A Eurozone outsider ready to give financial support

The finan­cial pack­age regard­ing Greece, which was agreed on by the Euro coun­tries at the Euro­pean Coun­cil meet­ing on 25/26 March 2010, and their pre­pared­ness to sup­port Greece if asked to do so was assessed pos­i­tive­ly. Prime Min­is­ter Fredrik Rein­feldt, when com­ment­ing on this agree­ment, also saw IMF par­tic­i­pa­tion in such a res­cue oper­a­tion as very pos­i­tive, since the Inter­na­tion­al Mon­e­tary Fund (IMF) has the exper­tise need­ed and is a long-term part­ner that can assist a coun­try in need of vast and dif­fi­cult reforms. He had prob­lems, he said, in under­stand­ing why some coun­tries were against this, not least since Ice­land and Latvia, as well as oth­er coun­tries, are already using IMF pro­grammes. Swe­den, being out­side the Euro area, had min­i­mal influ­ence on the pack­age; nonethe­less, the Prime Min­is­ter was quite con­tent with the sub­stance of this agree­ment.11Par­lia­men­tary Com­mit­tee on EU Affairs, 30 March 2010, pp.1 and 8.

On 10 May 2010, Swe­den declared itself ready to give finan­cial sup­port to coun­tries now in a cri­sis sit­u­a­tion. This was in addi­tion to the joint EU sup­port to which Swe­den had con­tributed a few days ear­li­er. If seek­ing loans from Swe­den, coun­tries in need would, how­ev­er, be required to take action of a kind that would pro­tect Swedish tax­pay­ers’ mon­ey. Pre­vi­ous­ly, large loans had been giv­en to Ice­land and to Latvia. Finance Min­is­ter Anders Borg explained this offer with the Swedish depen­dence on export, which is high­er than that of many oth­er coun­tries. With­out func­tion­ing cred­it mar­kets in Europe, no Sca­nia trucks could be sold, he declared. The present agree­ments were, how­ev­er, not suf­fi­cient: “We have gained some time, but if we do not solve the under­ly­ing prob­lems we will be back in the same sit­u­a­tion with­in a year or two”, the Finance Min­is­ter claimed.22Jacob Bursell: Sverige redo ge akut­stöd [Swe­den pre­pared to give emer­gency sup­port], Sven­s­ka Dag­bladet, Näringsliv [Trade and Indus­try], 11 May 2010, p. 8.

Lessons to be drawn for reform of the Stability and Growth Pact?

Much has been writ­ten in Swedish news­pa­pers about the Greek prob­lems, includ­ing cor­rup­tion, its ear­ly retire­ment age, etc., but also about the way in which Euro coun­tries have dis­re­gard­ed the stip­u­la­tions of the Sta­bil­i­ty and Growth Pact already from its incep­tion. As the news­pa­pers have described it, the dis­re­gard for the rules was the main prob­lem behind the fact that Greece was allowed to sink to this lev­el before any action was tak­en. Ger­many and France were among the first coun­tries to break the rules of the Sta­bil­i­ty and Growth Pact. The Greek prob­lems had been well known for years with­out any action tak­en. Today, all 16 Euro­zone coun­tries have a bud­get deficit above three per­cent of Gross Domes­tic prod­uct (GDP) and 12 of 16 have a nation­al debt that is high­er than 60 per­cent of GDP.33Mats Hall­gren: Samar­betet blir aldrig vad det var­it [Coop­er­a­tion will nev­er again return to what it was], Sven­s­ka Dag­bladet, Näringsliv, 7 May 2010, pp. 6–7; Peter Wolo­dars­ki: Stor­men före stål­badet [The storm before the steel bath], Dagens Nyheter, 2 May 2010, p. 4. (Swe­den has a bud­get deficit of 0.8 per­cent of GDP and a nation­al debt that amounts to 42.8 per­cent of GDP.44Coun­cil of the Euro­pean Union: Coun­cil Opin­ion on the updat­ed Con­ver­gence Pro­gramme of Swe­den 2009–2012, Doc. 9104/10, pp. 3 and 7.) Crit­i­cism has also been direct­ed towards the rat­ing agen­cies (Spain still has an AAA rat­ing with one of them) and against the Euro­pean Cen­tral Bank (ECB), whose main task is said to be to check on the effects that the dif­fer­ent devel­op­ments in dif­fer­ent Euro coun­tries would have on cred­it.55Per Lind­vall: ECB bär skulden [ECB is to blame], Sven­s­ka Dag­bladet, Näringsliv, 10 May 2010, p. 6.

