SHARE
COPY LINK

BUSINESS

Sweden slips in global corruption rankings

Sweden has dropped from third to fourth in an annual ranking comparing the levels of perceived corruption around the world.

Sweden slips in global corruption rankings
How corrupt is Sweden? Photo: Fredrik Sandberg/TT

Its Scandinavian neighbour Denmark shared first place with New Zealand in this year's Corruption Perception Index (CPI), released by anti-corruption campaign group Transparency International on Wednesday and ranking how corrupted countries were seen to be in 2016.

Both Denmark and New Zealand were given a score of 90 on the 0 to 100 scale (highly corrupt to very clean), followed closely by Finland and Sweden, which scored 89 and 88 respectively.

While still in the top-five of 176 countries, Sweden found itself pushed down one notch from last year and the group's Sweden office warned that this was no time to be complacent.

“Sweden's good performance in the 2016 index does not mean that we are spared from corruption in the public sector,” Ulla Andrén, chairwoman of Transparency International Sweden, said in a statement.

“Over the past year we have unfortunately seen how core values have wavered considerably. Leading figures have turned out to lack an ethical compass and corrupt behaviour has damaged trust in various public institutions.”

READ ALSO: Why Denmark is world's least corrupt country

Major Swedish institutions were rocked by scandals last year, including claims of cronyism and cover-ups at the state auditor Riksrevisionen and tax agency Skatteverket. Some of the country's largest businesses, such as Telia and Ericsson, have also faced allegations of illicit payouts.

“We believe that everything colloquially referred to as cronyism is corruption,” Lotta Rydström, executive secretary of Transparency International Sweden, told The Local.

“Transparency International's definition of corruption is wider than just bribes: 'Corruption is abuse of entrusted power for personal gain', which includes nepotism, buddy contracts and so on.”

“I would probably also say that several bribe-related incidents in the business world have shown that Sweden is not as spared (from corruption) as many think,” she said.

Rydström warned that the corruption index does not cover local and regional councils, where much of the political decisions are made in Sweden. Municipalities and county councils make up around 70 percent of public administration in the country.

“A high rating does not mean that we can beat our chest and say we are still almost the best student in the classroom. Good can get better and there is plenty to work on. Public procurement, municipal auditing and whistleblower protection are some of the issues we are working on.”

As a whole, Transparency International said that no nation in the world – Sweden included – is doing enough to fight corruption.

“There are no drastic changes in Europe and Central Asia in the Corruption Perceptions Index 2016, with only a few exceptions. However, this does not mean that the region is immune from corruption. The stagnation does not indicate that the fight against corruption has improved, but quite the opposite,” it wrote in the report.

For members

PROPERTY

EXPLAINED: Will Swedish housing prices plummet as interest rates rise?

The Swedish financial supervisory authority warned on Wednesday that rising interest rates could lead to house prices falling "quite sharply". How likely is it that this will happen?

EXPLAINED: Will Swedish housing prices plummet as interest rates rise?

What financial circumstances might make it difficult for borrowers to repay loans?

With an increase in the cost of living, including rising interest rates and rising electricity prices, there are plenty of circumstances that may make it difficult for borrowers – especially those holding large debts in relation to their income – to repay their mortgages.

Households with large debts are therefore more sensitive to an increase in interest rates, according to the Swedish financial supervisory authority, known in Swedish as Finansinspektionen (FI).

The agency published its annual Swedish Mortgage Market report on Wednesday.

“Large debts also mean a higher sensitivity if you were to suffer unemployment during an extensive recession,” said Henrik Braconier, the authority’s chief economist.

Other factors that could stretch borrowers’ finances include rising energy prices, higher food prices, and growing inflation.

“Apples, oranges, tomatoes have gone up by 30 percent,” said Américo Fernández, a household economist at SEB. “Wheat is coming from Ukraine and it’s getting harder and harder to get hold of.”

