Lars Nyberg: The Baltic region in the shadow of the financial crisis
Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at Intervalor and
Baltic Property Trust, Stockholm, 9 September 2009.
* * *
The global financial crisis has now been with us for over two years. It began in the summer of
2007 with anxiety about all the complicated credit instruments that had been issued using
subprime US mortgages as collateral. However, the most acute phase of the crisis began
almost exactly a year ago when the investment bank Lehman Brothers filed for bankruptcy
protection. This was followed by such a rapid and extensive decline in liquidity in the
international banking system that it led to a global financial crisis that also hit Sweden. The
financial crisis accelerated and reinforced the economic downturn that had already begun. As
a result, production around the world has fallen to an extent that we have not seen since the
Great Depression of the 1930s.
The countries in the Baltic region, which are the subject of today's discussion, have also
suffered. The Baltic states, that is Estonia, Latvia and Lithuania, have been hit hardest by the
crisis. As a couple of the Swedish banks dominate the Baltic banking system, this has had
consequences here in Sweden too.
Today, I intend to speak about how we at the Riksbank view the economic development of,
and financial stability in, the Baltic region. The Baltic states and Sweden are naturally closes
to our interests, so I will focus primarily on these countries. And as all financial crises are in
various ways linked to the banks' loans on the property markets, I also see this seminar as
an excellent opportunity to discuss these markets too.
We have heard and seen little more than negative news over the last 12 months and most
forecasters, including the Riksbank, have underestimated the strength of the international
economic downturn. Now, however, we are beginning to see increasingly distinct signs of a
stabilisation of the global economy, above all on the financial markets. I therefore intend to
conclude my speech by saying a few words about this.
The economic integration of the Baltic region is increasing
The Baltic region consists of eight countries. They are all members of the European Union
(EU) and the region has a total population of almost 72 million.1 This is more than 15 per
cent of the total population of the EU member states.2 Throughout the course of history, the
countries in the region have had close links with each other, not least because of common
economic interests. The Hanseatic League is a thing of the past, but the ties between the
countries have not weakened, quite the reverse. The economic links are now stronger than
ever and a large part of the countries' trade takes place within the region.
However, the integration does not relate to trade alone. Over the last ten years, Nordic banks
have increasingly established operations in other countries in the region and have begun to
offer their services to households and companies across national borders. Swedbank, for
example, accounts for almost 45 per cent of total lending in Estonia, while SEB accounts for
30 per cent of lending in Lithuania.3 Prior to the beginning of the crisis, the operations in the
Baltic states also generated an increasing proportion of the earnings of these two banks (see
Figure 1 and Table 1). Other major players are Nordea and Danske bank, which can now
regard practically the entire Baltic region as their domestic market.
This financial integration has many economic advantages, but it also poses major
challenges. I do not intend to discuss this further here, but will simply say that when the
financial systems of different countries become intertwined, the risk increases that problems
will spread across national borders. As far as Sweden is concerned, this has resulted in a
decline in confidence not just in the Baltic economies but in the Swedish economy too. This
is because there is a risk that developments in the Baltic states will entail substantial loan
losses for the Swedish banks. This is one of the reasons why the Swedish krona has
weakened against the euro. In the period since the beginning of the crisis to the present
date, the krona has depreciated by approximately eight per cent against the euro. However,
the fall has been even sharper over the last 12 months, reaching 18 to 19 per cent in March
2009.
Rapid downturn in the Baltic states
It became increasingly clear that the rate of growth in the world was beginning to slow down
already in 2008. But it was not until the autumn, when the global financial crisis really took
hold, that the situation seriously deteriorated. At present, the global economy is in recession
and GDP is expected to fall by one per cent this year. World trade is expected to fall by over
12 per cent.4 GDP is expected to fall in our region too - by 5 per cent in Sweden, which is
slightly more than the figure for our Nordic neighbours. Development in Germany is
somewhat weaker than in Sweden, while zero growth is expected in Poland. The situation is
much worse in the Baltic states (see Figures 2 and 3), where GDP is currently expected to
fall between 15 and 20 per cent this year.5 This means that the crisis in the Baltic states is
unparalleled compared with previous crises. The labour market has also weakened
dramatically throughout the region. This is evident not least in the Baltic states where
unemployment has now reached almost 17 per cent. Only a year ago, the level of
unemployment was approximately 5 per cent (see Figure 4).
For several years, development in the Baltic states could be described as a fantastic success
story with high economic growth. In the period 2005 to 2007, for example, economic growth
in Estonia and Latvia was approximately 10 per cent per year, while development in
Lithuania was more moderate. At the same time, however, major domestic imbalances
developed which laid the foundations for the crisis we are witnessing today.
