Mundus Brief: February 2021

We would wish you a Happy New Year, but for the inherent assumptions concerning affective phenomenology and the social construction of time (and being, if you must), new year is celebrated at different points of time in different societies. In the Chinese tradition, we at Mundus International wish you a Happy Lunar Year, wishing you that the Year of the Ox brings you fortune and happiness.

Huawei or the Highway

When the Swedish Post and Telecom Agency (PTS) ruled in favour of banning Chinese telecom-makers Huawei and ZTE last autumn following fears of espionage, Beijing warned Swedish businesses of repercussions, should Stockholm not make a U-turn. Leading business figures, like Ericsson CEO Börje Ekholm and Marcus Wallenberg, launched an offensive, urging authorities to rethink the ruling in hope to keep their market shares in lucrative Chinese markets. Nonetheless, Swedish exports destined to China have jumped by 10-15% last year, new export data suggests. Reluctant authorities maintained their policy line and 5G frequencies have since been auctioned off.

But that could ultimately be the ontologically-flawed construction of the hyperreal; what we see is a hierophany where Sino-American geopolitics manifests itself into the Swedish business environment by infusing regulators with tech and infrastructure, propelling us into a new dimension of hybrid conflicts. If the Swedish market is perceived as a test market for e.g. digital solutions in a European context, then we could perhaps view the Huawei 5G ban as a litmus test where Western telecom meets with their Chinese counterparts and as a space where boundaries and cooperation are being defined. Yet many questions arise. Maybe what is important is not how this transforms Transatlantic ties and the US-China trade war – with Europe and Sweden caught in the middle – but rather how this affects markets, trade and perhaps supply-chains. Maybe the 5G affair is a taster of the challenges and limitations that regulators face as economies change, with consumers and producers the losers as competition declines. The February Edition of the Monthly Policy Review explores 5G as a digital power struggle.

January proved to be an eventful month for Swedish diplomacy. The Government presented its 2021 EU policy statement to the Riksdag Committee on EU Affairs (EU-utskottet) early in January. What left observers dumbfounded was that discussions took place behind closed doors, a practice that is not commonplace in Swedish lawmaking. But what came out of the discussions was little dissent, as Swedish parties backed the Government’s views on the EU recovery plan, trade and rule of law, among other issues. The one matter that spurred some discontent was the European Commission’s plan of unveiling a common minimum wage, which could spell trouble to the Nordic model of wage negotiations – where businesses and workers agree without state intervention. Alongside this, Portugal assumed the rotating EU presidency for the next six months and Mundus International interviewed Portuguese Secretary of State for European Affairs, Ambassador Ana Paula Zacarias, in the latest issue of the Mundus Monthly Policy Review. For a taster of Portugal’s policy priorities, please read a post on the matter on the Mundus Blog.

Sweden takes on the rotating presidency of OSCE this year, shouldering the role from Albania. The Minister for Foreign Affairs Ann Linde (S) announced the topics of which will be spotlighted under her leadership, like resolving conflicts in Belarus, Moldova (Transnistria), Ukraine and the Caucasus. Observers would suggest that Linde’s mandate could render an additional spin to the OSCE, by deepening the presence of feminist and environmental approaches to their projects. But only time will tell. With these regional developments at play, Linde spoke with US Secretary of State Anthony Blinken last week and reportedly proposed to deepen democracy and security in their diplomatic partnership with US President Joe Biden’s forthcoming mandate. This dynamic could escalate tensions with Russia on multiple issues, from the jailing of opposition figure Alexey Navalny to NATO’s boosted presence in the Baltic region, even if Moscow and Stockholm seem to be able to put differences aside and cooperate on technical areas, like climate and the environment.

The security debates continues. Simmering tensions cannot be downplayed as a majority of Riksdag lawmakers voted in favour of a so-called NATO option which is now there for Sweden to join the Transatlantic military club in the event of deteriorating security. The decision divided media, politics, the public and society because Sweden has enjoyed its non-military alignment over the course of multiple decades. Could this fortify Stockholm’s place in the geopolitical chessboard? Nevertheless, good days could await the Swedish defence industry as an overhaul of the Armed Forces and defence-makers like BAE Hägglunds and SAAB secure big orders from overseas clients. BAE Hägglunds recently sealed a deal worth SEK5bn with the Netherlands, after securing another contract with Switzerland last November. SAAB followed up on a UAE order concerning advanced aerial radar systems worth USD1bn, which saw its shares jump by 6.2% in early January. 

