Sweden

Interest rate cuts will help but not completely reinvigorate the economy

The Swedish economy in 2024 faces a complex interplay of trends. Tight credit conditions have not only impacted household consumption but also resulted in a decline in business investment as variable interest rates frequently used by households and businesses contribute to the overall economic slowdown. Anticipated rate cuts later in the year are seen as a vital measure to counteract these adverse effects and slowly start to stimulate economic activity.

In the housing market, both prices and activity are on a swift decline as households and real estate companies adjust to the new normal of higher interest rates. This adjustment period has introduced a challenging phase for the real estate sector and has implications for broader economic sentiment.

While government spending is expected to remain stable, albeit at a slower pace, a notable concern lies in the reduced contribution of net exports due to a slowdown in the global economy. The weak exchange rate between the Swedish krona and major currencies like the US dollar and euro adds an additional layer of complexity, and presents a potential obstacle for the central bank in implementing necessary rate cuts. Striking a delicate balance between monetary policies and economic conditions will be crucial.

Rising debt should not be an issue

Sweden's current account balance is expected to maintain its usually stable surplus in 2024, driven by a surplus in both the balance of goods and primary income. Despite recent deficits in the balance of services in 2022 and 2023, there is an expected improvement in 2024. Anticipated adjustments include a weakening of the balance of goods, coupled with minor enhancements in both the balance of services and primary income. These changes suggest an overall current account balance quite similar to the ratio from the previous year.

In 2024, Sweden's public balance is anticipated to experience a slight widening of the deficit, primarily attributed to increased spending and investments, notably in defence. This strategic fiscal approach aligns with the government's commitment to increase defence spending. Consequently, public debt is expected to rise, but still remain below 40% of GDP. The measured increase in public debt reflects a balance between stimulating economic growth and maintaining fiscal responsibility. That said, Sweden’s fiscal situation is still strong and should not worry investors.

NATO membership is in sight but political intricacies are slow the process

In 2024, Sweden's political landscape is expected to be relatively subdued as the next general election is not scheduled until 2026. The current government, comprising the Moderates, Christian Democrats, and Liberals, along with the far-right Swedish Democrats, collectively maintains around 50% of votes in polls, with the Swedish Democrats emerging as the largest party. The upcoming European Parliament elections in June 2024 have added an intriguing dimension to the mix especially given the Swedish Democrats' current strength and their anti-EU stance.

Sweden grapples with the ongoing process of joining NATO and at this stage is only waiting approval from Turkey and Hungary. While both nations have expressed commitment to advancing Sweden's NATO accession through parliamentary sessions, domestic and bilateral political considerations are prolonging the approval process. The complex dynamics involved underscore the intricate interplay between Sweden and these NATO member states, adding a layer of diplomatic intricacy to one of the key issues facing the nation.

Payment

Bills of exchange and promissory notes are neither widely used nor recommended as they must meet a number of formal requirements in order to be considered as legally valid.

Just as the rules for issuing cheques have become more flexible, the sanctions for issuers of uncovered cheques have been relaxed over the years. The use of cheques has subsequently become almost non-existent.

Conversely, use of the SWIFT electronic network by Swedish banks provides a secure, efficient, and cost-effective domestic and international fund-transfer service. Payments are dependent on the buyer’s good faith. Sellers are advised to ensure that their bank account details are correct if they wish to receive timely payment.

Direct debits represent about 10% of non-cash payments in Sweden and are quickly growing in popularity. There are two types of direct debit in Sweden: Autogiro Foretag (AGF) for B2B transactions and AutogiroPrivat (AGP) for B2C payments. They can both be used for single or recurring payments.

Debt Collection

Amicable phase

Amicable settlement aims to recover the debt without transferring the case into a trial procedure. The debtor is informed (either orally or via writing, with written correspondence being preferred) about the debt, the payment deadline, and the consequences of not paying the debt. If debtor agrees to pay the debt, both parties may settle on instalment payments through an official document that sets out the contractual terms of the agreement.