On a more pos­i­tive note, it is also fore­seen that, while the cri­sis in Greece has made clear the weak­ness­es of the Euro with more rules, more con­trol and deep­er finan­cial coop­er­a­tion, the Mon­e­tary Union can actu­al­ly be strength­ened. In addi­tion, one should also con­sid­er that the present cri­sis is not only due to lax­i­ty of the EU’s con­trol mech­a­nism but also to struc­tur­al prob­lems that may look dif­fer­ent in dif­fer­ent coun­tries and there­fore need dif­fer­ent reme­dies.66Dagens Nyheter: Efter stor­men [After the storm], 7 May 2010, p. 2.

Coordination of economic policies

The Prime Min­is­ter referred to voic­es argu­ing for stronger eco­nom­ic coor­di­na­tion, but saw this as pri­mar­i­ly rel­e­vant for the Euro coun­tries. The Swedish view, he said, was that we should use the means that the treaty and the reg­u­la­tions give us. With­in this frame­work, Swe­den pos­i­tive­ly regards good coor­di­na­tion. Fur­ther­more, he saw it as unlike­ly that any per­son who had been involved in the last few years’ events would come for­ward with an ini­tia­tive to start a process of treaty changes. The present frame­work could be used bet­ter, but this is about coor­di­na­tion rather than supra­na­tion­al governance.

On 12 May 2010, José Manuel Bar­roso and Olli Rehn put for­ward the pro­pos­al that all EU mem­ber states should sub­mit their bud­get pro­pos­als to the Com­mis­sion for scruti­ny of its sound­ness. The Swedish gov­ern­ment and oppo­si­tion dis­missed this pro­pos­al imme­di­ate­ly.77Swedish Tele­vi­sion: news pro­gramme Rap­port, 12 May 2010.

The finance min­is­ters’ meet­ing on 18 May 2010, which result­ed in a num­ber of deci­sions, was char­ac­terised by Anders Borg as “too lit­tle and too late.” At the meet­ing, the finance min­is­ters did not give a final judg­ment on the aus­ter­i­ty mea­sures pre­sent­ed by Spain and Por­tu­gal. Borg’s view was that the goals should be more ambi­tious than the one decid­ed on in Decem­ber 2009, accord­ing to which the max­i­mum bud­get deficit would be three per­cent of GDP by 2013. This is not enough, he said. Coun­tries have to make sav­ings on a high­er lev­el in order to reduce their lev­els of debt. He also wel­comed the pro­pos­al for stricter rules for hedge funds. Borg again expressed his neg­a­tive view on the idea that the Com­mis­sion would scru­ti­nise bud­get pro­pos­als. Only broad guide­lines for Swedish eco­nom­ic pol­i­cy with­in the bud­get would be sub­mit­ted, accord­ing to Borg.88Mar­i­anne Björk­lund: Borg vill höja bud­getkraven [Borg wants to increase bud­get require­ments], Dagens Nyheter, Ekono­mi [Econ­o­my], 19 May 2010, p. 6.

The Ger­man pro­hi­bi­tion against naked short sell­ing received neg­a­tive reviews in Swe­den. Rep­re­sen­ta­tives of Swedish banks were unan­i­mous in see­ing it as unfor­tu­nate, since rather than calm­ing down mar­kets it had led to the oppo­site effect. They also deplored the fact that Ger­many did this uni­lat­er­al­ly, with­out con­sult­ing with oth­er coun­tries, see­ing instead a need for Euro­pean coun­tries to act joint­ly to find solu­tions to this com­mon prob­lem.99Sara L. Brän­ström: Onödig kamp mot finans­mark­naden [Unnec­es­sary fight against the finan­cial mar­ket], Sven­s­ka Dag­bladet, 20 May 2010.

A num­ber of Swedish con­cerns and ideas as regards the Europe 2020 Strat­e­gy were includ­ed in the Sus­tain­abil­i­ty Devel­op­ment Strat­e­gy Report, which was accept­ed dur­ing the Swedish Pres­i­den­cy. These are fair­ly well cov­ered in the head­line tar­gets brought up in the Europe 2020 Strat­e­gy. Among the oppo­si­tion par­ties, some would have pre­ferred to include more tar­gets; how­ev­er, the Prime Min­is­ter found that lim­it­ing one­self to five would give a bet­ter focus on activities.

