. In 2010, the economy is expected to improve although not enough to create more jobs. "We see no recovery before 2010," says Urban Hansson of KI.
As the Swedish economy dives into unprecedented recession, the parliament approved on Wednesday a stability package presented by the Alliance government. It takes effect today, Thursday. "The objective is not to support the banks but the households with loans and companies that need credit for their orders," says Finance Market Minister Mats Odell. The stability package consists partly of a guarantee for the banks' borrowings, and partly on the rules on how banks in crisis could be saved. The guarantee amounts to 1500 billion SEK. The state will take in from banks and other participants a total of 2.64 billion SEK yearly.#
Thursday, October 30, 2008
Wednesday, October 29, 2008
Where does Swedish aid money go?
Swedish development aid is an issue that generates controversy, especially if the reasons for its existence which is basically the reduction of poverty among the poorest in the world, is not achieved. In a special report today in Dagens Nyheter, the utilisation of Swedish aid money is once again under close scrutiny.
It appears according to the report, that no other previous Swedish government have had so much money to give to the poorest countries than the current Alliance government. From the level of SEK14 billion in 2000, development aid has risen to SEK34 billion today, although the recession may eat up some of this amount. But the controversy is not on how huge the aid money is but rather where and how it is used that bothers many.
One important reason why the Swedish aid money has grown enormously is the 1 percent of the gross national product (BNP) target that is expected to go to development assistance. With the looming recession, this one percent is a huge amount to pay. Swedish development assistance Minister Gunilla Carlsson is quoted as saying:"An economic brake means low demand in the world market, reduced export from developing countries, low national incomes because att the prices of raw materials have gone down and foreign investments are also down.There is also the risk that developed countries become more protectionist and less generous with their aid money as well as less enthusiasm to fulfill earlier commitments," Carlsson says.
SIDA, the Swedish development aid authority was earlier criticised for irregularities in the accounting and auditing of several projects. Bengt Nilsson's book "Sweden's African War," pointed out that in principle all development aid to countries should be abolished because it often ends up supporting wars and corrupt regimes.
As far as Gunilla Carlsson is concerned, the current recession is a good argument against the 1 percent aid target. At present, Swedish aid money goes to supporting diplomatic presence, as in Kabul; asylum and refugee reception and debt writeoffs. The biggest aid receiver is still Africa with SEK6.2 billion; Asia with SEK2.8 billion; Oceania with SEK2.4 billion and South-Central America with SEK1.4 billion. The rest of Europe and the Central and Eastern Europe gets SEK1.4 billion and SEK319 million, respectively.
How the future of the Swedish development aid will look like depends upon the outcome of the ongoing debate among the different political parties and the global economic meltdown.#
It appears according to the report, that no other previous Swedish government have had so much money to give to the poorest countries than the current Alliance government. From the level of SEK14 billion in 2000, development aid has risen to SEK34 billion today, although the recession may eat up some of this amount. But the controversy is not on how huge the aid money is but rather where and how it is used that bothers many.
One important reason why the Swedish aid money has grown enormously is the 1 percent of the gross national product (BNP) target that is expected to go to development assistance. With the looming recession, this one percent is a huge amount to pay. Swedish development assistance Minister Gunilla Carlsson is quoted as saying:"An economic brake means low demand in the world market, reduced export from developing countries, low national incomes because att the prices of raw materials have gone down and foreign investments are also down.There is also the risk that developed countries become more protectionist and less generous with their aid money as well as less enthusiasm to fulfill earlier commitments," Carlsson says.
SIDA, the Swedish development aid authority was earlier criticised for irregularities in the accounting and auditing of several projects. Bengt Nilsson's book "Sweden's African War," pointed out that in principle all development aid to countries should be abolished because it often ends up supporting wars and corrupt regimes.
As far as Gunilla Carlsson is concerned, the current recession is a good argument against the 1 percent aid target. At present, Swedish aid money goes to supporting diplomatic presence, as in Kabul; asylum and refugee reception and debt writeoffs. The biggest aid receiver is still Africa with SEK6.2 billion; Asia with SEK2.8 billion; Oceania with SEK2.4 billion and South-Central America with SEK1.4 billion. The rest of Europe and the Central and Eastern Europe gets SEK1.4 billion and SEK319 million, respectively.
How the future of the Swedish development aid will look like depends upon the outcome of the ongoing debate among the different political parties and the global economic meltdown.#
Friday, October 24, 2008
Europe and Asia meet on financial crises
Over forty heads of governments from Europe and Asia met Friday evening to discuss and find solutions to the acute world financial crisis, reported Dagens Nyheter today. A general feeling of emergency characterizes the Asem meeting that is held every other year.
