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Merry Christmas and A Happy New Economic Year!

22-12-2011 15:30

2011 is drawing to a close. The year opened with continued recovery all round the world, but has since been marked by ever graver debt crises, falling stock markets, rising risk premiums and growing economic gloom. Gazing into the crystal ball for 2012 is a challenge. There is a risk that the economic year will not be as good as the headlines suggest.

At the same time, the situation is not all doom and gloom. In his recent monthly newsletter on the Swedish Economy, my colleague Magnus Alvesson demonstrates that confidence is not falling as sharply any more, that companies are in a good position, the country's competitiveness is strong and there is scope for an easing of monetary and fiscal policy if necessary. There are not many other European countries that can use economic policy in quite such a flexible way as Sweden is able to do in this situation.

At the same time, Sweden is a country that is very exposed to developments elsewhere in the world due to our significant export sector. Which means it is especially important that we have the opportunity to pursue a more expansive economic policy.

What would I like for Christmas ahead of the coming year?

That decision makers in the western world tackle the problems and boost confidence on the financial market and in companies and households, would be a lovely present to unwrap. The ECB has already started giving out early Christmas presents in the form of long-term loans with lower security in order to strengthen the weak and capital hungry banking sector in Europe, extending credit to companies and households and indirectly also consolidating budgets in the crisis countries. We are seeing the rate differences are reducing for crisis countries such as Spain, although it is too early to draw any conclusions on whether confidence is on the up on the finance market. A brought forward ESM support fund and IMF funding as bonus presents, and the finance market would almost begin to see signs of the much yearned for bazooka that many people have been looking for to untie these tight knots.

Another Christmas present that would be nice to see would be a renaissance of structural policy in 2012, primarily in the crisis countries in Europe, but also in Sweden, where we cannot relax purely because other countries are lagging behind. Education, research and development, participation in the job market, social insurance systems, regionalisation and diversity/integration are issues where there is plenty of work to do. There needs to be a greater focus on competitiveness in the crisis countries, for instance, how can small businesses in Italy compete with ever hungrier and more efficient growth countries?

A third and final Christmas present would be for us to focus more on a sustainable work life balance. It is a matter of getting all the pieces in place, something that is difficult for many people. Stress is not something that is confined purely to the Christmas period, it is there most of the year. Shareholder value remains high on the corporate agenda, while customer value and employee value often risk being overshadowed. With an ageing population and companies finding it increasingly difficult to find the right skills, it is important that we also support a sustainable long-term work life balance.

Merry Christmas



Cecilia Hermansson
Cecilia Hermansson
Group Chief Economist, Economic Research Department, Sweden


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