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IMF Warns Nordic Countries on Housing Bubbles

The International Monetary Fund warned Thursday that the Nordic countries’ large, shared banking sector, high household debt and property prices pose a financial risk for the region.

The Nordic countries’ “robust social institutions” and sound macroeconomic policies helped them recover more quickly than others from the global financial crisis, the IMF said, though it warned the banking sector is heavily reliant on wholesale funding.

Household debt in parts of the area is among the highest among developed economies and authorities need to restrict the availability of interest-only mortgages, the fund said. Because large parts of the banking sector are shared across the Nordic region, a sudden drop in housing prizes in one country could have negative effects on consumption and unemployment in the entire region.

To avoid this, it is important to maintain strong fiscal buffers and phase out preferential tax treatment of housing investments, it said in a regular review of the region.

Overall, the IMF commended the countries for their ongoing reforms and sound financial policies, and welcomed measures to set up mechanisms to deal with distressed banks.

via Mainichi [1]

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Alfonso Esparza

Alfonso Esparza [6]

Senior Currency Analyst at Market Pulse [7]
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza
Alfonso Esparza

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