Among the five head­line tar­gets brought up in the Europe 2020 Strat­e­gy, Swe­den con­tributed to changes of sev­er­al for­mu­la­tions. As for the first head­line tar­get, the final for­mu­la­tion “aim­ing to raise the employ­ment rate for women and men aged 20–64, etc. to 75 per­cent” was accept­ed after Swe­den had inter­vened against the pre­vi­ous for­mu­la­tion in which women and men were not men­tioned togeth­er, but instead the low lev­el of female employ­ment was seen as one among oth­er par­tic­u­lar issues to address. The rea­son for Reinfeldt’s demand for change was his view that women should not be treat­ed as a sub­group, but as par­tic­i­pants in the work force on the same lev­el as men. Rein­feldt was con­tent with the dis­cus­sion that had tak­en place on this point and his hope was that some changes would take place in coun­tries in which laws (such as joint tax­a­tion of hus­band and wife) and defi­cien­cies (such as lack of good day care for chil­dren, etc.) con­sti­tute hur­dles for women who wish to work out­side home. The par­tic­i­pa­tion of women is fur­ther­more, as he expressed to the par­lia­men­tary com­mit­tee on EU affairs, not only a ques­tion of gen­der equal­i­ty but also strong­ly relat­ed to eco­nom­ic progress. He point­ed to stud­ies show­ing that increased par­tic­i­pa­tion may lead to increas­es in EU GDP by 15–20 per­cent. The issue of female par­tic­i­pa­tion in the work force should also be seen in con­nec­tion with the age of retire­ment. Here, Rein­feldt point­ed to the dif­fer­ences among Euro­pean coun­tries, declar­ing that if peo­ple are allowed to retire between 50 and 55 years of age, while at the same time receiv­ing tax financed wel­fare, prob­lems in pub­lic finances should come as no sur­prise.1010Fredrik Rein­feldt before the Par­lia­men­tary Com­mit­tee on EU Affairs, 30 March 2010, pp.1–7.

In the dis­cus­sions on this issue in the par­lia­men­tary com­mit­tee on Euro­pean affairs, a Social Demo­c­ra­t­ic (SAP) mem­ber of the com­mit­tee voiced her fear that some coun­tries might see the 75 per­cent goal as an aver­age fig­ure, mean­ing that they would find it appro­pri­ate that 90 per­cent of men and 70 per­cent of women were employed. State Sec­re­tary Frank Bel­frage of the Min­istry for For­eign Affairs agreed with her that such an inter­pre­ta­tion was pos­si­ble, but promised that the gov­ern­ment would watch out for this.1111Christi­na Axels­son and Frank Bel­frage before the Par­lia­men­tary Com­mit­tee on EU Affairs, 23 April 2010, p. 4. State Sec­re­tary Amelie von Zweig­bergk agreed as well and point­ed to the laws and hur­dles which make it unprof­itable or dif­fi­cult for women in some coun­tries to work. She assured the oppo­si­tion that, while this is not an issue in Swe­den, Swe­den pur­sues solu­tions for these prob­lems in a Euro­pean con­text and that in this it has the sup­port of many Nordic neigh­bours.1212Amelie von Zweig­bergk before the Par­lia­men­tary Com­mit­tee on EU Affairs, 7 May 2010, p. 3. The oppo­si­tion par­ties, the Social Democ­rats, the Left Par­ty (V) and the Green Par­ty, were, how­ev­er, not sat­is­fied with this. A clear­er for­mu­la­tion, they argued, should have been sug­gest­ed by the Prime Min­is­ter, in which it was obvi­ous that the goal should be that 75 per­cent of men and 75 per­cent of women between 20 and 64 should be active in work out­side home.1313Par­lia­men­tary Com­mit­tee on EU Affairs, 7 May 2010, p. 3.

