Reading our brief last month, it is clear that it was going to take something big to push crime and the politics around it off the front pages. It turned out that the issue to do that was one of the biggest global stories of this short decade – the corona virus (Covid-19). The politicians were of course still fighting for airtime, and did achieve some success in the first few weeks of February until the pandemic really hit. The government, particularly the Social Democrats, and their leader, Stefan Löfven, are in an existential struggle. Their support has not been this low for a hundred years and the party is torn between those who want to blame Löfven and switch leaders, and those who believe that the party can survive if it finds relevant policies. Elsewhere, the economy was performing OK, Swedish companies were doing well, and Ericsson is in the uncomfortable situation of being a pawn in the US-China cold war. Sweden’s Foreign Minister, Ann Linde, ducked this issue as she outlined her foreign policy in the Parliament.

Coronavirus update

Our January Brief did not even mention the word Corona once. Today, one could fill several reports on that issue alone. As our chart below shows, the number of references to this term on Swedish TV and radio literally went viral. At the beginning of January there were 51 mentions in a week. By the beginning of March there were 5,000. 

Around 20 countries have over 100 confirmed cases of Covid-19 (corona), according to statisticsprovided by the WHO. The first case of the coronavirus was reported in Jönköping at the end of January. At 1pm on 9 March, the total number of Covid-19 cases in Sweden had risen to 248, of which 147 were in the Stockholm region. Sweden now has the most cases in Scandinavia. “This is due to Swedish travel habits and nothing else. This is an imported illness and travel is driving the spread,” according to Anders Tegnell, the Public Health Agency’s epidemiologist. The Ministry for Foreign Affairs is advising against all but essential travel to several regions in Italy, including Lombardy, Veneto and Tuscany, parts of South Korea, and to Iran. The Tyrol in Northern Italy and Western Austria have been added to the list of areas where there is a high spread of the Corona virus, so people returning from these areas and show symptoms, should call 1177 for testing, the Swedish Public Health Agency says. It also recommended that people who have any kind of cold or flu symptoms stay at home. 

On Monday afternoon, St Göran Hospital in Stockholm announced that they have adopted an extra “state of readiness” after a patient at the hospital was confirmed to have the virus, although the patient had not travelled in any risk area or been in contact with anyone diagnosed with Covid-19. “You could interpret it as being the first case of domestic infection, but we don’t yet know,” said Dr Per Follin at Stockholm infectious disease unit (TT newswire).

So far, none of the confirmed coronavirus patients have been reported to have serious symptoms. Although the vast majority of people who catch coronavirus are likely to experience only mild symptoms and make a full recovery, even with mild symptoms it is possible to infect others.

The spread of the coronavirus to Europe has rattled financial markets over the past week. Besides the human suffering, it has an economic impact as well. The first wave of business effects was felt by Swedish companies with a manufacturing base or showrooms in China. This affected companies like Volvo Cars, Sandvik, H&M and IKEA. After the third week of February, the contagion spread to the stock market, beginning to have a much broader effect, as concerns about the effect on domestic consumer demand and economic performance began to sink in. But by the end of February the situation had flipped, and Swedish companies were beginning to reopen their production in China, whilst those companies which depended on China for their supply chain were beginning to worry about their inventories, and whether they would need to close factories in Sweden. On 9 March, Scandinavian Airlines advised that it will cancel 2,000 flights in March due to the virus. The virus has still been good for some – there as been an upswing for the sale of disinfectants and face masks. Online pharmacy Med’s sales of these products have increased by 2,000% in one week, according to the company’s CEO Björn Thorngren, who has quarantined himself at home after a ski trip to northern Italy.

The physical virus may yet be contained in Sweden, but the economic effects are still very concerning. The uncertainty regarding the economic development ahead is exceptionally high. The OECD’s main scenario means that global GDP will be 0.5% lower this year as a result of the corona. In an optimistic scenario, the effects on the Swedish economy will be small with the GDP growth projected to decline by 0.2–0.3 percentage points in 2020 compared with the January forecast, and then to recover already the following year. In a more severe scenario, Swedish GDP growth would decline by 0.8 percentage points. At a press conference on 6 March, the Minister for Finance, Magdalena Andersson (S) said that the GOS’s assessment is that Swedish GDP growth will be 0.3 percentage points weaker this year than it otherwise would have been due to the virus outbreak.

➢  Useful links on Covid-19

• Information about COVID-19 from the Swedish Public Health Agency (in English)
• Official information on the novel corona virus from Krisninformation.se (in English)
• Travel information from the Swedish Ministry for Foreign Affairs (in Swedish)
• Information about crisis management in the Government Offices (in English)
• Information from European Centre for Disease Prevention and Control (in English)

Political Power Struggles

The term, Battle Royale, seems particularly suited to present-day Swedish politics. Traditionally the term refers to a fight involving many combatants that is fought until only one fighter remains standing. A less pleasant way explaining such a fight is a “free for all”, implying almost anything is acceptable. And this seems to be the case, with unholy alliances being formed between for instance, KD+M and SD, seeking to create a new coalition for after the next election, and V teaming up with M to harass the government as it tries to implement the policies it agreed to in the January Agreement. The point was underlined by Jimmie Åkesson, SD’s leader, when he said that “toppling Löfven was more crucial than SD’s own policies.” On this front, SD and the other opposition is having some success. The Social Democrats (S) have sunk to record low popularity ratings. In one poll at the end of February, S fell to 22%, with the Sweden Democrats (SD) the highest at 23%, the Moderates at 17% and the Left Party at 11%. Meanwhile, Löfven is attracting significant internal criticism within his party, both for his political skills, and his wish to stay on as leader until the next election in 2022. 