When the Baltic states moved from being regulated economies to market economies,
optimism about the future was high and both household consumption and private sector
investment increased dramatically. However, the investments went to the service and
property sectors instead of to developing production capacity in the industrial sector. Export
development was thus weak while imports increased rapidly as a result of strong domestic
demand. Consequently, the current account deficits of the Baltic states increased (see Figure
4). The deficits were largely funded by taking loans in euro, mainly from Swedish and other
foreign banks. The high level of economic growth led to the overheating of the labour market
and wages and inflation increased (see Figure 6). In Latvia, for example, nominal wages in
the public sector increased by more than 35 per cent in the year prior to the outbreak of the
crisis, and in the private sector by over 30 per cent (see Figure 7). As, however, nominal
interest rates remained low, the high level of inflation entailed negative real interest rates,
which further fuelled the expansion of credit. Even though credit began to expand from a very
low level, the rate of development was startling and it did not take long before the debts of
the companies in relation to GDP reached levels only slightly below the level of private sector
indebtedness in Sweden (see Figure 8). Household indebtedness did not increase quite as
much (see Figure 9). As all three countries had also in various ways tied their currencies to
the euro with the aim of eventually joining the European Monetary Union, they were not able
to use monetary policy to restrict demand. The interest rate weapon was limited to the aim of
maintaining the fixed exchange rate. At the same time, fiscal policy was expansionary and
accelerated development.
Unlike the other countries in the Baltic region, the Baltic states thus entered the global
financial crisis with several underlying weaknesses. There were large savings deficits in both
the private and public sectors and a high level of indebtedness in the private sector. The
loans also gave rise to a growing currency crisis. In addition, increasing cost pressures
gradually undermined the competitiveness of the three countries.
When the global financial crisis broke out, economic growth in the Baltic states had already
begun to decline. Declining growth and the large current account deficits led investors to
begin reappraising the value of eastern European and central European assets. Capital
inflows dried up, which made it more difficult to fund many projects and further reinforced the
downturn in economic activity. The credit rating agencies downgraded the Baltic states, one
after the other, which further aggrevated the shortage of capital. The lack of capital thus
helped to reinforce the downturn in the same way that the surplus of capital once reinforced
the dramatic upturn.
There are some signs that the real economy in this part of the Baltic region has now begun to
stabilise, but unfortunately the recovery may be a long, slow process. This is partly because
external demand is still weak as a result of the global recession. Above all, however, it is
because domestic demand is low due to the fact that the Baltic states are now carrying out
so-called internal devaluations. This means that wages and other costs have been
substantially reduced to restore competiveness and to counteract the serious weakening of
public finances. In the case of Latvia, this is taking place within the framework of a financial
support programme led by the International Monetary Fund (IMF) and the EU. The previous
imbalances have now declined in all of the three countries. The current account is, for
example, now showing a surplus following years of deficits in all the three countries. This is
mainly because there has been a very substantial fall in imports. Inflation has also declined,
and in Estonia prices are now falling on an annual basis. However, these developments have
also taken place at the expense of increased unemployment and impaired credit quality. This
is reflected not least in the fact that late payments have increased dramatically.
Although there are signs that the downturn is slowing down, the development of the Baltic
states in the period ahead is still associated with several risks. The main challenge relates to
government finances where the budget deficits have grown as economic activity has
weakened. The possibility to issue government securities to cover these deficits is, however,
limited and Latvia is almost entirely dependent on the international support programme. Here
there is also a great need for reforms in the public sector, reforms that should have been
carried out during the period of positive growth. Estonia is in a better initial position as during
the good years of the decade the country took the chance to build up fiscal policy reserves
that can now be used as an extra buffer to fund the budget deficit.
Falling prices on the Baltic property market
In terms of financial stability, the development of the Baltic property market is of course a
cause for concern. This development is in many ways reminiscent of the Swedish property
crisis. Exaggerated expectations of future price increases pushed up prices, particularly
housing prices. Now the prices of both commercial properties and housing have fallen
dramatically. For example, the average price of an apartment in Tallinn was more than 50
lower in June 2009 compared to the peak in April 2007. This means that prices will soon be
back at the level of 2004 (see Figure 10). In Latvia, the average price of apartments fell in the
same period by almost 60 per cent, which is among the largest price falls noted in Europe
during this crisis.6 In Lithuania, the fall in prices has been comparatively moderate: 28 per
cent during the second quarter of this year compared to 2008.7
We could say that after being a landlord's market for several years, the property market is
now a tenant's market. In an economic downturn, it is common for landlords to offer rent
rebates or to refrain from increasing rents in line with the index to the full extent allowed in
rental contracts. Lenders can also put pressure on the construction and property companies
to increase the level of occupancy. This can lead to lower rents than those the construction
cost estimates were based on and thus give rise to payment difficulties for construction
companies and property companies.
As I have said, the demand for properties in the Baltic states is very low at present.
Eventually, however, the countries will recover and demand will return. There is also a strong
underlying demand for property in these countries as much of the property there is old (it was
built in the Soviet era) and in need of renewal. As property prices are already so depressed,
this may mean that prices will increase rapidly when the economic turnaround finally comes.
Property also has a lasting value, providing that it is maintained. To the extent that the banks
in Estonia, Latvia and Lithuania have taken properties as collateral it is probable that these
properties will not be sold until there is an upswing in demand. This is what happened
following the Swedish property crisis in the early 1990s when Securum and other companies
were specifically set up to manage the settlement of bad loans with property as collateral.