Even before the meeting formally opened, discussions on the current financial crisis already begun. Swedish Prime Minister Fredrik Reinfeldt was quoted as saying to the Swedish media in Beijing : "After all, I find myself in the company of some 44 heads of governments and those who say that things are bad in Sweden should hear what others are describing. It is dramatic for many just now."
During dinnertime, the attending heads of governments focused their talks on finding common measures to meet the threat and dampen the crisis. " It is a darkness that looms over the world", said Reinfeldt after hearing what others say of the effects and prognoses in their respective countries.
The European Union's Chairman Jose Barroso in his opening statement urged cooperation in creating common rules and regulations for the international financial system and the importance of not closing national doors to protect domestic markets. His message was that protectionism only stops the chance for world recovery. The discussions were mainly on how the stabilisation package could be coordinated globally. "It is how to do this without over-regulating the market", says Reinfeldt.
The Asem meeting has no deciding mandate but the French President Nicolas Sarkozy urged the Asian government leaders to support Europe, in order to write a rule book on international capitalism which would guide the forthcoming meeting in Washington between 20 countries on Nov. 15 this year.#
Even before the meeting formally opened, discussions on the current financial crisis already begun. Swedish Prime Minister Fredrik Reinfeldt was quoted as saying to the Swedish media in Beijing : "After all, I find myself in the company of some 44 heads of governments and those who say that things are bad in Sweden should hear what others are describing. It is dramatic for many just now."
During dinnertime, the attending heads of governments focused their talks on finding common measures to meet the threat and dampen the crisis. " It is a darkness that looms over the world", said Reinfeldt after hearing what others say of the effects and prognoses in their respective countries.
The European Union's Chairman Jose Barroso in his opening statement urged cooperation in creating common rules and regulations for the international financial system and the importance of not closing national doors to protect domestic markets. His message was that protectionism only stops the chance for world recovery. The discussions were mainly on how the stabilisation package could be coordinated globally. "It is how to do this without over-regulating the market", says Reinfeldt.
The Asem meeting has no deciding mandate but the French President Nicolas Sarkozy urged the Asian government leaders to support Europe, in order to write a rule book on international capitalism which would guide the forthcoming meeting in Washington between 20 countries on Nov. 15 this year.#
Tuesday, October 21, 2008
Swedish gov't gives loan guarantee but demands bonus stop
In a unique agreement announced today, the Swedish coalition government guarantees the banks borrowings to the tune of 1.5 billion Swedish crowns. As a requirement, it is demanding a stop on bonuses but not on dividends."We will not have bonuses that can lead to a lot of risks when we stand behind the guarantees," says Finance Minister Anders Borg.
Several other countries have recently undertaken huge bailout packages for the banking sector. But in order for the taxpayers to guarantee the private banks' transactions certain requirements are necessary. One of the tougher requirements is to abstain from dividends to shareholders. In United Kingdom, the demand on suspended dividend payments runs for five years, in Denmark two years. In Sweden, the discussion is under hard criticism. Last Monday, the coalition government presented a package of measures aimed to calm the finance market. There was no mention of a stop to giving out dividends.
According to Swedish Financial Market Minister Mats Odell, the reason behind the stop to dividends is that banks could run out of money if they make new share issues. " This would mean that we have forget new capital injections to the banks that need one. It would be a signal that the state would take care of the whole capitalization issue," Odell states.
The share market reacted positively to the government's bank package and all the bank shares rose in value last Monday. The banks' dividends have been sizable in the recent years and they have influenced an upswing in share values. Last year Swedbank, Handelsbanken and SEbanken together issued 15 million SEK in dividends. The partly state-owned Nordea bank issued around 12 billion SEK in dividends.
The requirement that stands behind the government guarantee is the stop to bonuses during the guarantee period and a statusquo to salary increases and board members' fees and severance pays. The demand on banks however, stands only during the guarantee period that stretches up to April 30, 2009 which means that it would be no hinder to raise salaries and give bonuses if the guarantee period is not prolonged. According to the government, a prolongation is possible up to December next year. ( Translated from Dagens Nyheter, Oct. 21, 2008)
Several other countries have recently undertaken huge bailout packages for the banking sector. But in order for the taxpayers to guarantee the private banks' transactions certain requirements are necessary. One of the tougher requirements is to abstain from dividends to shareholders. In United Kingdom, the demand on suspended dividend payments runs for five years, in Denmark two years. In Sweden, the discussion is under hard criticism. Last Monday, the coalition government presented a package of measures aimed to calm the finance market. There was no mention of a stop to giving out dividends.
