Mundus Brief – September in review

The Mundus Brief is your chance to read a summary of what happened in Sweden last month and our chance to let you know what we’ve been looking into. We try to keep the Mundus Brief brief and entertaining; a counterbalance to our more serious news and analysis. We hope you find it interesting! 
/The Mundus Team

When we wrote about the economy a month ago we said, “summer is over – it is just a question of how much rain the storm clouds will bring.” Sadly, the storms are already bad, and the clouds on the horizon suggest worse is on the way. This month’s business and economic headlines are about economic decline, trade wars and Brexit. 
Darkening storm clouds
Perhaps one should not be too glum about the economy. At this stage we are still talking about lower economic growth, rather than a recession. The August CPI was the most recent indicator that the economy was not doing well. It came in at 1.3%, a significant miss against the Riksbank’s forecast of 1.5%. Riksbank Governor, Stefan Ingves, is now in a very difficult position, on a number of fronts. From a policy perspective he is caught between the temporary need to stimulate the economy by dropping the interest rate versus the longer-term need to raise interest rates to positive levels. This challenge has now gotten worse, as the financial markets doubt his credibility. “The Riksbank was wrong again. VERY wrong,” said Nordea when the inflation numbers were announced early in the month. Three weeks later the bank raised its voice even more, “A PMI-tastrophe … Details horrible. Further proof the Riksbank is wrong on everything that matters,“ referring to the purchasing managers index, which fell off the chart in September. Other economic forecasters were not much more favourable, making it harder for the bank to steer economic policy. With exporters already worried, Brexit a month away and the US-China and US-EU trade warsnow biting, winter might become bitter. 
Given the setting, the government could have tried to run an expansionary fiscal policy. However, it chose instead to adopt a cautious approach, with SEK 30 billion of reforms announced. One can only guess at the reasons for this, but it is not difficult to imagine that budget negotiations are quite cumbersome under the January Agreement structure. With the economy changing so quickly in the weeks before the budget announcement, Magdalena Andersson’s ability for manoeuvre would likely have been quite limited. Furthermore, with most of the reforms announced well before budget day, the presentation itself lost some impact. The biggest impact was the elimination of the “austerity tax”, an extra 5% of income on high income earners, as agreed to under the January Agreement. The bank tax was also introduced to pay for increased military spending and extra billions were allocated for climate spending – part of what the government calls the green tax shift. For further details of the budget see the October edition of the Monthly Policy Review.
A new Foreign Minister
Just before the last Mundus Brief went out Sweden was delivered some surprising news – Foreign Minister Margot Wallström was to step down. This made it an even bigger cabinet reshuffle, with Löfven also needing to replace Ylva Johansson, who is moving to Brussels. When the Riksdag opened, Löfven announced that Eva Nordmark, who has been the Head of the Swedish Confederation of Professional Employees, will become Sweden’s Minister for Employment, replacing Johansson, and Anna Hallberg, who has been Deputy CEO of state-owned investment company, Almi, will become the new Minister for Foreign Trade. This allowed Ann Linde, to become Foreign Minister. Our feature story in this Monthly Policy Review looks at the legacy of Margot Wallström and considers whether Ann Linde is likely to follow in her footsteps or choose her own path. In Mundus’s assessment, despite her often controversial approach, Wallström was a competent and hard working minister, who delivered all the way until the end, including a tour to the Arabian Gulf in her last days in office, and in securing the release of the Swedish-owned, Stena Impero, which was being held by Iran.
In other international news, Ylva Johansson was nominated by EU President-elect, Ursula von der Leyen, to be Europe’s new Home Affairs Commissioner, responsible for migration and asylum policy, a significant trophy, given Sweden’s outspokenness on this issue. Stefan Löfven participated in the UN’s Climate Action Summit, but with little new to announce and with the overall lack of progress achieved at the summit, the event quickly came and went. We explore the status of Swedish climate policy in the Monthly Policy Review.
Apart from the ministerial reshuffle and the budget, the overarching domestic political news was of the seven party talks on gang violence. The negotiations, which aim to significantly change the dynamic of what appears to be a spiralling wave of crime spreading through Sweden started with all parties expressing willing. 70 proposals were presented and discussed. However, as the talks went on, and proposals were eliminated, the Moderates and Christian Democrats became increasingly frustrated, eventually walking out of the discussion.
Although the forward looking indicators for Sweden’s exporters look poor, there is still a significant amount of positive development in the news. EQT, one of Europe’s largest buyout groups, listed on the Stockholm Stock Exchange. Its share price popped 20% in the first hour of trading. Fortknox, a provider of accounting software, has seen its share price jump 170% in 2019. IKEA made further announcements about its greening, announcing that it now produces more renewable energy than it consumes. Spotify made an amazing achievement, being listed at the second most relevant brand for American consumers, behind Apple, but beating out Disney, Amazon and Netflix! Northvolt continued to make major announcements, including new cooperation with VW to build a Gigafactory in Germany. But for Swedbank and Ericsson the news remained depressing, with both being forced to clean up after past ethical scandals. Ericsson received a billion USD fine for bribery in emerging markets.
Saint Greta
Finally, to finish on an upbeat note, the Greta juggernaut continued. Fresh off the boat (literally) in the USA, Greta delivered an opening address at the UN Climate Action Summit, found time to chat with former US President Obama, marched with Canadian Prime Minister Trudeau, addressed Congress and along the way, won the Right Livelihood Award, nicknamed the “Alternative Nobel Prize”. One wonders when or where her aura will stop.
Mundus News
Sean is responsible for Mundus’ strategy and commercial activities. He began his career in the oil industry Australia. After working internationally in commercial roles with BP in South Africa, the UK and Singapore he moved to Sweden with his family in 2009. He worked in business development and then as the Strategy and Growth Director for NASDAQ Commodities from 2009 to 2015. Sean holds an engineering degree from Adelaide University and an MBA from the Darden Business School at the University of Virginia.