Sweden’s new center-left government and its financial authorities are under huge pressure when they meet on Tuesday to tackle a mountain of household debt that is casting a long shadow over one of Europe’s few economic bright spots.
Having slashed rates to zero to fight the risk of deflation, top Swedish officials are now in a quandary over how to rein in borrowing and house price rises without sending the real estate market into a downward spiral.
The country’s AAA-rated economy is still one of Europe’s strongest, with low public debt, sound state finances and banks among the best capitalized and most profitable in Europe.
The ratings agency downgraded its 2015 growth forecasts for many countries and regions, including the euro zone, Japan and Brazil.
“In contrast, Moody’s expects sustained robust growth in the U.S., U.K. and India over the next two years,” she said.
By 2019, Moody’s expects the euro area economy to be 17 percent or 1.7 trillion euros smaller than it would have been had pre-crisis growth trends been maintained.