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Rampant Negative ratings pass Sweden by as its economy seen as strong

Sunday, 15 January 2012
Rampant negative ratings hitting the European economies just has just pass Sweden by as its economy is determined to be well placed to weather any crisis despite the fact that several euro area countries had their credit ratings lowered - at least in the short term.

But with Europe a major trading partner for Sweden being beaten this way it is expected that Sweden will soon catch up with European gloom sooner or later. Note that Sweden is a very small place and must sell abroad to survive. If the Europeans fail to buy because of their gloomy outlook then that will drag Sweden down with them


Relatively speaking, it looks much better than before in Sweden as Standard & Poor's turned ands was lowering the credit ratings of the several euro area countries on Friday.

Authorities in Sweden such as Tomas Pousette, chief economist at government mortgage company, SBAB, point out that “for those investors who are looking for really safe investments, there are few available to them now and Sweden stands out as one of those few.”

The question now is how the downgrade will impact the European bond markets and the ability of countries like France to finance its borrowing requirements.

“Should there be more difficult there could be unsettling in the market and that would have an effect on the Swedish economy,” said Pousette.

“It is clear that this could have significance for the joint funding between the EMU countries. But I do not think that there is a new major crisis waiting because of this.”

Annika Winsth, chief economist at Nordea, believe that the reduction will affect the "risk appetite” in Europe

“This also affects Sweden. But it could also be that there will be a boost for countries to take more vigorous action, a reminder that one should pull oneself together, to speed up decision making, sending the right kind of signals to the market.”

It would mean a more positive development, according to Winsth. But the euro countries are forced to savings that could affect their economies and thus Sweden, since Europe is a major trading partner.
So far, the Swedish Krona was strong when though the world was messy.
by Team

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    • The credit rating agency Standard & Poor's downgraded the ratings of nine countries on Friday. For France and Austria, theirs was brought down from AAA to AA +.
    • Lower credit ratings for several euro area countries that previously had top marks is a serious blow to the euro zone's emergency fund EFSF, whose ratings are also at risk.
    • The fund, which accounts for emergency loans to crisis countries, Ireland and Portugal, is also expected to play a crucial role in the second aid program to Greece, which is required if the Greeks should not be forced to suspend payments.
    • Large countries' credit ratings are particularly important, as they conform to the model that will account for most of the EFSF-guarantees.
    • A lower credit rating means also that individual countries' bond yields rise, which in extreme cases (as for Greece, Ireland and Portugal) means that countries can no longer finance themselves on their own.
    By Team