Crime

Few phenomena have been so hotly discussed in recent times in Sweden as the increase in gun and other crime-related violence. The number of people injured by gunshots more than doubled between 2008 and 2018. Between 2014 and 2018 the death toll in the group of men aged 20-29 increased by more than 200%. The government is attempting to regain the initiative, and has finally determined its political response to the wave of violent crime that has hit Sweden. In September last year, it advised a 34 point plan to address gang criminality, and on February 27, Ministers Damberg and Johansson gave an update. In our lead story in this Monthly Policy Review, “Bombings and Grenades! What’s Happening in Sweden?”, we review the current situation and what is being done to curb a development that shocks law enforcement entities, the political establishment and ordinary Swedes alike.

Foreign Policy

February was a very active month for Swedish foreign policy. The ongoing fight with China over the future of Gui Minhai peaked on February 25, when China sentenced Gui to prison for providing foreign powers with intelligence material. Sweden’s political class was in a furore, but the government was muted in its response, not wanting to inflame the situation further. Earlier in the month, the Foreign Minister, Ann Linde, met her Russian counterpart, Sergey Lavrov, where she raised Sweden’s feminist foreign policy, and a few weeks later, she was involved in forging a Yemeni peace deal. Linde and Sweden issued strong wording to say that the EU needed to work harder to stop the humanitarian catastrophe in Syria’s Idlib province. 

On 12 February, the Government delivered its annual Statement of Policy on Foreign Affairs to the Riksdag and held a debate over the policy. This year’s debate was Linde’s first as Minister for Foreign Affairs, a role she took over from Margot Wallström last September. Although the statement displayed continuity with her predecessor’s initiatives, there are a number of signs that Linde will try to make her own mark. And, she announced a new diplomatic initiative on organised crime, synchronising with the broader efforts that the government is making. The March Monthly Policy Review analyses the statement in depth. 

Another major foreign policy initiative this month was led by Hans Dahlgren, rather than the Foreign Minister. Given Dahlgren’s role as EU Minister, he was a key actor with the Frugal Four – Sweden, the Netherlands, Denmark and Austria looking to stymie higher EU budgets, a fight which will likely play a major role in determining the shape of the EU going forward. While the EU Commission is seeking the traditional compromise, the Frugal Four are digging in their heels, determined to point the EU budget away from continued handouts to agriculture and poorer areas, leaving more available to be spent on climate change, migration and climate. This will be in focus in the April Monthly Policy Review.

The Economy 

The economy continues to bump along in a trough. The unemployment rate jumped to 7% in January, according to fresh statistics from Statistics Sweden. The seasonally adjusted rate rose to 7.1%, up from the previous month’s reading of 6.6% and above analysts’ consensus forecast of 6.9%. Meanwhile inflation fell, from 1.7% to 1.2%, due to large drops in prices for clothes and shoes, energy and overseas travel – the last of which is going to fall even further in February given the coronavirus. The fall in inflation, which is now well below the 2% target, means the Riksbank faces further questioning about the wisdom of increasing the repo rate last December. The Riksbank was also in the news over the e-krona project, so the bank continues to have an international profile far in excess of its size or Sweden’s economic status.

The European Commission released its annual country report of the Swedish economy. The EU said that while things are still currently good, it gave the now traditional slap downs, warning of high property prices, high level of private debt and poor integration of foreign-born workers into the labour market. The last point was picked up by other business leaders. Peter Wallenberg, agreed that Sweden fails at integrating its foreign-born skilled and unskilled workers, while Sven Hagströmer, Business Executive of Avanza Bank, said his “nightmare” was when crime is a “rational choice” for youngsters who feel far away from society.

Business

The two leading business stories for February were both China related. Volvo Cars, which has been owned by Geely for several years, is now looking to merge fully with Geely, in a move that causes friction in Gothenburg, given the tensions over Gui Minhai. And Ericsson saw itself thrust into the centre of geopolitical tensions between the USA and China, with the US Attorney General, William Barr, suggesting that the US should buy controlling stakes in Ericsson, and its Finnish competitor, Nokia. Meanwhile, despite the global pressure to reject Huawei, Sweden will allow the Chinese company to license its technology domestically, given both its technological capability and low prices.

February was the reporting season for most companies tabling their final quarter and 2019 annual reports. Many fared well, although Spotify disappointed with higher than expected losses, and Klarna reported its first loss in a decade, which the company put down to increased credit losses and their US expansion. Wind power developers are also suffering, as increased investment into the sector is leading to overcapacity, and also economic pressure on the older farms, with less efficient technology.

Our final story in the March Monthly Policy Review is on the Gaming industry, which has re-injected life into the previously depressed industrial areas around Malmö and other Swedish rural centres. The statistic that catches our eye is that Sweden’s gaming industry expects its exports to be higher than those of Sweden’s paper industry in 2020.