Stefan Ingves

Extra meeting of the Riksdag

Committee on Finance

16 August 2011

Rising long interest rates for countries with sovereign debt problems

Ten-year government bond rates, per cent.

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14

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20

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jul-08 jan-09 jul-09 jan-10 jul-10 jan-11 jul-11

Greece

Ireland

Italy

Portugal

Spain

Sweden

Weak public finances a problem

Sovereign debt as percentage of GDP

Source: IMF WEO April 2011

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20

40

60

80

100

120

140

160

180

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00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

USA

Greece

Ireland

Italy

Portugal

Spain

Adjustment programmes and sovereign debtEUR billion

Greece Ireland Portugal

Funding through EU/IMF programmes

109 85 78

Sovereign debt (2010)

329 148 160

Sources: IMF and Eurostat

Some international events during the summer EMU: EFSF extended and empowered to buy government

bonds on secondary market EMU: Cut interest rates on official loans to countries with

support programmes EMU: Incentives for holders of Greek government bonds to

exchange them for new ones with longer maturities EMU: ECB begins to buy Italian and Spanish government

bonds EMU: New savings measures announced in Italy and Spain

USA: Public debt ceiling raised. Savings of USD 2400 billion over the coming 10 years.

USA: Standard & Poor downgraded US credit rating

Scope of the adjustment fundsEUR billion

EFSF (European Financial Stability Facility)

EFSM(European Financial Stabilisation Mechanism)

Extended EFSF*

ESM**(European Stability Mechanism)

Period Created 2010 Created 2010 2011-2013

2013

Amount Approx. 250 60 440 500

Guarantee Euro countries EU budget

Earmarked for Ireland and Portugal

43,7 48,5

*Requires parliamentary approval of euro area countries

** ESM replaces EFSF and EFSM

Sources: EFSF and European Commission

Large dependence on foreign marked fundingThe major Swedish banks’ market funding via Swedish parent and subsidiary companies, SEK billion

Sources: Statistics Sweden and the Riksbank

0

500

1 000

1 500

2 000

2 500

3 000

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Foreign Currency SEK

Expected slowdown in GDP growth

Sources: Statistics Sweden and the Riksbank

Quarterly changed calculated as an annual change

-20

-15

-10

-5

0

5

10

-20

-15

-10

-5

0

5

10

04 05 06 07 08 09 10 11 12 13 14

GDP, outcome

GDP, forecast July 2011

Average growth since 1980

The main task for monetary policy is the inflation targetForecasts from the July Monetary Policy Report

Sources: Statistics Sweden and the Riksbank

Annual percentage change

-2

-1

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1

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5

-2

-1

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CPI

CPIF

Summary Swedish banks are well capitalised, and at

present have no funding problems The Riksbank is ready and able to take action if

required Statistics received so far are roughly in line with

the most recent assessments of the Swedish economy, but prospects abroad look weaker

The Riksbank will publish a new interest rate decision and new assessments on 7 September