According to Swedish Financial Market Minister Mats Odell, the reason behind the stop to dividends is that banks could run out of money if they make new share issues. " This would mean that we have forget new capital injections to the banks that need one. It would be a signal that the state would take care of the whole capitalization issue," Odell states.
The share market reacted positively to the government's bank package and all the bank shares rose in value last Monday. The banks' dividends have been sizable in the recent years and they have influenced an upswing in share values. Last year Swedbank, Handelsbanken and SEbanken together issued 15 million SEK in dividends. The partly state-owned Nordea bank issued around 12 billion SEK in dividends.
The requirement that stands behind the government guarantee is the stop to bonuses during the guarantee period and a statusquo to salary increases and board members' fees and severance pays. The demand on banks however, stands only during the guarantee period that stretches up to April 30, 2009 which means that it would be no hinder to raise salaries and give bonuses if the guarantee period is not prolonged. According to the government, a prolongation is possible up to December next year. ( Translated from Dagens Nyheter, Oct. 21, 2008)
Thursday, October 16, 2008
Economic troubles threaten to capsize EU's climate target
In the shadow of the European Union's unity on how to resolve the financial crisis emerges a conflict on how the EU will tackle the global warming problem. Several Eastern European countries are intent on releasing more carbon dioxide in order to cope with the costs of the economic downfall.
The financial crisis is top priority in the agenda of the forthcoming heads of states meeting in Brussels Thursday and Friday. A deciding step towards a common plan to tackle the financial crisis was agreed upon last Sunday when the heads of the Euro countries meet in Paris. This time, all 27 EU leaders will have to stand behind the common action.
However, even if the EU leaders are agreed on how the financial crisis will be resolved though savings and credit guarantee's, state interventions and auditing regulations the big question on climate goals remain undecided. The EU countries have agreed to reduce the carbon dioxide emission to an average of 20 percent by 2020. The question is, how big will be the reduction by each EU member state.
Several EU members are discussing how the financial crisis have affected their economies and are asking for a more lenient adherence to the EU proposed goal in order to increase their competitive advantage. For example, Poland, Bulgaria, Romania; Czech, Hungary, Slovakia and the three Baltic states - which had a separate meeting before the summit. They want to reduce their commitment to the climate package.
Sweden's Prime Minister Fredrik Reinfeldt says that " the climate issue cannot wait." He thinks that many try to lighten their burden by using the solidarity argument. " I believe that one should be cautious," he was quoted as saying. (Source: Dagens Nyheter, 16 October 2008)
The financial crisis is top priority in the agenda of the forthcoming heads of states meeting in Brussels Thursday and Friday. A deciding step towards a common plan to tackle the financial crisis was agreed upon last Sunday when the heads of the Euro countries meet in Paris. This time, all 27 EU leaders will have to stand behind the common action.
However, even if the EU leaders are agreed on how the financial crisis will be resolved though savings and credit guarantee's, state interventions and auditing regulations the big question on climate goals remain undecided. The EU countries have agreed to reduce the carbon dioxide emission to an average of 20 percent by 2020. The question is, how big will be the reduction by each EU member state.
Several EU members are discussing how the financial crisis have affected their economies and are asking for a more lenient adherence to the EU proposed goal in order to increase their competitive advantage. For example, Poland, Bulgaria, Romania; Czech, Hungary, Slovakia and the three Baltic states - which had a separate meeting before the summit. They want to reduce their commitment to the climate package.
Sweden's Prime Minister Fredrik Reinfeldt says that " the climate issue cannot wait." He thinks that many try to lighten their burden by using the solidarity argument. " I believe that one should be cautious," he was quoted as saying. (Source: Dagens Nyheter, 16 October 2008)
Tuesday, October 14, 2008
Swedish banks promised state support
The Swedish banks will get government support at the same time that the Central Bank announced an additional 150 billion Swedish crowns injected into the the banking system. A new law is being prepared in record speed towards implementation of these new measures which came about after the meeting Sunday night of Euro member states.
The Swedish Central Bank will release the money to the banks in two installments, the first on Wednesday and the second on Thursday and it will run for three months. At the same time, the Central Bank also plans to ease credits to companies outside of the financial sector.
The agreement on state support to European banks made by EU heads of state last Sunday will also become a Swedish law. The agreement provides a framework for the rules that will encompass the state support, although each EU member-state will have each own implementing law. "This is very heartening", said Prime Minister Fredrik Reinfeldt. He stressed however, along with Finance Minister Anders Borg, "that the Swedish banks do not need any capital injection. It is simply capital coverage that is needed since they are still earning well."