READ ALSO: 

Will homeowners become unable to repay their mortgage loans?

Not according to Fernández.

“One of the last things Swedish households will fail to make their payments on is their mortgage and their houses,” he said. “They would rather decrease their spending on vacations abroad, or restaurants.”

The FI report noted that most new mortgages include margins that allow for fluctuations in the borrower’s finances. This means that mortgage holders have a cushion that allows them to handle financial changes.

“Our stress test shows that they can handle increases in the interest rate and also loss of income,” said Magnus Karlsson, FI’s director of macroanalysis. “New mortgages have margins in them calculating discretionary income, and will be able to absorb increases in interest rates and loss of income.”

SEB foresees an interest rise of up to three percent over the next two years, Fernández said,an increase that can be absorbed by most households.

Both Fernández and Karlsson agreed that if homeowners have to cut back on spending, those cuts will not come from debt repayment, but from their disposable income – the money they might ordinarily spend on entertainment, eating out, or travelling.

So while household spending may have to change, financial stability is not at stake for most households.

What’s going on with the housing market?

Right now, a record number of mortgage-holders have loans that are worth more than 4.5 times their income. This year, more than 14 percent of new mortgagors took on such large loans, compared to 6.3 percent last year.

A “low interest rate, increase in housing prices, increase in disposable real income and a housing market that is not functioning well” are all factors in the large debts that homeowners have incurred today, Karlsson argued.

Fernández noted that there is an imbalance between the low supply of housing and the high demand for housing, which is in part responsible for the high housing prices we see today.

He said a decrease in price of a few percentage points would not be surprising: “We’re coming from two years of exaggerated prices.”

Will housing prices begin to decrease after two years of increasing prices?

Calculations for three different scenarios tested by FI show that housing prices will decrease, Karlsson said.

While the agency does not predict housing prices, its report shows that under three different scenarios – the first an increase in mortgage interest rate, the second an increase in energy prices, and the third a combination of the first two with a reversal to pre-pandemic housing preferences – prices will decrease.

The Local Sweden reported last year about increasing housing costs in Sweden, spurred on in part by a desire for bigger homes further away from urban areas during the COVID-19 pandemic.

Fernández called the two years of increasing housing costs “surprising.”

“10-12 percent two years in a row, that’s historical in these uncertain times,” he said, noting that prices were still increasing in figures for March this year.

What sorts of housing will see the largest price decrease?

The FI report also included various scenarios of how the price of different types of housing may fluctuate based on changes in the interest rate.

One scenario assumed a 1 percent increase in interest rates this year and a 0.5 percent increase next year, and predicted that while the price of apartments owned in a cooperative – called bostadsrätter – would fall only slightly, the price of detached houses would fall by 10 percent.

Another calculation that accounted for rising electricity prices and a decline in new housing purchases found that the price of bostadsrätter and detached houses risked falling by an average of 30 percent.

Is there a plan to let borrowers end their mortgage terms early?

“We believe it needs to be simpler and more inexpensive for households to repay their mortgages early,” FI Director General Erik Thedéen is quoted as saying in a press release published by the agency on Wednesday.

To that end, Thedéen said at a press conference that the agency had sent a request to the government to change the calculation model for how banks are compensated when mortgages are terminated early.

“When you terminate a loan agreement and the bank incurs costs, it must be reimbursed,” Thedéen said. “But at present the banks are overcompensated, that is what our calculations show. If the government follows our line and changes the model and follows our line, then the banks must simply adapt.”

When asked about the likelihood of this request being granted, FI recommended reaching out to the Ministry of Justice for comment.

What does this mean for foreigners in Sweden?

If you’re already a mortgage holder, then as Karlsson and Fernández assured, mortgage calculations include a cushion that allow for changes in your financial circumstances.

If homeownership is in your future, housing prices may begin to decrease in the near future, so it’s worth keeping an eye on your local real estate listings.

By Shandana Mufti

SHOW COMMENTS