The Riksbank is monitoring developments closely, but our assessment is that at the moment there are no funding problems for the Swedish banks on the international capital markets. To sum up we can say that the turbulence around the world will have a dampening effect on Swedish growth in the period immediately ahead. The clearest signs of this so far are the weak stock market in Sweden and the dramatic decline in the confidence of the households and companies, which is reducing demand. How can we ourselves facilitate developments in Sweden? We have laid stable foundations – which we must build on Although we are dependent on what happens abroad, we must do what we can to keep the economy on an even keel in Sweden. We can compare the situation to our own personal finances. Various external circumstances that we have no control over can undermine our financial situation. However, if we have had a firm grip on our personal finances before this happens, we will be better prepared and have a better chance of managing the situation. But how can we relate this to the Swedish economy as a whole? If we return to Figure 7 we can see that labour costs over the last 10 years or so have increased more slowly in Sweden than in the euro area. We can also go back to Figure 9.
Stock market falls creating uncertainty There are now strong international links between the financial markets. Share prices have fallen dramatically in Sweden as in a number of other countries (see Figure 1). This in turn has had a highly-negative impact on the confidence of Swedish households and companies (see Figure 12). We could say that a “wait-and-see” attitude is guiding the households and companies at the moment. The households are saving more and investment is weak because people are simply waiting to see what happens in the present uncertain climate. The banks may find it more difficult to get funding The Swedish banks form another channel through which the increasing unease abroad may have an impact in Sweden. In this connection it is worth pointing out that the Swedish banks have little direct exposure to the countries in southern Europe that are experiencing publicfinance problems and that they are well capitalised compared to banks in other countries. So, what are the risks? Traditionally, the Swedish banks’ lending has been largely funded by deposits from Swedish bank customers. However, in recent years an increasing share of the funding has instead taken the form of market funding, often in foreign currencies (see Figure 13). A greater degree of stress in the financial system may reduce the effectiveness of these markets. This may in turn affect both access to and the price of the Swedish banks’ market funding, even if the cause of the stress lies outside Sweden.