When there is no specific interest clause in the contract, the rate of interest applicable since 2002 is the six-monthly benchmark rate (referensräntan) of the Central Bank of Sweden (Sveriges Riksbank), plus eight percentage points.

Under the Swedish Interest Act (räntelag, 1975, last amended in 2013), interest on damages is awarded from the 30th day following the day on which the creditor addressed a written claim for damages to the defendant, if the plaintiff so requests. In any event, interest may be awarded from the date of service of the summons application.

Legal proceedings

Fast-track proceedings

Where claims meet some basic requirements (e.g. payment is overdue, mediation was attempted), creditors can obtain an injunction to pay (Betalningsföreläggande) via summary proceedings through the Enforcement Service. The application has to be made in writing and clearly express the grounds of the claim. No further proof needs to be submitted.

This Enforcement Authority (Kronofog–demyndigheten) orders the debtor to respond within a period of ten days to two weeks. If the debtor fails to reply in time or acknowledge the debt, a verdict will be rendered on the merits of the original application.

While formal, this system offers a relatively straightforward and quick remedy in respect of undisputed claims, which has greatly freed up the courts. Creditors are not required to hire a lawyer but, in some circumstances, would be well advised to do so. On average, the process takes two months from application to decision. The decision is immediately enforceable.

Court proceedings

If the debtor contests the debt, the creditor has the decision of either turning to the District Court (the first instance, Tingsrätten) or to terminate the process.

Proceedings involve a preliminary hearing in which the judge attempts to help the parties reach a settlement after examining their case documents, evidence and arguments. It is up to the parties themselves to decide what evidence they wish to submit.

If the dispute remains unresolved, the proceedings continue with written submissions and oral arguments until the main hearing, where the emphasis is on counsels’ pleadings (defence and prosecution) and examination of witnesses’ testimonies.

In accordance with the principle of immediateness, the court bases its decision exclusively on the evidence presented at the trial. Barring exceptional circumstances, the judgement is customarily issued within two weeks thereafter.

As a general rule, the Code of Civil Procedure requires the losing party to bear all legal costs considered reasonable, as well as the attorney fees incurred by the winning party beyond a given threshold claim amount (about SEK 23,800, approximately EUR 2,390).

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It takes up to twelve months (in exceptional cases more) to obtain a writ of execution in first instance, bearing in mind that there is a widespread tendency in Sweden to appeal against judgements.

Enforcement of a Legal Decision

As soon as a domestic judgment becomes final, it is enforceable. If the debtor does not comply, the creditor can request the court’s enforcement authority to seize and sell the debtor’s assets.

For awards rendered in an EU member-state, special enforcement conditions are provided. When the claim is undisputed, the creditor may apply to the European Enforcement Order, or when the claim does not exceed €2,000, the creditor may start a European Small Claim Procedure. For awards issued in non-EU countries, the Svea Hovrät Court of Appeal must recognize an award in order to enforce it, provided that a recognition and enforcement agreement has been signed between the non-EU country and Sweden.

Insolvency Proceedings

OUT-OF COURT PROCEEDINGS

Swedish law does not formally regulate out-of court arrangements. Nevertheless, creditors and debtors can enter into voluntary negotiations in order to negotiate the debt and reach an agreement.

RESTRUCTURING

The aim of restructuring is to find a financial solution for an insolvent company that is deemed to have sustainable long-term business prospects. It can apply for a restructuring with the local court. If approved, the court will appoint a rekonstruktör to manage the restructuring. The latter will investigate the financial situation of the company, before establishing and implementing a restructuring plan under which up to 75% of the debt may be written off.

BANKRUPTCY

Bankruptcy proceedings are initiated as a consequence of a company becoming permanently insolvent. They aim to wind down an insolvent company by selling its assets and distributing any income to creditors. Either the debtor or the creditor can file a petition before the local court. After the court has declared a company bankrupt, it appoints an administrator that independently takes control over the company’s assets with the main task of realising such assets and repaying the debts of the bankruptcy estate in accordance with the creditors’ statutory ranking.

Last updated: January 2024