Another plan by the government is for the state to guarantee depositors' money in the event any bank goes bankrupt by raising the present SEK500 - recently raised from SEK250, to a higher amount. Both Reinfeldt and Borg think that the agreement among the European leaders is a sign of a more determined and unified action than what one could see in United States.#
(Source: Dagens Nyheter, 14 Oct. 2008)
The Swedish Central Bank will release the money to the banks in two installments, the first on Wednesday and the second on Thursday and it will run for three months. At the same time, the Central Bank also plans to ease credits to companies outside of the financial sector.
The agreement on state support to European banks made by EU heads of state last Sunday will also become a Swedish law. The agreement provides a framework for the rules that will encompass the state support, although each EU member-state will have each own implementing law. "This is very heartening", said Prime Minister Fredrik Reinfeldt. He stressed however, along with Finance Minister Anders Borg, "that the Swedish banks do not need any capital injection. It is simply capital coverage that is needed since they are still earning well."
Another plan by the government is for the state to guarantee depositors' money in the event any bank goes bankrupt by raising the present SEK500 - recently raised from SEK250, to a higher amount. Both Reinfeldt and Borg think that the agreement among the European leaders is a sign of a more determined and unified action than what one could see in United States.#
(Source: Dagens Nyheter, 14 Oct. 2008)
Monday, October 13, 2008
EURO member-states move to avert financial crisis
French President Nicolas Sarkozy announced Sunday evening that the European leaders have agreed on a common plan to tackle the banking crisis using the British model to create stability in the economic system. Along with British Prime Minister Gordon Brown, Sarkozy took the initiative in the campaign to save the world economy, especially after the IMF announced that the financial system is threatened by the lack of liquidity.
The fifteen Euro member-states met in Paris Sunday night and agreed on a common plan whereby the governments would inject large sums of money into the bank system as well as safeguard the credit system between banks. "Europe is united to tackle the crisis", Sarkozy said, adding that each country could be forced to come up with their respective measures.
Swedish Prime Minister Fredrik Reinfeldt said that "whether the bailout package would have sufficient effect depends upon how the guarantees are exactly formed." He added: " We have been very active, not least with Denmark and Finland, and many here have also asked since we have had a similar experience with a banking crisis ( in the 1990s ) and how we resolved it."
He also said that, as far as the Euro member-states package is concerned, everything will depend upon the details, how they will be formed; what would be the limits of the guarantees and how would the members react in common against a financial institution that needs saving.#
Saturday, October 11, 2008
Martti Ahtisaari: A worthy peace prize winner
Former President of Finland and peace negotiator Martti Ahtisaari is the 2008 winner of the Nobel Peace Prize, a well-deserved recognition that came three years late. He was not particularly surprised at receiving the award, reported the Swedish daily, Dagens Nyheter (DN). Ahtisaari's effort to broker a peace negotiation in Aceh province in Indonesia, shortly after the tsunami catastrophe has successfully brought peace in that beleaguered region.
He said: " I have received the prize for my life's work. This is the biggest recognition one can get in my area of work", he was quoted as saying. He received the news en route to a meeting with current Finland President Tarja Halonen. "The prize has come at an important moment. This morning I learned that Montenegro and Macedonia have recognized Kosovo's independence. Now I hope that others will follow their example", he said.
The Norwegian Nobel Peace Prize Committee's choice of Ahtisaari was motivated by his "significant efforts in the resolution of international conflicts in several continents over the last three-year period." The Committee believes that Ahtisaari with his work in crisis management has contributed to a more peaceful world and brotherhood between nations in the spirit of Alfred Nobel's will.
Earlier in the week Ahtisaari was also awarded UNESCO's recognition for his life work on peace promotion. Experts predicted that his getting the Nobel Peace Prize was not far behind.
There have been criticisms for some of the earlier Nobel Peace Prize awards because they were not given to those for whom the recognition was intended for. Sometimes the motivation was politically-oriented in an effort to influence a particular development instead of rewarding an actual achievement, as was the case of 1966 prize to Carlos Bela and Jose Ramos-Horta from East Timor, wrote DN. Others were even controversial like Henry Kissinger, or the unknown Rigoberta Menchu Tum. And there were those that should have received the peace award but never got to Oslo, like the International Tribunal for War Criminals, added DN.
This year's Nobel Prize winner appears to have satisfied Alfred Nobel's intention that one who succeeds in bringing tangible peace in any part of the world, must be justly compensated. It is the traditional spirit of the Nobel Peace Prize.#
He said: " I have received the prize for my life's work. This is the biggest recognition one can get in my area of work", he was quoted as saying. He received the news en route to a meeting with current Finland President Tarja Halonen. "The prize has come at an important moment. This morning I learned that Montenegro and Macedonia have recognized Kosovo's independence. Now I hope that others will follow their example", he said.
