We have a crisis that will continue during 2009 and 2010,” Borg said in an interview on Sveriges Radio adding, “We will have aftershocks during 2011 and 2012.”
Sweden’s economy contracted 4.9 percent in the fourth quarter from a year earlier, the first annual decline since the data series began in 1993.
The report was far worse than markets expected and more recent numbers have been gloomier still. Industrial production in January dropped a record 22.9 percent from a year earlier and order books contracted by almost a third.
But Borg said Sweden should not rely too much on government spending to get out of trouble.
“When I hear people talk about spending packages, I get concerned,” he said, noting that the price of too much short-term spending could end up being extremely high.
Borg said banks needed to do their part to help the economy.
The comment comes after one of Sweden’s top banks, SEB, cancelled bonuses and compensatory pay rises for its senior executives, a move that paves the way for it to join a government loan guarantee programme that is designed to spark more lending in the credit-starved country.
“We must have limits in the bank bonuses to have stability in the financial system,” Borg said after SEB CEO Annika Falkengren on Saturday apologized to customers, shareholders and colleagues alike for the untimely pay hikes.
“It’s about crisis management,” Anders Borg concluded.