The Mundus Brief: September

The Mundus Brief is our summary of the main Swedish news stories over the past month

The political dynamic

With an election just a year away, all the political parties are now feverishly jockeying for position. The Moderates have faced up to the reality that their position has been seriously undermined since the Reinfeldt years. Anna Kinberg Batra has taken the political consequences of this with her resignation, and the party is looking to move on. It ran a brief election during September, in which Ulf Kristersson was elected unopposed on October 1. Kristersson takes on a job with fewer expectations than his predecessor – instead of being the preeminent leader of Sweden, the party is instead hoping to retain sufficient power and influence that it can piece together an Alliance coalition, in which it provides the Prime Minister after the 2018 election.  Although their standing is poor, relative to former glories, the Moderates must be grateful that they are at least not in the same position as the Greens or Christian Democrats, who need to fight to stay in the Riksdag, and who therefore have limited influence in current political decision-making. Jan Björklund from the Liberals has survived, having seen off the challenge from Birgitta Ohlsson, who will leave politics. The three parties in the political ascendancy are the Social Democrats, Centre Party and Sweden Democrats. The Social Democrats find themselves in a rather surprising position. Despite leading a governing minority coalition described by many commentators as being in a state of continuous, low-level crisis, they are riding high in opinion polls, and with a booming economy looking to entrench themselves for a second term by providing voters with startling amounts of new spending. The Centre Party, and its leader, Annie Lööf, are enjoying public support that has not been seen for decades. Meanwhile, Jimmie Åkesson, and the Sweden Democrats continue to snipe from the sidelines, trying to find a way to use their popularity to obtain formal influence and power. This has political scientists and politicians trying to develop new ways of forming the next government. Our background article on Jimmie Åkesson and the Sweden Democrats is available for purchase here.

An Election Budget

On September 21, Finance Minister Andersson presented the Government’s budget proposal, increasing government spending by SEK 40 billion, including major handouts to families (+ SEK 4.5 billion), households (+ SEK 9.1 billion), the climate (+ SEK 5 billion), health (+ SEK 5.7 billion) and police (+ SEK 2.7 billion). The Alliance was generally cynical of the reasons for the spending, seeing it as overtly political. Economists were concerned that further stimulating the economy at a time when it is already booming could tip the balance towards the creation of bubbles. The Alliance parties presented their responses to the government, profiling issues important to their constituency. Subscribers may read our analysis from the Monthly Policy Review by clicking here.
Monthly Policy Review

Security continues to be a very important issue

The government solved the issue of border controls during September. These were introduced at the height of the refugee crisis, but the EU refused to let the government continue with the current policy, where controls at the Öresund bridge were used to control migration. But, the European Commission decided that controls could be allowed to control terror threats, so, in effect, nothing changed, except that Sweden added 100 police to beef up controls.

Security issues continued to pop up on many other fronts. Aurora 17, a major military exercise was conducted on Gotland, involving troops from the USA and NATO countries was covered extensively in Swedish news. Nazi demonstrations occurred in Gothenburg and the security police (SÄPO) are vigilant against the rise of the far right. The police wish to increase their use of CCTV cameras to surveil areas, including hospitals, but this is threatened by law. Meanwhile the police chief, Dan Eliasson, himself is now under investigation, accused of giving sensitive information to a foreign company. This could be the trigger for his political downfall, given his deep unpopularity within the police rank and file. For its part, the Government is keen to seize the initiative on policing, allocating SEK 2.7 billion extra in the budget and Löfven declaring that more crimes would be solved.

Economy: All guns blazing

The current economic performance and future outlook continue to be rosy. Mundus Weekly reported that GDP grew by 1.3% in the second quarter, the fastest rate of growth since 2015, driven primarily by booming exports. Unemployment fell to 6.0% and there are now 148,000 more people employed than a year ago. One consequence is that businesses are finding it difficult to recruit skilled staff. However, households became far less optimistic, as they grew concerned about whether the government would make changes to the taxation treatment of their mortgages.

A new Riksbank governor was meant to be appointed. However, as Mundus reported last month, the government’s preferred candidate was seen to be a political appointment, and when this was blocked by the Alliance, the government instead reappointed Stefan Ingves for another 5-year term. This move was not uncontroversial either, as Ingves has received stiff criticism for his past management of interest rates. However, the IMF came out and provided strong support for his current policy of keeping low or negative rates for a sustained period.

Business: Winners and Losers

There is an apparent changing of the guard in businesses. The performance of some of the old guard, represented by Ericsson and Vattenfall is poor, and both of these are speculated to be cutting thousands of jobs. Ericsson in particular has deep issues, and may need to slash 15% of its global workforce. Mundus News reported that Nordea, one of Sweden’s largest banks, adopted an altogether different tactic, deciding to move to Finland, after a very public fight with the government about a new bank tax. Some commentators predict that the move will harm Stockholm’s standing as the premier financial centre in the Nordics. Were that to happen it would be a reversal of the current very strong trend towards Stockholm as a leading financial centre and global fintech city.

More generally, the tech industry continues to boom. NASDAQ, the operator of the Stockholm Stock Exchange reports strong foreign investor interest in Sweden’s gaming companies, and, as previously reported, NASDAQ is actively targeting European tech firms that would normally consider listing in London. Mundus attended in the STHLM Techfest at the beginning of September – read our blog covering the exciting themes (subscribers may read a more in-depth analysis here). One of the most prominent companies at the Techfest was Northvolt, a start-up seeking to build a €4 billion battery mega-factory. During September, ABB agreed to partner Northvolt in the venture, supplying technology and collaborating on product development.

Last but not least

The rise of far-right populist parties in the Nordics presents the deepest challenge to social democracy since the Secon

d World War. Our in-depth report on Nordic populist parties is available here for subscribers.

Hidden amongst other spending increases in the budget was a substantial increase in foreign aid, raising Sweden’s aid to the 1% of GDP target. Achieving this target has been a controversial subject for several years, with the government diverting significant funds towards accommodating asylum seekers. Subscribers may read our analysis here.

And finally, on our blog we wrote about unfriendly Swedes and how expats perceive life in Sweden.

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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.