For the fifth head­line tar­get, Swe­den had also act­ed to bring about changes in the for­mu­la­tions: The Swedish argu­ment was that issues con­cern­ing social exclu­sion and social cohe­sion should be the over­rid­ing goals for this tar­get. The spe­cif­ic prob­lem today is that one of three unem­ployed in the EU has been with­out work for more than one year. This is seri­ous and tends to increase both eco­nom­ic and social exclu­sion. This was also the out­come in the final for­mu­la­tion of the fifth head­line tar­get, which reads as fol­lows: “pro­mot­ing social inclu­sion, in par­tic­u­lar through the reduc­tion of pover­ty.” Like in the case of female par­tic­i­pa­tion in the work force, the con­cern for social inclu­sion is deemed to con­tribute to a more sta­ble and inte­grat­ed soci­ety.1414Fredrik Rein­feldt before the Par­lia­men­tary Com­mit­tee on EU Affairs, 30 March 2010, pp. 1–2.

The third head­line tar­get, con­cern­ing reduc­tion of green­house gas emis­sions, is again a strong Swedish inter­est and Swe­den was active in its for­mu­la­tion, includ­ing not only the pre­vi­ous­ly agreed tar­get of a 20 per­cent reduc­tion com­pared to 1990 lev­els but also the goal of a 30 per­cent reduc­tion. State Sec­re­tary Frank Bel­frage described this as a con­flict­ual issue since all mem­ber coun­tries do not feel as strong­ly as Swe­den about includ­ing the 30 per­cent reduc­tion per­spec­tive. The goal of includ­ing them (with the pro­vi­sion that oth­er devel­oped coun­tries com­mit them­selves to com­pa­ra­ble emis­sion reduc­tions and the devel­op­ing coun­tries con­tribute ade­quate­ly accord­ing to their respon­si­bil­i­ties and respec­tive capa­bil­i­ties) was achieved, how­ev­er. This means that this goal is now anchored and part of EU pol­i­tics. As expressed by State Sec­re­tary Amelie von Zweig­bergk, Swe­den sees the nation­al process of achiev­ing the agreed goals as very impor­tant since this is the way in which the EU 2020 Strat­e­gy will be realised. In Swe­den, she said, the goals will be well anchored with­in the nation­al polit­i­cal deci­sion-mak­ing process.1515Frank Bel­frage before the Par­lia­men­tary Com­mit­tee on EU Affairs, 23 April 2010, p. 2; Amelie von Zweig­berg before the Par­lia­men­tary Com­mit­tee on EU Affairs, 7 May 2010, p. 2. All the polit­i­cal par­ties are in agree­ment on this policy.

A fur­ther con­cern for Swe­den relat­ed to the Europe 2020 Strat­e­gy is that of pro­tec­tion­ism. At the March Euro­pean Coun­cil, Fredrik Rein­feldt brought up pro­tec­tion­ism as detri­men­tal with­in the EU, see­ing this as a short­sight­ed pol­i­cy that will not help in cre­at­ing work but rather oper­ates in the oppo­site direc­tion due to the reduced trade that it cre­ates.1616Fredrik Rein­feldt before the Par­lia­men­tary Com­mit­tee on EU Affairs, 30 March 2010, p. 3.

Lena Ek, Swedish Cen­tre Par­ty Mem­ber of Euro­pean Par­lia­ment (MEP) and head nego­tia­tor for the Euro­pean Par­lia­ment on the Europe 2020 Strat­e­gy, has argued that con­crete insti­tu­tion­al reforms are now need­ed in order for the Strat­e­gy not to fail, as the Lis­bon Strat­e­gy had. She has four main ideas: (1) Respon­si­bil­i­ty for con­trol and fol­low-up of the Strat­e­gy should rest main­ly with the Com­mis­sion, not with the Coun­cil, since mem­ber states have sim­ply not been capa­ble to put pres­sure on each oth­er. (2) When a mem­ber state cheats with goals and lies with sta­tis­tics, this must have some con­se­quences and she sug­gests reduc­tion in the finan­cial sup­port giv­en to it. (3) The inter­nal mar­ket must be com­plet­ed, also in areas such as ser­vices and ener­gy. This is in order to pre­vent the pro­tec­tion­ism of which one can see ten­den­cies among EU gov­ern­ments today. (4) It is nec­es­sary that the Coun­cil of Min­is­ters open­ly dis­cuss whether and to which extent states heed the goals. Reports pro­duced by the Com­mis­sion should be dis­cussed open­ly before Coun­cil meet­ings, giv­ing the pos­si­bil­i­ty for nation­al par­lia­ments and the Euro­pean Par­lia­ment to debate these issues. In this way, fur­ther pres­sure could be put on the indi­vid­ual gov­ern­ments.1717Lena Ek, MEP and head nego­tia­tor for Europa 2020 in the Euro­pean Par­lia­ment: Så vill par­la­mentet sät­ta tän­der på EU:s pap­per­stiger [This is the way in which the par­lia­ment wants to put teeth in the EU’s paper tiger], DN Debate, Dagens Nyheter, 24 March 2010, p. 5.

