SHARE
COPY LINK

EUROPEAN UNION

Brexit vote has Swedish leaders’ nerves jangling

Sweden’s prime minister and foreign minister have both warned of negative consequences for Sweden if Britons vote this week to leave the European Union.

Brexit vote has Swedish leaders' nerves jangling
Prime Minister Stefan Löfven addresses the LO congress in Stockholm. Photo: Jonas Ekströmer/TT

Prime Minister Stefan Löfven voiced his concerns in a speech given to trade union confederation LO’s annual congress on Monday morning.

“We can’t be gripped with panic, but we are waking up to a new political reality,” he said. 

A Leave vote in the June 23rd referendum could endanger the European Union’s future, the Prime Minister told news agency TT after the speech. 

“We don’t know exactly what the effects will be or what forces they might trigger in Europe,” said Löfven. 

He added that there was concern in the EU that a Leave vote in Britain would give fresh impetus to Eurosceptics in other countries to push to leave the union or to renegotiate their membership terms. 

“It’s not a good time now to have divisions in the EU,” said Löfven. 

The government was working on a plan for how to proceed if Britain left the EU, he said, with Sweden seeking to preserve its good trade relations with both the UK and the rest of the EU. 

“But there’s not going to be an collapse, panic, or chaos in Sweden [if Britain leaves]. We’ll manage it,” he said. 

Foreign Minister Margot Wallström was in Luxembourg on Monday for a meeting with her EU counterparts. Although the British referendum is not officially on the agenda, it was the main topic of conversation in the corridors, she said. 

“On the fringes we’re talking about it all the time,” said Wallström. 

With the result set to be announced on Friday, Midsummer Eve, she admitted: “It’s very exciting and I am a bit nervous.”

Wallström expected EU leaders to have plenty of work to do even if Britons vote to stay in the 28-member club, with negotiations set to begin within days on new memberships terms. 

“It won’t be easy if they remain either – there’s a series of exceptions on which there are likely to be tricky discussions.”

ENERGY

How European countries are spending billions on easing energy crisis

European governments are announcing emergency measures on a near-weekly basis to protect households and businesses from the energy crisis stemming from Russia's war in Ukraine.

How European countries are spending billions on easing energy crisis

Hundreds of billions of euros and counting have been shelled out since Russia invaded its pro-EU neighbour in late February.

Governments have gone all out: from capping gas and electricity prices to rescuing struggling energy companies and providing direct aid to households to fill up their cars.

The public spending has continued, even though European Union countries had accumulated mountains of new debt to save their economies during the Covid pandemic in 2020.

But some leaders have taken pride at their use of the public purse to battle this new crisis, which has sent inflation soaring, raised the cost of living and sparked fears of recession.

After announcing €14billion in new measures last week, Italian Prime Minister Mario Draghi boasted the latest spending put Italy, “among the countries that have spent the most in Europe”.

The Bruegel institute, a Brussels-based think tank that is tracking energy crisis spending by EU governments, ranks Italy as the second-biggest spender in Europe, after Germany.

READ ALSO How EU countries aim to cut energy bills and avoid blackouts this winter

Rome has allocated €59.2billion since September 2021 to shield households and businesses from the rising energy prices, accounting for 3.3 percent of its gross domestic product.

Germany tops the list with €100.2billion, or 2.8 percent of its GDP, as the country was hit hard by its reliance on Russian gas supplies, which have dwindled in suspected retaliation over Western sanctions against Moscow for the war.

On Wednesday, Germany announced the nationalisation of troubled gas giant Uniper.

France, which shielded consumers from gas and electricity price rises early, ranks third with €53.6billion euros allocated so far, representing 2.2 percent of its GDP.

Spending to continue rising
EU countries have now put up €314billion so far since September 2021, according to Bruegel.

“This number is set to increase as energy prices remain elevated,” Simone Tagliapietra, a senior fellow at Bruegel, told AFP.

The energy bills of a typical European family could reach €500 per month early next year, compared to €160 in 2021, according to US investment bank Goldman Sachs.

The measures to help consumers have ranged from a special tax on excess profits in Italy, to the energy price freeze in France, and subsidies public transport in Germany.

But the spending follows a pandemic response that increased public debt, which in the first quarter accounted for 189 percent of Greece’s GDP, 153 percent in Italy, 127 percent in Portugal, 118 percent in Spain and 114 percent in France.

“Initially designed as a temporary response to what was supposed to be a temporary problem, these measures have ballooned and become structural,” Tagliapietra said.

“This is clearly not sustainable from a public finance perspective. It is important that governments make an effort to focus this action on the most vulnerable households and businesses as much as possible.”

Budget reform
The higher spending comes as borrowing costs are rising. The European Central Bank hiked its rate for the first time in more than a decade in July to combat runaway inflation, which has been fuelled by soaring energy prices.

The yield on 10-year French sovereign bonds reached an eight-year high of 2.5 percent on Tuesday, while Germany now pays 1.8 percent interest after boasting a negative rate at the start of the year.

The rate charged to Italy has quadrupled from one percent earlier this year to four percent now, reviving the spectre of the debt crisis that threatened the eurozone a decade ago.

“It is critical to avoid debt crises that could have large destabilising effects and put the EU itself at risk,” the International Monetary Fund warned in a recent blog calling for reforms to budget rules.

The EU has suspended until 2023 rules that limit the public deficit of countries to three percent of GDP and debt to 60 percent.

The European Commission plans to present next month proposals to reform the 27-nation bloc’s budget rules, which have been shattered by the crises.

SHOW COMMENTS