The Mundus Brief: April 2018

The Mundus Brief: April 2018
The Mundus Brief is our monthly summary of Swedish news and current affairs

The top stories in April – a month that Sweden rather forget

The stories that Sweden would have wished the world to focus on were the announcement of a fossil-free industrial future, Indian Prime Minister Modi’s visit and the meeting of the UN Security Council in Skåne. If it did not get those stories in global press it would probably have settled for the debate about the interest and exchange rates. What it did not want at all was the scandal around the Swedish Academy, that resulted in today’s announcement that the Nobel Prize in Literature would not be awarded this year.

But first to our news. Mundus is excited to announce that we are expanding our coverage to Finland. Please see our headline story about the Liike Nyt movement.

Another Swedish saga

In January and February, we reported on the storm over the New Karolinska Hospital, describing it as a saga – an old Viking term. The storm continued to rage into April, claiming the entire Board of the hospital, which resigned, en masse. Now Sweden has a new saga to contend with – the disintegration of the Swedish Academy. Although the story has been around since November, 2017, it generated fresh momentum in April, when 3 members of the Academy tried to leave an institution that they were appointed to for life. This caused political furore and an administrative crisis within the Academy, which had no way of dealing with a mass departure of its membership. In this month’s Monthly Policy Review we investigate the issue, from its inception in the #MeToo movement to today’s calamitous announcement about the Nobel Prize, and try to ascertain the likely effects on Sweden’s reputation.

“A permanent world exhibition for climate-smart technology”

Back to the news that Sweden would prefer to talk about. On April 25th, an initiative called Fossil Free Sweden presented its conclusions to the government, about how Sweden could transform its economy to zero emissions by 2045. The coordinator of Fossil Free Sweden said that he, and Sweden’s industrialists, have a vision of Sweden as a permanent world exhibition for climate-smart technology. Mundus reviews the roadmaps in the May edition of the Monthly Policy Review. The technological proposals are amazing, including electric airplanes, plastics made from pine trees, and a whole bio-economy, replacing fossil fuels by renewable forestry. But how committed is Sweden to this economically perilous adventure? Can a change of government overturn the best laid plans? Today’s report that the Moderate Party supports the direction of the changes, and is only arguing about the mechanisms for getting there, suggests that one way or another, Sweden is going to give it a shot.

Swedish Krona takes a kicking

The big macroeconomic news of the month was the interlocking dynamic between the housing market, interest rates and the Krona. The amortisation changes forced on the housing market by the government have had a dramatic effect. Although reported statistics suggest the market has had only a moderate, 10% correction, real estate agents say that the real amount is double that, especially on marginal properties. The Riksbank was already fighting a battle to get inflation up to its 2% target, but is now also faced with the real concern of softness in the domestic economy as a result of weaker household spending. This is pushing the likelihood of rate rises even further out. With no-one interested in defending the Krona, it is taking a kicking as a consequence. Construction projects are also being cancelled – one estimate puts the fall at 30%, and some developers are even trying to give back the land that they had agreed to purchase.

Otherwise the economy is doing fine for the moment – Sweden’s exporters had a fair profit reporting season, and the Stockholm Stock Exchange is flat for the year.

Government gets back to the job

Last month we wrote that all decisions had a decidedly political flavour to them – election politics, in short. But, in April, that fell away, as the Government needed to adopt a more statesmanlike demeanour, with 3 very important visits. First to arrive was the British PM, Theresa May. Her main aim was clearly lobbying to get the best Brexit deal, although the poisoning of the former Russian agent Skripal was also discussed. A week later, Narendra Modi visited. Saab was hoping for indications that India would buy its fighter planes. Modi gave a presentation to a very large gathering of Indians, that Mundus also attended. The next day, the Indian Prime Minister attended a combined India-Nordic summit. A few days later and the UN Security Council met at the farm of former UN leader, Dag Hammarskjöld. Stefan Löfven was able to use the visit to elevate Sweden’s concerns about international systems for managing refugees.

Also of note was the first anniversary of the Drottninggatan terrorist attack, which fell on April 7. The event was remembered at a memorial service.

Apart from that, it was electioneering, as usual…

In April, Mundus observed a further hardening of the Government’s rhetoric around immigration. The Integration Minister announced that the Social Democrats wanted to introduce new bureaucracy to administer labour migration to Sweden, and would make anyone taking government financial assistance attend Swedish classes. Political analysts suspect these moves are aimed to win back the 20% of the vote that the Social Democrats have lost to the Sweden Democrats. Mundus is concerned about the impacts of such changes on the future of expats in Sweden, and for the competitiveness of Sweden’s economy. We expressed these in the Mundus blog.

The last budget prior to the election was presented by the Finance Minister. Commentators were generally unimpressed by it (see May Monthly Policy Review), but noted that the more interesting announcements were likely being saved until later in the campaign season. In their budget replies, Alliance parties generally focused on increasing spending on defence, health and education. Meanwhile, the Moderates said that they wanted to recruit 5,000 foreign teachers, profiling themselves as the most immigration and market friendly party, and also identifying education as a focus area.

The polls however, remain largely the same. The Social Democrats are still the largest party, at around 28%, followed by the Moderates at 22% and Sweden Democrats with 17%. The Centre Party has 9% and the Left Party is around 8%. The other 3 parties – the Christian Democrats, Liberals and Greens are all struggling to stay in the Riksdag, and are perilously close to the 4% threshold. Read our explanation of how the 4% threshold works in the May Monthly Policy Review.

 

Avicii passes

Finally, we note with great sadness, the untimely death of the performer, Avicii. While he leaves us far too early, aged 28, his music lives on, as yet another indicator of the strength of the Swedish music industry.

 

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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.