EU to probe Sweden's 'economic imbalance'

Sweden is among twelve countries set to be discussed in a report from the EU commission, due to what the European Commission believes are imbalances in the economy.

Sweden has been singled out for investigation along with countries including France, Britain, Finland and Denmark. The Commission says the countries in the report have displayed economic danger signs such as asset bubbles, high labour costs and long-term trade deficits. The weaknesses have been highlighted by a new EU 'economic scoreboard', created to identify countries at most risk.

The 12 countries being discussed have range from crisis economies such as Spain, Italy and Belgium to economies considered to have avoided the worst of the euro crisis, such as Sweden.

”Many have become accustomed to the fact that we have bad finances in Europe, so this does not come out of the blue. But now the finger is being put on certain countries that are so weak that they could be forced into some kind of a debt reconstruction,” said Robert Bergqvist, chief of economics of SEB.

Credit rating agency Moody’s lowered the rating for six EU countries on Tuesday and warned three others that the outlook was negative. Those whose rating was lowered were Italy, Malta, Portugal, Slovakia, Slovenia and Spain, and the warned countries were France, Britain and Austria.

Representatives at Moody’s predicted that the market’s confidence in the Eurozone ”probably remains fragile” accoring to TT news agency.

SBAB’s chief of economy Tomas Pousette said that the downgrading of the credit ratings is negative, but that it wasn’t entirely unexpected.

“It practically means that it will become more expensive for these countries to borrow money. If you only look at the lowered ratings, it can actually be positive for Swedish interest rates.

“We are one of the few countries who are not affected by all this, and for those who want to invest in government bonds of high credit quality… it’s sort of fewer countries left to choose from and Sweden is one of them,” he said to TT news agency.

When asked if this was a consequence of the Riksbank's actions with regard to interest rates, Pousette replied:

“I don’t think this is the most important part of the decision. It’s more about the Swedish workforce, the Swedish krona, economic outlook and inflation,” he told TT.