Governments around the world are injecting staggering sums of money into businesses, banks and households to keep economies afloat. In Sweden alone, SEK 635 billion in fiscal measures have been decided in the past few weeks, combined with support purchases and central bank loans totalling SEK 1,500 billion to safeguard the credit supply.
Torbjörn Isaksson, Nordea’s chief analyst, says additional aid packages will be announced, given the bleak outlook.
The majority of the funding comes from central bank printing presses, thereby increasing the risk of financial bubbles and high inflation at a later date. However, this is a risk that must be taken, say economists
A majority in the Swedish Parliament wants to force the government to lower the interest rate in the government’s crisis package. The interest rate, including charges, of the package is 6.6 per cent annually. Several parties and some business representatives are critical.
The opposition has now joined together to urge the government, the Centre Party and the Liberals to lower the interest rate.
“We want small and medium-sized enterprises to be able to be rescued in order to save as many jobs as possible,” says the Left Party’s Ulla Andersson.
The finance committee will ask the government to put forward a proposal about how the interest rate could be lowered and the cost of this, says Andersson.
Finance Minister Magdalena Andersson is irritated by Swiss-Swedish ABB’s decision to make dividend payments equivalent to some SEK 18 billion.
The minister says the decision “is hard to swallow” in these times and is considering a law change.
The engineering group’s two largest shareholders, Sweden’s Investor and Cevian Capital will receive dividend payments of just over SEK 2 billion and SEK 1 billion apiece.
The Swedish economy will shrink by 4.2% in 2020 and unemployment will rise to 10% by the summer, predicts Swedbank in its latest economic outlook. In January, the bank forecast economic growth of 1.4% in 2019 and of 1.8% in 2021.
The economy is expected to shrink by 6% in the second quarter, compared to the first, which is the fastest slowdown ever recorded, according to Swedbank. Nevertheless, it forecasts a rebound of 3.9% in 2021.
The new assessment is based on the assumption that measures taken to reduce the spread of infection will decrease “in the near future,” according to the bank's acting chief economist Andreas Wallström.
“If that doesn't happen, the economic downturn will be even deeper,” he says.
Extra fiscal stimulus will be required, according to the bank’s analysts. The measures announced to date amount to 0.3% of GDP. In total, Swedbank forecasts measures for a total of SEK 100 billion or 2% of GDP. This includes direct support to affected companies and increased state subsidies to the municipalities.
The global economy is expected to shrink by 2% this year and then to rebound and grow by 6% next year in the main scenario. Swedbank emphasises that the forecast is uncertain and is based on assumptions that the spread of infection in the US and Europe reaches its peak in the second quarter and that the measures against the spread of infection will be rolled back within a few weeks.
The Confederation of Swedish Enterprise (SN) has called for state aid of SEK 200,000 to save companies.
A survey by the organisation has shown that 53% of its member companies have liquidity and financing problems, while 41% have already laid off employees, or plan to do so, and 57% intend to make use of the system for short-term lay-offs. The survey was conducted among 3,000 companies, of which 1,100 responded.
SN CEO Jan-Olof Jacke said the organisation envisages a scenario of mass unemployment due to the corona outbreak and has called for employer contributions to be shelved for three months. The SEK 200 billion should be added to Sweden’s national debt, which is at a record low.
Green Financial Markets Minister Per Bolund has said the Ministry of Finance is “working around the clock” to draw up a package of measures for small companies, hinting that the government is looking at ways to assist firms with major costs, such as salaries.
Swedbank cancelled the severance pay of former CEO Birgitte Bonnesen on Monday after a report by law firm Clifford Chance said she had failed to address deficiencies in the bank’s anti-money laundering controls. The bank was due to pay Bonnesen SEK 26.6 million, reports DI.
The law firm found that several of the statements issued by the bank between October 2018 and February 2019 about suspected money laundering were inaccurate. Furthermore, the former CEO lied when she claimed in October 2019 that the bank’s internal probe had shown that Swedbank was not part of the money laundering scandal, which had involved Danske Bank.
Swedbank Chairman Göran Persson said the bank had not measured up to the “requirements that customers, owners and society are entitled to set”.
Clifford Chance has also criticised Michael Wolf, the CEO of the bank between 2009 and 2016, who failed to focus on the shortcomings in anti-money laundering practices in the Baltic subsidiaries.
The Swedish Financial Supervisory Authority last week fined Swedbank SEK 4 billion over the breaches.
Closures in Italy are worrying Anna Hallberg, Sweden’s trade minister. “Northern Italy is Europe’s second largest exporter of goods and closing down production is going to affect global value chains”, she says.
The minister is also concerned about getting necessary medical equipment. She describes her primary task as resolving transport and is alarmed that the EU’s internal market is functioning so poorly despite new EU guidelines that goods must flow between countries without obstacles.
Sweden’s Financial Supervisory Authority (FSA) has fined Swedbank a record SEK 4 billion for serious deficiencies in its management of money laundering risks in its Baltic operations. The financial watchdog also said the management had withheld information from the authorities as recently as April 2019, when the then CEO and Board chairman were forced to leave the bank.
“Swedbank has had serious, systematic shortcomings in its work to prevent money laundering in the Baltics,” said FSA Director General Erik Thedéen at a news conference.
The proximity to Russia, the high number of foreign clients and the ease with which Russian clients could make transactions via the bank’s Baltic operations were all factors that should have raised alarm bells, he said.
“This is very serious, and it is a large fine,” Swedbank CEO Jens Henriksson later told DN. “I am not surprised. We respect the decision. These are historical shortcomings which we are working to rectify,” he added.
The economic and labour crisis created by the Covid-19 pandemic could increase global unemployment by almost 25 million, according to a new assessment by the International Labour Organization (ILO).
Based on different scenarios for the impact of Covid-19 on global GDP growth, the ILO estimates indicate a rise in global unemployment of between 5.3 million and 24.7 million from a base level of 188 million in 2019. By comparison, the 2008-2009 global financial crisis increased global unemployment by 22 million.
The Swedish Public Employment Agency, which has said that some 5,000 redundancies were announced last week, fears unemployment levels will be similar to those seen in the financial crisis. In the autumn of 2008, around 20,000 people were given in one month.
The largest wave of redundancies since the financial crisis is sweeping across Sweden and thousands of hourly contract and probationary period workers are at risk of losing their jobs. In the past two weeks alone almost 4,700 people have been given notice, mostly in the Stockholm region. The hospitality and airline industries are worst-affected but the Swedish Public Employment Service (AF) expects job losses to spread to other industries and areas.
The message from Employment Minister Eva Nordmark is that the government is going to do what is required to support companies.
She says the government is in close contact with AF and that supporting companies is not just about saving jobs here and now, but about the impact on Sweden’s ability to recover.
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