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As the Greek crisis moves to a next uncertain stage we look what this means for the Swedish micro economy

Wednesday, 02 November 2011
As the Greek government support of the Prime Minister Papandreou's surprising decision that Greece will hold a referendum on the rescue package the IMF and the EU previously agreed, it is clear that there will be a lengthy euro crisis after the crisis meeting last night.

The prime minister defended the Tuesday’s decision to let people have their say on the issue of the austerity package. A referendum will clarify that Greece belongs in the euro zone, he said at last night’s extraordinary Government meeting, according to a statement from his office.

He also said that the market turmoil that followed the announcement on Monday evening on the referendum will be short-lived.

During the seven hours long emergency meeting of the Greek government there was broad base supported for some of Papandreou's decision by Ministers while others questioned the timing of the referendum, and criticized that they were not informed beforehand.
As the crisis rages, the question now stands as how it might affect the Swedish common person here at home.

As the concern increases, the confidence between banks, which include borrowing money for a mortgage from one another could grow making it not possible to get a mortgage. Right now, fear is great that European banks could go bankrupt as those heavily exposed to Greece might get their money back. Interbank borrowing now stands at crossroad and these would likely affect home buyers.


As there could be stricter requirements on banks in the EU build greater equity so as to cope with an accelerating banking crisis, which is most likely to costs money, much of the increased costs will fall on those who have mortgages in the form of higher mortgage rates.

The continued financial turmoil and the continued falling stock markets will reduced the value of money invested in equity funds.
Changes in market interest rates seldom make any major impact on savers' bank accounts, because banks earn on the margin between lending and borrowing.

The pace of growth in Europe is likely in the sector of consumption will continue to fall and growth will slow further. The Riksbank, or the Swedish central bank and other central banks may lower interest rates to stimulate the economy, but 2012 is still being seen to be a much weaker year than the 2011

If the euro crisis is spreading to other heavily indebted countries like Italy, Spain and Portugal, the slump in the euro area economy is even being seen as greater. Reduced demand from the likes of the giant important German market would disrupt the Swedish export industry.

Many European banks have large loans to the crisis countries and will be forced to become more restrictive in their lending to businesses.

Changes in market interest rates may make it more expensive for companies to borrow money for investment and hiring as such this will have a direct hit on jobs.

In the wake of statements about the Greek referendum, the Swedish krona fell against the euro and the dollar. One good thing here is that it lowers the prices of Swedish exports and makes them more competitive.
Swedish export industries will receive an increase in demand from Asia for example, and can thus lead to increase job growth.
By Team

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