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Extra meeting of the Riksdag Committee on Finance 16 August 2011 Stefan Ingves Rising long interest rates for countries with sovereign debt problems 20 20 Greece 18 16 14 18 Ireland Italy 16 Portugal Spain 14 Sweden 12 12 10 10 8 8 6 6 4 4 2 2 0 jul-08 0 jan-09 jul-09 Ten-year government bond rates, per cent. jan-10 jul-10 jan-11 jul-11 Weak public finances a problem Sovereign debt as percentage of GDP 180 180 USA Greece Ireland Italy Portugal Spain 160 140 160 140 120 120 100 100 80 80 60 60 40 40 20 20 0 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Source: IMF WEO April 2011 Adjustment programmes and sovereign debt EUR billion Greece Ireland Portugal Funding through EU/IMF programmes 109 85 78 Sovereign debt (2010) 329 148 160 Sources: IMF and Eurostat Some international events during the summer EMU: EFSF extended and empowered to buy government bonds on secondary market EMU: Cut interest rates on official loans to countries with support programmes EMU: Incentives for holders of Greek government bonds to exchange them for new ones with longer maturities EMU: ECB begins to buy Italian and Spanish government bonds EMU: New savings measures announced in Italy and Spain USA: Public debt ceiling raised. Savings of USD 2400 billion over the coming 10 years. USA: Standard & Poor downgraded US credit rating Scope of the adjustment funds EUR billion EFSF EFSM (European Financial Stability Facility) (European Financial Stabilisation Mechanism) Period Created 2010 Created 2010 2011-2013 2013 Amount Approx. 250 60 440 500 Euro countries EU budget 43,7 48,5 *Requires parliamentary approval of euro area countries ** ESM replaces EFSF and EFSM Guarantee Earmarked for Ireland and Portugal Sources: EFSF and European Commission Extended EFSF* ESM** (European Stability Mechanism) Large dependence on foreign marked funding The major Swedish banks’ market funding via Swedish parent and subsidiary companies, SEK billion 3 000 2 500 2 000 1 500 1 000 500 0 98 99 00 01 02 03 04 Foreign Currency Sources: Statistics Sweden and the Riksbank 05 06 07 SEK 08 09 10 11 12 Expected slowdown in GDP growth 10 10 5 5 0 0 -5 -5 -10 -10 GDP, outcome -15 -15 GDP, forecast July 2011 Average growth since 1980 -20 -20 04 05 06 07 08 Quarterly changed calculated as an annual change 09 10 11 12 13 14 Sources: Statistics Sweden and the Riksbank The main task for monetary policy is the inflation target Forecasts from the July Monetary Policy Report 5 5 CPI CPIF 4 4 3 3 2 2 1 1 0 0 -1 -1 -2 -2 00 01 02 Annual percentage change 03 04 05 06 07 08 09 10 11 12 13 14 Sources: Statistics Sweden and the Riksbank Summary Swedish banks are well capitalised, and at present have no funding problems The Riksbank is ready and able to take action if required Statistics received so far are roughly in line with the most recent assessments of the Swedish economy, but prospects abroad look weaker The Riksbank will publish a new interest rate decision and new assessments on 7 September