The Mundus Brief – September 2018

The Mundus Brief – September 2018

Each month, Mundus International produces a monthly brief. It’s 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 for our more serious news and analysis. We hope that you enjoy it. Feel free to forward it to friends or colleagues who need to understand what’s going on in Sweden.
/The Mundus Team

Our September round-up

A New Kristersson Government?

Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the beginning of the beginning. Churchill didn’t say that, but then again, the war had been going for over 3 years by then.

In comparison, the 3 weeks that have elapsed since the election are a brief moment in time. But, by the standards of Swedish politics, it feels longer. It’s not meant to happen this way. There are elections, and then a government is formed, most likely involving the Social Democrats. But, this time is different. As many experts observe, this election result completes the transformation of Swedish politics begun in 2014. The Social Democrats are no longer the sun around which the smaller parties orbit, and the Sweden Democrats have become a blocking force to coalition formation on the right. As Mundus declared last month, that’s led to a gridlock which really no one knows how to get out of. The problem isn’t that the electoral maths cant be done. That is obvious. The issue is that so much is at stake, and each political bloc is thinking 4, 8 or even 20 years into the future, for decisions made today will likely be felt for that length of time.

So, despite the announcement on 2 October that the Speaker has asked Ulf Kristersson to see if he could form a government, it is no done deal that he can. The Speaker, Mr Norlén, is realistic, commenting “I am the speaker, not a wizard.” Of course, it is entirely possible that the planets align and Sweden gets an Alliance government in October. But, Mundus best view is that that remains an unlikely outcome. And if that fails, then Plan B needs to be developed. If you want to follow all the political developments, try our daily, Mundus News, a news-round up covering more than a dozen sources.

Mundus News

What exactly was the election result, and why?

This is the question that we turn our attention to in this month’s edition of the Monthly Policy Review. We begin by looking at the national result, and interpret what the exit polls said about why they chose to vote the way they had. It turns out that immigration wasn’t as critical as some thought prior to the poll.

After that, we look at what happened at a local level, as, in addition to the national poll, there were also elections held across the country for municipalities and regions. There were some fascinating outcomes, because although the macro picture is still the same at the national poll, with the Social Democrats, Greens and Moderates losing votes and the Sweden Democrats gaining votes, local parties come into play. In Gothenburg, for instance, a new party, called the Democrats was able to win 17% of the vote. Now they can play kingmaker. And across the rest of the country the red-green side of politics has tended to lose majorities at a local level, but the right-wing side doesn’t have the numbers either. Hundreds of municipalities need to decide if they will accept a local government with Sweden Democrat support. Will they?

Finally, for our election coverage, we look at how the international press covered the Swedish election.

Here’s some of the headlines that were run leading up to the September election:

Sweden election to spell nightmare for EU as anti-Brussels party set to be kingmaker
Swedish state is in crisis, says election favourite
Sweden is a disaster – former UKIP leader Nigel Farage gives Fox News his opinion

Does that sound like your neighbourhood? In some cases, yes, but for most of us there are no nightmares, disasters or crises. So, why the fuss? We explore the Good Sweden Bad Sweden narratives that are being bounced around in a global culture war. Arm yourself with relevant facts and insights and be ready to explain to foreigners why they’re being fed post-truths.

10 Year Anniversary of the Financial Crisis

The Financial Crisis and Great Recession began a decade ago. But, for Sweden this wasn’t such a big deal, and, in any case, it’s firmly in the past. Sweden’s economy rebounded strongly continues to grow, and the country is a global success story. Here’s some of the facts reported by Mundus Business Insights in September.

Sweden’s GDP grew 0.8% in 2Q

Sweden’s GDP increased by 0.8% in 2Q18, compared with 1Q18 and by 2.5% compared to 2Q17, according to a new report by Statistics Sweden (SCB). Furthermore, SEB published its Nordic Outlook on 28 August. The already bright growth picture has improved. After a strong 2Q, the bank is revising its GDP growth forecast three tenths higher in 2018 to 2.9% and two tenths higher in 2019 to 2.4%. Economic growth will be sustained by exports and industrial investments as home construction decreases and households hesitate to spend.Sweden’s exports and imports continue to increase sharply

Sweden’s foreign trade also continues to increase sharply

In 1H18, exports of goods increased by 9.2% and imports by 12% measured in value, according to a new report by the Swedish National Board of Trade.

House prices increasing

House prices in Sweden are increasing again, according to a report by Statistics Sweden (SCB). The average house price at the national level in the period from June to August 2018 was just over SEK 2.9 million. House prices rose in 14 out of 21 counties with the largest increase was in Kalmar County where house prices rose by 7%. Stockholm County saw a price decrease of 1% over the past three months.

So, why are any number of luminaries using the anniversary as an occasion to warm of impending danger? Those warning “Danger, Danger” are not just minor players. The list of doom mongers includes Stefan Ingves, the Riksbank Governor, Anders Borg, the Reinfeldt government’s Finance Minister and Lars Jonung, Professor of Economics at Lund University. We explore current risks in the context of the 1990s Swedish financial crisis and the 2008 Crisis as our final story in the Monthly Policy Review.

What happens next? Will Sweden have a government?

In practical terms, Kristersson has two weeks to win the support of enough Riksdag votes to become Prime Minister (click here for further reading of the process). Unless the Sweden Democrats agree to provide that support, he appears to have little chance of that. But, some interesting moves are starting to happen in preparation for a second round. Yesterday, Åkesson offered to resign, would that allow other parties to find the SD more acceptable. We don’t believe that this will shift the dial. More interesting, was the announcement by the Social Democrats that they didn’t actually want to accept support from the Left Party during the last parliament session – they were forced to. Unsurprisingly, Jonas Sjöstedt, the Left Party’s leader was entirely unimpressed by this. But, it was a clear signal from the Social Democrats that they’re prepared to tolerate more market-led policies. They would dearly love to crack the Alliance.

According to Expressen, the Sweden Democrats’ game theory is that Kristersson will fail in this round. Löfven and the Social Democrats will then have an opportunity to form government. Unless Lööf gives up on the Alliance, this attempt will fail too. That will open the way for a second round of negotiations, where Kristersson can justify discussions with the Sweden Democrats, other options having been exhausted. This sounds plausible, but it is just as possible that Lööf might decide that she’d rather govern with the Social Democrats than deal with Jimmy Åkesson. Time will tell.