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Political Economy
EU again worried about Sweden household debt as it carried out a compulsory periodic test of EU economies
Tuesday, 14 February 2012Swedish economy is great when compared to many EU economies but there is a time bomb waiting to explode that is not focused on when various forms of analysis are being made – Swedish real estate prices and household debts is that time bomb.
We have done our bit here on this network in highlighting this premise but as it stands, there is still huge worries about this Swedish micro economic sector such that the likes of the EU once again has called for Sweden to do something about this deficiency and as soon as possible.
The European Commission begins detailed examination of Sweden and eleven other European countries in relation to the very large macroeconomic imbalances in the region.
The danger for Sweden stands clear, increasing household debt, "which is now at high levels despite a slowdown in credit growth."
"This reflects very rapid increase in house prices over the past 15 years, which has only recently begun to stabilize, "the Commission said in a statement on Tuesday. But as the Swedish central bank might lower interest rates and commercial banks bent on increasing their own lending interest rates as well as high prices Sweden’s over valued homes it remains worrying as to how this problem could be tackled.
The other eleven countries whose economies are meticulously being examined are Belgium, Bulgaria, Cyprus, Denmark, Finland, France, Italy, Slovenia, Spain, Britain and Hungary.
EU countries that already receive emergency loans, such as Greece, Ireland, Portugal and Romania are already placed under close monitoring of their support program. Latvia is also monitored more closely in the wake of the country's aid program.
The new EU rules on economic governance include not only tougher budget rules but also a macroeconomic surveillance. On Tuesday, the Commission presented the first "warning report" that identifies the EU countries that require closer scrutiny.
The Commission's detailed investigation may lead to concrete recommendations for each EU country to improve. By extension, if the recommendations are ignored and the situation becomes very serious, the EU may ultimately impose sanctions on the euro area country (ies).
"This crisis that has the structure to macroeconomic imbalances poses risks to financial stability, economic outlook and the country's prosperity, "said economics commissioner Olli Rehn in a press conference in Strasbourg.
Belgium is examined for loss of shares in the export markets that has led to its deteriorating current account balance and reduced competitiveness. The level of private debt should be viewed together with the high public debt.
Denmark is examined for its household indebtedness after the rapid price rise in house prices.
Finland has lost shares in its export market and private sector debt is increasing, mainly because of the mortgages.
France's trade balance has gradually deteriorated as well as Italy which is being examined for a loss of competitiveness since the mid-1990s. Public debt is a cause for concern, especially given the poor growth and structural weaknesses.
Spain is undergoing an adjustment to large external and internal imbalances in the housing and credit boom.
Britain has lost export market shares. The high level of private debt in the country, particularly with the mortgages is to be seen together with the country’s weak public finances.
Hungary is being examined for high public and private debt. It indebtedness to foreign countries is the highest in the EU.
By Scancomark.se Team
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