Government details crisis measures

Finance Minister Anders Borg and Enterprise Minister Maud Olofsson on Thursday presented a government bill containing measures to counteract Sweden's current economic crisis, including emergency loans to the country’s struggling auto sector.

• Borg sees second financial crisis ahead (20 Jan 09)
• Sweden faces rising budget deficit (15 Jan 09)
• Financial crisis to 'peter out' in 2009: Riksbank (9 Jan 09)

While the economic forecasts used in drawing up the legislation haven’t changed much since December, the bill does contain a few adjustments with respect to state finances, projecting a deficit of 1.1 percent of GDP for 2009 and 2010, to be followed by a 0.5 percent surplus in 2011.

“We can expect that the winter in the economy will persist during the spring, summer, and autumn,” Borg said at a press conference.

The proposal gives the National Debt Office (Riksgälden) authority to grant emergency loans to Sweden’s larger companies in the auto sector, which are in dire need of funding.

Sweden is home to Ford-owned Volvo Car Corporation and Saab, owned by General Motors, which like their US parents are suffering from a sharp fall in sales.

Small- and mid-sized auto companies would be able to seek support with ALMI Foretagspartner, a state-financed business development company.

ALMI will receive 2 billion kronor ($244 million) in extra financing and be allowed to cover up to 80 percent of an applicant company’s financing needs, the government said.

The Swedish government said last month it would provide up to 25 billion kronor ($3.1 billion) in credit guarantees and emergency loans to its ailing auto industry.

The package included 20 billion kronor in collateral-backed credit guarantees, directed towards the manufacture of more emissions-friendly vehicles, as well as "rescue" loans of up to 5 billion kronor.

At the same time, the government put forward a new referral to be reviewed by the Council on Legislation (Lagrådet) which would give companies a grace period for paying taxes in certain instances.

The proposal would allow employers to apply for up to a one-year delay in the payment of up to two months worth of their employees’ withheld taxes and social fees in 2009.

The provisions will be applied to salaries paid out starting in February 2009 and are meant to help smaller companies overcome acute liquidity problems stemming from difficulties securing financing from banks and other institutes.

To take advantage of the programme, companies would be required pay a 2 percent interest rate per year and a 3.9 percent fee.