    Footnotes

  • 1Par­lia­men­tary Com­mit­tee on EU Affairs, 30 March 2010, pp.1 and 8.
  • 2Jacob Bursell: Sverige redo ge akut­stöd [Swe­den pre­pared to give emer­gency sup­port], Sven­s­ka Dag­bladet, Näringsliv [Trade and Indus­try], 11 May 2010, p. 8.
  • 3Mats Hall­gren: Samar­betet blir aldrig vad det var­it [Coop­er­a­tion will nev­er again return to what it was], Sven­s­ka Dag­bladet, Näringsliv, 7 May 2010, pp. 6–7; Peter Wolo­dars­ki: Stor­men före stål­badet [The storm before the steel bath], Dagens Nyheter, 2 May 2010, p. 4.
  • 4Coun­cil of the Euro­pean Union: Coun­cil Opin­ion on the updat­ed Con­ver­gence Pro­gramme of Swe­den 2009–2012, Doc. 9104/10, pp. 3 and 7.
  • 5Per Lind­vall: ECB bär skulden [ECB is to blame], Sven­s­ka Dag­bladet, Näringsliv, 10 May 2010, p. 6.
  • 6Dagens Nyheter: Efter stor­men [After the storm], 7 May 2010, p. 2.
  • 7Swedish Tele­vi­sion: news pro­gramme Rap­port, 12 May 2010.
  • 8Mar­i­anne Björk­lund: Borg vill höja bud­getkraven [Borg wants to increase bud­get require­ments], Dagens Nyheter, Ekono­mi [Econ­o­my], 19 May 2010, p. 6.
  • 9Sara L. Brän­ström: Onödig kamp mot finans­mark­naden [Unnec­es­sary fight against the finan­cial mar­ket], Sven­s­ka Dag­bladet, 20 May 2010.
  • 10Fredrik Rein­feldt before the Par­lia­men­tary Com­mit­tee on EU Affairs, 30 March 2010, pp.1–7.
  • 11Christi­na Axels­son and Frank Bel­frage before the Par­lia­men­tary Com­mit­tee on EU Affairs, 23 April 2010, p. 4.
  • 12Amelie von Zweig­bergk before the Par­lia­men­tary Com­mit­tee on EU Affairs, 7 May 2010, p. 3.
  • 13Par­lia­men­tary Com­mit­tee on EU Affairs, 7 May 2010, p. 3.
  • 14Fredrik Rein­feldt before the Par­lia­men­tary Com­mit­tee on EU Affairs, 30 March 2010, pp. 1–2.
  • 15Frank Bel­frage before the Par­lia­men­tary Com­mit­tee on EU Affairs, 23 April 2010, p. 2; Amelie von Zweig­berg before the Par­lia­men­tary Com­mit­tee on EU Affairs, 7 May 2010, p. 2.
  • 16Fredrik Rein­feldt before the Par­lia­men­tary Com­mit­tee on EU Affairs, 30 March 2010, p. 3.
  • 17Lena Ek, MEP and head nego­tia­tor for Europa 2020 in the Euro­pean Par­lia­ment: Så vill par­la­mentet sät­ta tän­der på EU:s pap­per­stiger [This is the way in which the par­lia­ment wants to put teeth in the EU’s paper tiger], DN Debate, Dagens Nyheter, 24 March 2010, p. 5.

The reports focus on a report­ing peri­od from Decem­ber 2009 until May 2010. This sur­vey was con­duct­ed on the basis of a ques­tion­naire that has been elab­o­rat­ed in March and April 2010. Most of the 31 reports were deliv­ered in May 2010.

The EU-27 Watch No. 9 receives sig­nif­i­cant fund­ing from the Otto Wolff-Foun­da­tion, Cologne, in the frame­work of the ‘Dia­log Europa der Otto Wolff-Stiftung’, and finan­cial sup­port from the Euro­pean Com­mis­sion. The Euro­pean Com­mis­sion is not respon­si­ble for any use that may be made of the infor­ma­tion con­tained therein.