Sweden’s Social Democrats Ready to Sell Nordea at Right Price
Sweden’s Social Democrats are signaling they are open to selling the state’s stake in Nordea Bank AB (NDA), marking a shift away from the party’s previous opposition to the government’s planned divestment.
“I have a pragmatic view, but if it’s sold it should be sold when you get paid well,” Magdalena Andersson, economic spokeswoman for Sweden’s largest opposition party and a candidate for Finance Minister should her bloc win the next election, said in an Oct. 19 interview.
The Social Democrats, out of power since 2006, are heading for a comeback in 2014 as most polls put them ahead of Prime Minister Fredrik Reinfeldt’s minority coalition. The splintered opposition, which has a majority in parliament, last year blocked government plans to sell state assets, even after the Social Democrats lost their bid to rescind a 1991 mandate allowing the sale of the 13.5 percent the state still holds in Stockholm-based Nordea, the largest Nordic bank.
The government has targeted asset sales as part of its recipe for lowering public debt as taxes are cut. It sought to sell more of its stake in phone company TeliaSonera AB (TLSN) after reducing its holding to 37.3 percent, and has sold all of Vin & Sprit AB, the maker of Absolut vodka, as well as property company Vasakronan AB. The state cut its stake in Nordea from 19.8 percent in February 2011.
Andersson, born in 1967, took over as economic spokeswoman in February and has since seen the 123-year-old party surge in the polls. She says she will prioritize debt reduction and won’t back more income tax cuts. The Social Democrats argue that the government, which has cut income taxes four times since taking power, hasn’t done enough to help people get jobs. Unemployment rose to 7.4 percent in September from 7.2 percent the previous month, a report last week showed.
“I don’t see a need from an employment policy point of view for further income tax cuts,” said Andersson, who has an economics degree from Stockholm School of Economics.
The Social Democrats, the Left and the Green Party is backed by 48.6 percent of voters, compared with the government’s 42.2 percent, a Sifo poll for the Svenska Dagbladet newspaper showed on Oct. 14.
Reinfeldt’s government has also prioritized debt reduction. Swedish public debt has fallen every year since 2009 to 38.4 percent last year. That compares with an average burden of 88 percent in the 17-member euro area, according to the European Commission. Finance Minister Anders Borg has now delayed plans for another round of income tax cuts to protect public finances after predicting deficits of 0.3 percent of gross domestic product in 2012 and 0.6 percent in 2013.
The Social Democrats, who before losing in 2006 had held power for six of the past seven decades, in the party’s so- called shadow budget released this month proposed raising unemployment benefits, student and child subsidies and increasing spending to cut youth joblessness. To pay for the measures, the party would eliminate some of the government’s cuts in payroll taxes. It would also drop reductions in restaurant taxes as well as eliminate the earned-income tax credit on pay above a million kronor.
The party last month opposed government plans to cut the corporate tax to 22 percent from 26.3 percent next year, arguing instead for a reduction to 24 percent. Reinfeldt’s four-party ruling coalition said the cuts will cost about 16 billion kronor ($2.4 billion). His government last lowered the rate from 28 percent in 2009. The European Union’s average corporate tax rate is 23.4 percent.
Andersson said her party’s opposition to deeper tax cuts was based on concern over public finances as it’s “obvious” the government will breach its budget rules. “We have nothing against a bigger corporate tax cut but it has to happen at a pace allowed by the economy,” she said.
The party has said the government is overly optimistic in its assessment that it will be able to spend about 23 billion kronor on stimulus next year while sticking to its budget surplus target of 1 percent of GDP over an economic cycle. The government forecasts economic growth will be 1.6 percent this year and 2.7 percent next year, while unemployment will average 7.6 percent and 7.5 percent.
“If things turn out so that Swedish public finances are very poor in 2014, then the Social Democrats have shown in the past to be prepared to consider both expenditure cuts and tax hikes so that we can have sound public finances,” she said. “That’s incredibly important.”
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