The Norwegian Nobel Peace Prize Committee's choice of Ahtisaari was motivated by his "significant efforts in the resolution of international conflicts in several continents over the last three-year period." The Committee believes that Ahtisaari with his work in crisis management has contributed to a more peaceful world and brotherhood between nations in the spirit of Alfred Nobel's will.
Earlier in the week Ahtisaari was also awarded UNESCO's recognition for his life work on peace promotion. Experts predicted that his getting the Nobel Peace Prize was not far behind.
There have been criticisms for some of the earlier Nobel Peace Prize awards because they were not given to those for whom the recognition was intended for. Sometimes the motivation was politically-oriented in an effort to influence a particular development instead of rewarding an actual achievement, as was the case of 1966 prize to Carlos Bela and Jose Ramos-Horta from East Timor, wrote DN. Others were even controversial like Henry Kissinger, or the unknown Rigoberta Menchu Tum. And there were those that should have received the peace award but never got to Oslo, like the International Tribunal for War Criminals, added DN.
This year's Nobel Prize winner appears to have satisfied Alfred Nobel's intention that one who succeeds in bringing tangible peace in any part of the world, must be justly compensated. It is the traditional spirit of the Nobel Peace Prize.#
Wednesday, October 1, 2008
The Aftermath of America's Financial Crisis
The United States congress has voted down the USD700 billion bailout plan and sent stock markets around the world spinning to new lows. Pres. George Bush Jr. has lost whatever influence he has over his own Republican congressmen who refused to save "Wall Street at the cost of Main Street". With the US elections in just 34 days from today, the only political platform of urgency is the economic salvation of United States. Everything else pales in comparison and importance.
Having watched the CNN for almost 12 hours each day since the first broadcast on the shocking financial crisis to hit America since the 1920s, starting with the downfall of the global American Insurance Group or AIG then followed by other major investment houses, the impact had been tremendous especially for ordinary people with houses and pensions to lose. Wall Street has been accused of greed and recklessness and US politicians have the right to be angry, to refuse to bail out the culprits of this world-shaking financial catastrophe.
In Sweden, the stock market plunged and sent pension funds and company shares to new lows while mortgage loans hit new highs in interest adjustments. The Swedish dailies headlined impending cutbacks among industrial workers such as Volvo, where 1900 will lose their jobs; pension companies will be declaring a zero return on investment; interest rates will hit major companies and housing mortgage loans will go up in interest rate payment.
Those who borrowed 80 to 90 percent of their house values are worst affected, writes Dagens Nyheter.
Having watched the debate between the US presidential candidates last weekend, I was convinced that Republican candidate John McCain has more experience to take over a very troubled American economy. It seems though that Barack Obama is better understood by ordinary Americans now threatened with more unemployment and failure to pay housing mortgages. McCain has the misfortune of being blamed for the failures of the Bush Administration, although he has been trying to distance himself from the mistakes of the outgoing presidency. I do believe that McCain will and can handle the urgency to act on America's economic situation with his long experience as legislator as against Barack Obama's elegant rhetoric.
Having watched the CNN for almost 12 hours each day since the first broadcast on the shocking financial crisis to hit America since the 1920s, starting with the downfall of the global American Insurance Group or AIG then followed by other major investment houses, the impact had been tremendous especially for ordinary people with houses and pensions to lose. Wall Street has been accused of greed and recklessness and US politicians have the right to be angry, to refuse to bail out the culprits of this world-shaking financial catastrophe.
In Sweden, the stock market plunged and sent pension funds and company shares to new lows while mortgage loans hit new highs in interest adjustments. The Swedish dailies headlined impending cutbacks among industrial workers such as Volvo, where 1900 will lose their jobs; pension companies will be declaring a zero return on investment; interest rates will hit major companies and housing mortgage loans will go up in interest rate payment.
Those who borrowed 80 to 90 percent of their house values are worst affected, writes Dagens Nyheter.
Having watched the debate between the US presidential candidates last weekend, I was convinced that Republican candidate John McCain has more experience to take over a very troubled American economy. It seems though that Barack Obama is better understood by ordinary Americans now threatened with more unemployment and failure to pay housing mortgages. McCain has the misfortune of being blamed for the failures of the Bush Administration, although he has been trying to distance himself from the mistakes of the outgoing presidency. I do believe that McCain will and can handle the urgency to act on America's economic situation with his long experience as legislator as against Barack Obama's elegant rhetoric.
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