Clued up in Covidnomics

The coronavirus continues to generate headlines in domestic- and foreign media. Though subject to criticism, the soft-touch approach devised by State Epidemiologist Anders Tegnell resulted in mixed results depending on one’s views. The death toll was on the cusp of exceeding 12,000 at the end of January, and Sweden’s per capita health outcomes have been poor. But, even if Tegnell’s decisions were never presented with an economic rationale, new economic and industry data provided by Statistics Sweden demonstrate that the Swedish economy took less of a beating compared to its European counterparts. The contraction of the Swedish economy amounted to -2.2% in 2020, far below the EU average of -6.4%.

Businesses reported an increase of new orders during November and December, enabling Sweden to maintain its export surplus in November, which amounted to SEK1.4bn. Although unemployment is beginning to stabilise from the year’s furloughs, now tallying at 8.2%, household spending saw a gentle decline by 0.4% in December, indicating that households are cautious and are holding onto their Kronor. And happier times could be on their way as the Swedish economy grew by 0.5% in 4Q20, according to Statistic Swedens’ data. The role of the vaccine will undoubtedly provide people and businesses with a degree of optimism since it could spell the end of social distancing, fuelling a desire to return to a new normal. 

Those steering the Swedish recovery are Magdalena Andersson (S), Minister for Finance, and Stefan Ingves, Governor of the Riksbank. Facing the challenges in restructuring the welfare state for present and future needs, Andersson balanced strictness with generosity in opening up the coffers as part of the national virus rescue package. It meant that big industries like AB Volvo received cash, whereas some small-scale businesses, creatives and sole traders received less. Andersson’s approach was recently given a thumbs up by the IMF, whose criticisms concerned the integration of the foreign-born into the labour market and the brittle property market – which is marred by high prices and few first-time buyers able to jump on the property ladder. Ingves was recently recognised as Central Banker of the Year for his efforts in keeping the economy moving during the pandemic. 

Fiscal issues face more headaches as the parties in the cross-block January Agreement (Januariavtalet, JA) involving C, L, MP and S are at loggerheads over how taxes are meant to look and over Sweden’s migration policy going forward. The Liberals are  seemingly hell-bent of leaving the Agreement, which could usher a snap election. For more about the dynamics please consult the latest edition of the Monthly Policy Review.

But most Swedish politicians seem to consider the pandemic a stellar opportunity to accelerate the green transition. The automobile sector, like AB Volvo and Volvo Cars, broke expectations and achieved phenomenal figures in recent quarterly reports. Volvo Cars for instance reported a big sales jump in lucrative Chinese markets as buyers now prefer to drive to work instead of opting for public transport in a post-pandemic context. Electric vehicles are no longer the future but the present, as Volvo Cars reported an increase of sales of its electric and hybrid models. The European Commission earmarked nearly EUR3bn for European car battery development and Brussels has backed battery-maker Northvolt in past funding sessions. The hydrogen economy has also suddenly exploded as a political and industrial issue in Sweden’s green transition, after being pushed as a multi-faceted cure to many ills in the EUs Green Deal. The February Edition of the Monthly Policy Review approaches this.

… and in the Finland Monthly Brief

Meanwhile, the Finland Monthly Brief  continues on the climate theme. Finland has a highly distinctive strategy in its approach to decarbonising its economy. Not only is its climate target amongst the most aggressive in the world – with a fantastical target of carbon neutrality by 2035, but its circular economy strategy to get there is seen as a fringe issue elsewhere. It is not to say that the other Nordics don’t believe in the circular economy. Rather, it is seen to be a nice additional policy that produces some interesting business models and perhaps some climate benefits, while the heavy lifting still needs to be done via clean energy and industrial decarbonisation of industries such as cement and steel. Is Finland’s strategy viable, politically or economically? These are the questions that we explore as our lead article. 

Our second story in the Finland Monthly Brief looks at the political fortunes of the Coalition Party. Once one of the big three parties dominating Finnish politics, its fortunes have ebbed as it leaks voters to both the right and the left. How will the party respond, and will it decide to dump its leader in doing so? Our final story, The Portuguese EU Presidency – the view from Finland, continues the theme of how the Nordics are engaging with the EUs post-pandemic recovery plans.