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Greece default 'a threat' to Sweden: minister

Greece default 'a threat' to Sweden: minister

Published: 05 Nov 2011 11:00 GMT+01:00
Updated: 05 Nov 2011 11:00 GMT+01:00

Although the Greek Prime Minister Giorgos Papandreou snagged a narrow vote-of-confidence win late Friday, it has done nothing to minimize the threatening economic disaster that has plagued the debt-laden country and sent shock waves through international markets.

Sweden’s European Union Affairs Minister Birgitta Ohlsson believes that spillover effects of any unkept reform promises by Greece are a direct threat to Sweden’s economy.

"The Greek government has now received support at a critical state. There are no shortcuts or miracle cures, but hard reform work awaits Greece to get back on their feet," Ohlsson wrote in an e-mail to the TT news agency, regarding the outcome of Greece's parliament vote.

She thinks that the EU must continue to set high standards for Greece, so that it actually carries out the reforms as promised.

"To avoid a disorderly bankruptcy at the risk of domino effects is in everyone's interest. This would be a direct threat even to the Swedish economy," Ohlsson said.

Papandreou, who has led Greece during the two year’s of its deepening debt crisis, is expected to begin talks Saturday on the formation of a coalition government, though it was not immediately clear if he would lead it.

Friday night’s vote of confidence from parliament with an eight-vote margin followed a turbulent week after Papandreou demanded a referendum on last week’s crisis settlement with the European Union. He later retracted that call after both Germany and France declared such a move to be the same as Greeks voting to remain in the euro zone or not.

Despite the marginal win, there is concern with a coalition government in Greece and questions persist regarding how long Papandreou will lead the southerly nation as he pushes the government to accept the recent international bailout package it has been offered.

“I would say that there is continued political uncertainty in Greece, based on what we know here and now,” Robert Bergqvist, chief economist with SEB bank, told TT.

But, Jan Häggström, chief economist at Handelsbanken, believes the situation has cleared somewhat due to the opposition party’s turn toward enforcing restraint in Greece.

“The most important point is that the opposition has swung. Previously, it held a more populist stance,” Häggström said to TT.

According to the Greek government, the state has cash to cover its expenses until mid-December.

The international bailout package, brokered on October 26 and worth hundreds of billions of kronor, would erase half of what Greece owes and includes funding from the public sector to help pay off some of the remaining debts. It also requires Greece to slash government jobs, reduce pensions and privatize some businesses.

TT/The Local/kh (news@thelocal.se)

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Your comments about this article

15:59 November 5, 2011 by philster61
I wonder is she would care to explain how......
16:38 November 5, 2011 by McChatter
From what I have gathered today, only some small oppostion parties are prepared to form a coalition government. The major opposition party has refused, so that leaves Papandreou in a weak situation. Maybe Ms Ohlsson can explain how this forms a "direct threat" to the Swedish economy?

The banks got rid of their toxic investments by forming "Bad Banks". Maybe Merkel and Sarkozy should consider creating "Bad Countries"?
16:52 November 5, 2011 by Smiling Canuk
If Greece goes down it will have ripples around the world, but far more so in Europe. If Greece does collapse, keep a close watch on Spain or Italy next.
19:43 November 5, 2011 by sgt_doom
So, a Greek default (Greece only making up 5% of the financial structure of the EU), would lead to a global meltdown --- which completely ignores the actual problem, the banksters' peddling of hundreds of trillions of dollars' worth of debt, based upon ALL debt, including sovereign debt, etc.

What a D-bag!
20:30 November 5, 2011 by skogsbo
Ohlsson completely fails to state what the direct impact to Sweden is, that or the local failed to include it.

There is unlikely be any 'direct' link, unless Swedish banks have invested heavily in Greece or Greek Debt, which I don't think is the case. Those banks in France and Germany which liable to go down should greece default have already been named.

Sweden will be hit be a knock on effect, less than countries which have the Euro, probably the same as UK, Denmark, etc... it's still not good news though.
20:38 November 5, 2011 by philster61
sgt_doom..

exactly.....
20:49 November 5, 2011 by Twiceshy
And why is it a threat? Because of the irresponsible actions of bankers and their buddy politicians...
22:46 November 5, 2011 by JoeSwede
Blaming the banks...why is this their fault? Poor underwriting standards? My impression is that lately Germany and France have encouraged the banks to continue to roll over the Greek debt and continue to finance it...

If any bank had more than 5% of its assets in Greek bonds then I guess I would also blame the banks....what were they thinking? Perhaps the debt was bought prior to the ramp up of Greek's fiscal adjustments (unfurling of the great Greek society).

Ultimately the European economy was not strong enough to support the combined EU debt... which begs the question why wasn't the economy strong enough...maybe another area of the world is out competing the EU and stealing some of their thunder. Which area is that? Asia.

Any of my thinking off?
23:27 November 5, 2011 by skumdum
Birgitta Ohlsson is a greater threat to Sweden than Greece. Many people serously question her sanity.
05:26 November 6, 2011 by Abe L
There is only a short term 'threat' to the Swedish economy if Greece defaults, as is there for any other European and many non-European countries. In the longterm there are only benefits from Greece defaulting, but only if it also means that their EU membership gets revoked.

Greece has nothing to offer in the bigger picture. Turning it into a non-EU state that makes for a perfect holiday destination for Europeans with low cost and taxes is in everyone's best interest, including their own. Aside from tourism, the country has little to leverage on.
09:33 November 6, 2011 by RobinHood
If Greece defaults, the markets will turn their fire on Italy. If italy defaults the Euro is dead, and European finances will descend into chaos as countries restore their national currencies. Consumer confidence will collapse, and people and companies will stop buying stuff; including Swedish stuff. The Swedish companies that make Swedish stuff will make less money and employ less Swedish people? All sorts of other bad things will happen too. "threat to Sweden" - i agree.
12:46 November 6, 2011 by D. ane
I cannot avoid thinking that Greece is being made the scape goat for all of Europe's economic problems. The politicialns and the media have found a country to blame and hence divert attention from their own wastefulness.

How can a country worth 2% of all of Europe's GDP be blamed for all of Europe's economic woes!

Can Greece be blamed for :

the UKs nearly one trillion pounds debt?

Italy's almost 2 trillion Euros debt?

Irland's citizens who all aspired to become property developers and plunged the county into debt?

Spain's building boom changing the whole of Spain into a building site, building houses that none wanted to buy?

etc. etc.!

The Germans were happy to lend Greece money to buy their cars now they are supposed to be the victims. I don't buy it. And I cannot help but think that there is a degree of jelousy among other Europeans of the Greek lifestyle.

Europe has ruined Greece.

You can ask the question will this foretell the future of other countries?

I hope Greece defaults and it can then become competative for tourism. It will be painful for a few years for many of its citizens but it will be better it the long run.
21:35 November 6, 2011 by JoeSwede
The big questions is who own all this debt as each country defaults. Some have said that there are CDO's involved.... it this ture?
04:07 November 8, 2011 by sleezypornorangutang
So let me just try and figure this out:

Greece gets a haircut of 50% on loans it owes to banks and private investors.

This is not a 50% cut on ALL Greek sovereign debt, and if I'm correct, this cut only adds up to less than a third of ALL it's debt burden.

However it seems we are being fed the idea that this cut is forgiving half of greek sovereing debt...?

This cut also -correct me if I'm wrong, means a cut of the nominal price, not current value.

Hell, I'm confused, what the stink is going on?
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