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Swedish manufacturing jobs threaten by constricted euro economic growth and strengthening Krona over the Euro and dollar
Wednesday, 15 August 2012
The Swedish export companies are having a sweaty period as the Swedish
krona continues to strengthen against the euro and the dollar such that
it is estimated that 75 000 jobs in Sweden could be affected
According to Swedish Trade Council, Swedish central bank, the
Riksbank's interest rate policy is not economically viable to the
Swedish industrial sector.
The past week has seen the Swedish currency strengthened against the
euro, now trading at Skr8.24 to Euro. For Swedish people travelling
abroad, it is a favourable environment that they find themselves.
For the export sector, the reverse is expected. A strong Krona makes
Swedish-made goods more expensive abroad and its companies would it
more difficult to compete.
"Companies must balance their costs with revenues. To stay ahead, they
try to reduce their costs in Sweden, for example by outsourcing
operations to subcontractors in other countries,"says Mauro Gozzo,
chief economist at swedish Export Council, which is jointly owned
by government and business.
He is concerned that the Krona is so strong in a recession, which
affects growth and employment. Mauro Gozzos calculations show that if
the crown continues to be valued as high as Skr8.30 against the euro
and Skr6.70 against the dollar, 75 000 jobs in Sweden could be lost
over the next two years.
The companies that are affected most rapidly are small and medium-sized
companies, which often do not hedge their trades to counter such
shocks. But already seen are also large euro companies such as
Holmen which are reporting tough times
Holmen already has programs to reduce its costs. "We have long lived in
the belief that the euro should be valued around Skr 9. If it goes down
to Skr8 it will not be sustainable for our industry in the long
run," Magnus Hall of Holmen adding that the increase changes in the
strength of currency now means that there should be increase saving and
SCA on its part has been forced to reduce some of its prices for
newsprint and sawn timber overseas to be able to compete with the
Finnish and Central European companies.
"For the Swedish export industry, the situation is extremely difficult
now. What we are doing short term is to work with our costs and in the
end it's about taking away jobs," says company CEO Jan Johansson.
The reason for the strong Krona the Swedish interest rates which is higher than rates in the U.S. and the euro countries.
Jan Johansson is therefore critical to the Swedish Riksbank's interest rate policy.
He is backed by Mauro Gozzo, who is surprised the Riksbank's attitude towards the euro area.
He believe that the bank would have cut rates long ago since
we're in a weak period. "I can not see the benefits of appreciation,"
says Mauro Gozzo.
The Swedish central bank's position with regard to the interest rates
has had to do with the Swedish housing market which was over heating
with prices just sky rocketing. It was pushing more and more
Swedish home owners into enormous household debts which even the IMF
and the EU commission had insisted that the household debt must be
Next was also the fact that many Swedish homes where over prices with
some authorities saying that the Swedish real estate sector was
pricing its homes three to 4 times its value.
by Scancomark.se Team
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