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Political Economy
Sweden’s crisis not only housing but also lost export market share
Wednesday, 15 February 2012We reported yesterday that the EU Commission is worried about a Swedish mortgage bubble as such Sweden is being placed under close observation which can lead to demands on the government for urgent action.
The EU Commission has reviewed member countries' economies in ten areas, including exports, balance of payments, unemployment, wages, debts and house prices.
Swedish household debt levels are among the five highest in the EU, equivalent to 237 percent of gross domestic product. It also suggests that property prices have risen sharply over the past fifteen years and only recently have there been some declined...somewhat.
Finance Minister Anders Borg agrees with the Commission that household debt is a problem, but he believes that the government has already begun to respond.
“We have taken a wide range of measures to strengthen the robustness of the banking sector and household sector,” Borg told reporters after a parliamentary debate. He pointed to the tightening of capital adequacy requirements for banks and the lending ceiling for house purchase to households.
EU commission warns also that Swedish exports has lost market share and property investments are at a low level. At the same time Sweden is criticized for the large surpluses in the current account, which the Commission believes is partly due to a low level of investment.
Anders Borg does not agree with that aspect of the criticism but says that it is countries with high deficits that need to strengthen their competitiveness.
The Commission will now make a detailed examination of the identified countries with governments based on the latest developments. In May, the Commission will decide which countries will received few direct recommendations calling for action.
If the requirements are ignored, it can ultimately lead to decisions on hefty sanctions against designated euro area countries.
By Scancomark.se Team
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