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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 little investment.

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 reduced.
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 Team

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