Viewing cable 09STOCKHOLM195
Title: SWEDISH FINANCE MINISTER ON FINANCIAL CRISIS,

IdentifierCreatedReleasedClassificationOrigin
09STOCKHOLM1952009-03-20 15:48:00 2011-08-30 01:44:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Stockholm
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DE RUEHSM #0195/01 0791548
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O 201548Z MAR 09
FM AMEMBASSY STOCKHOLM
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UNCLAS SECTION 01 OF 02 STOCKHOLM 000195 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ETRD PGOV EN LG LH SW
SUBJECT: SWEDISH FINANCE MINISTER ON FINANCIAL CRISIS, 
SWEDISH BANKS AND THE BALTICS 
 
REF: STATE 23758 
 
¶1. (SBU)  Summary:  On March 16, Swedish Finance Minister 
Anders Borg told Treasury DAS Meyer and CDA the following 
regarding the financial crisis, Swedish banks and the Baltics: 
 
- Swedish banks can absorb further losses given their 
profitability in recent years.  The Swedish financial sector 
is stable. 
 
- Sweden does not possess full knowledge of the domestic 
Latvian and Lithuanian banking sectors outside the Swedish 
banks' subsidiaries. 
 
- The IMF should continue to play a leading role in the 
region.  Lithuania should turn to the IMF for a program. 
 
- The EU is not a single group; some members want to help the 
Baltics while others do not. 
 
- All three Baltic states should be treated equally; Sweden 
would have to support Lithuania before giving more financing 
to Latvia. 
 
- The Baltics problem is far from over, but Sweden is pleased 
the U.S. is taking an active interest in the issue. 
 
End Summary. 
 
¶2. (SBU) Swedish Finance Minister Anders Borg told CDA and 
Treasury DAS for Europe and Eurasia Eric Meyer on March 16 
that Swedish banks have a number of domestic problems to 
resolve in addition to their exposure in the Baltics, but 
that the Swedish financial sector remains stable.  Borg 
commented that the Swedish economy contracted by nearly five 
percent year on year in the fourth quarter of 2008, and that 
industrial production in January 2009 was down 23 percent 
from a year earlier.  He stated that everything depends on 
the international market and added that Swedish banks can 
absorb the losses because Swedish consumers are "picking up 
the bill."  Borg stated that Sweden might need to set aside 
large sums of money to recapitalize parent company banks, 
which would then recapitalize their Baltic subsidiaries.  "We 
need to do more for our own banking system," Borg opined. 
Earlier in the week, Borg told journalists that he expected 
the current financial crisis to continue into 2010 with 
"aftershocks to occur in 2011 and 2012." 
 
¶3. (SBU) Borg stated that Sweden doesn't have full knowledge 
of the Latvian and Lithuanian domestic banking sectors 
outside of the Swedish banks' subsidiaries, adding that a 
lack of transparency makes it difficult to evaluate their 
domestic banking practices.  He commented that Sweden might 
need to provide additional financial resources if Latvia 
continues to defend the Lat, but that Sweden cannot do much 
more than that.  He indicated that Sweden might need to 
provide additional support to Lithuania.  Borg said that 
Sweden would need to "lean on" Brussels to help Latvia should 
it need more support, rather than provide Latvia more 
bilateral financing.  Borg noted that the IMF's process with 
Latvia was unnecessarily costly politically, which has 
spilled off on Lithuania, making it reluctant to approach the 
fund.  Nonetheless, he said that the EU and the Nordics 
believe Lithuania should turn to the IMF.  Borg stated that 
the IMF should continue to play a lead role in the region. 
When asked about his views on an early Euro zone entry for 
Latvia, Borg replied that it must be a Latvian decision 
alone.  Borg stated that the EU is not a single group.  Some 
members want to help the Baltics, while others do not.  Borg 
said all three Baltic states should be treated equally, but 
that he is less worried about Estonia. He said that even 
though Swedish banks account for 90 percent of the lending of 
Estonia the country is politically stable.  Borg noted that 
the Baltics problem is "far from over," and that he is 
"pleased that the U.S. is taking an active interest in this 
issue." 
 
Background on Swedish banks' exposure to the Baltics 
--------------------------------------------- ------- 
 
¶4. (SBU) According to figures released by the Swedish 
Financial Supervisory Authority (SFSA), Swedish banks' 
lending in the Baltics amounts to $58.2 billion, including 
$80 billion for Nordea, $200 billion for SEB and $220 billion 
for Swedbank.  Swedbank has 17 percent of its total lending 
in the Baltics, followed by SEB with 12 percent and Nordea 
with three percent.  Swedbank's operating income fell by 41 
percent in the fourth quarter  of 2008 from the same period 
in 2007, while SEB's dropped by 12 percent.  SFSA analyst 
Masih Wazdi of the Swedish Financial Supervisory Authority 
 
STOCKHOLM 00000195  002 OF 002 
 
 
stated that while the exposures are large in absolute 
numbers, lending to the Baltics represents less than 10 
percent of the Swedish banking sector and "does not pose a 
threat to the Swedish economy as a whole." 
 
¶5. Post will report Treasury DAS Meyers' additional visits 
septel. 
 
¶6. Treasury has cleared this cable. 
SILVERMAN