The increasing market value of property in the Baltic states will also eventually lead to an
increase in the supply of new properties. An important precondition for all this is, however,
that the internal reform programmes of the Baltic states are successful so that costs do not
begin to rise once more.
Small risk of a crisis on the Swedish property market
In recent years, we have once again seen rapid price increases for commercial properties in
Sweden. These prices have now begun to fall, however, and the question is whether this can
lead to major loan losses for the banks in the same way as it did during the crisis of the
1990s (see Figure 11). The current downturn is after all much worse than that of the 1990s. I
do not believe, however, that the effects on the property market will be so serious.
The years prior to the property crisis of the 1990s were marked by a rapid rise in the price of
office premises. This was mainly a result of the deregulation of the credit market as a pent-up
demand for loans led a rapid expansion of credit. A large part of the loans went to the
property sector, where optimism was high as a result of the favourable situation on the
market for office premises. The good times on the property market signalled the start of a
construction boom. However, when the downturn came, prices fell and real interest rates
increased the crisis was upon us. As well all know, this entailed substantial loan losses for
the banks.
Today too, the property companies account for the banks' largest single exposure - almost
20 percent of lending goes to this group of borrowers. This is, however, a lower figure than
during the crisis of the 1990s when the banks' exposure to the property companies amounted
to one third. But, despite the fact that the percentage is now lower, exposure is still at such a
level that it can constitute a potential credit risk for Swedish banks. A similarity between the
increase in prices we have just seen and the increase at the end of the 1980s is that prices
were not driven by so-called fundamental factors. In other words, prices increased not
because of a higher demand for offices, lower vacancy rates or higher rents but rather
because the investors did not demand as high a return on their invested capital. This in turn
indicates that higher rents were expected in the future.8 The risk premium was, for example,
close to zero at the end of 2007. Investors did not thus compensate for the extra risk that a
property investment entails compared to a risk-free investment such as a government bond.
There were, however, periods in the 1980s when the risk premium was negative. The
investors accepted a lower return on high-risk property investments than on safe investments
in government bonds (see Figure 12).
However, there are also major differences between the situation on the Swedish property
market then and now. One of the important factors that made it possible for prices to
increase so much during the latter part of the 1980s was the deregulation of the credit
market. Although lending to property companies has increased during the 2000s, this has not
been to the same extent as in the years prior to the property crisis. The construction of new
properties has also been moderate in recent years The most important difference, however,
is that the interest rate is much lower today now that monetary policy no longer needs to
focus on defending a fixed exchange rate (see Figure 13). The banks' credit assessments
also focus more on the customers' cash flows and their ability to service their loans. In the
1990s, the banks focused to a greater extent on the value of the collateral, and as the
collateral for the loans was often in the form of property the value of the collateral fell quickly
in pace with the fall in prices.
With these differences in mind, we can note that it is unlikely that the fall in prices we have
seen so far will lead to a crisis on the Swedish property market.
However, an economic downturn is always associated with increased risks. During the
second quarter of this year, nominal prices for office premises in Stockholm, Gothenburg and
Malmö fell by between 14 and 20 per cent on an annual basis. These are substantial price
falls, although not as substantial as during the crisis of the 1990s. Prices began to fall in late
2007 and this was primarily driven by that fact that investors increased their return
requirements. At the same time, rents were still increasing at a good rate, which
counteracted an even more substantial fall in prices. However, rents began falling in the
spring, especially in Stockholm where the number of vacancies has also increased. Given
that the outlook on the labour market is deteriorating and that bankruptcies are expected to
increase among tenants, it is highly probable that vacancies will continue to increase. Such a
development will reduce the earnings of the property companies, thus weakening their ability
to make interest and amortisation payments. Ultimately, this may also lead to the suspension
of payments on the part of property companies too. Falling prices may also cause difficulties
for the property companies if they do not meet the banks' requirements regarding maximum
leverage. Some property companies, which before the current crisis funded parts of their
operations abroad, appear to be experiencing difficulties with their funding.
Let me now say a few words about the Swedish housing market. Here, prices have not fallen
in anything like the same way as for commercial properties. Despite the fact that we are
experiencing the severest slump of the post-war period, house prices fell by only
approximately two percent during the second quarter of this year compared to the same
period last year. House prices in Sweden have so far fallen much less than in a number of
other industrial countries (see Figure 14). Several of these countries, for example Ireland,
Spain and the UK, have, however, had a much more ioverheated housing market than
Sweden. Another reason why house prices in Sweden have not fallen as much may be that
the Swedish banks have not been hit so hard by the financial crisis that they have found it
difficult to lend money to the households. Incomes have also developed positively - at least
for those who still have jobs. Another important explanation of why house prices have not
fallen more is that the real interest rates faced by the households are at historically low
levels. The construction of new housing has also been at a low level since the crisis of the
1990s. This is despite the fact that in most of the large urban areas it pays to build new
house in comparison to what it costs to buy an existing house.9
At the moment, when the crisis appears to have bottomed out and optimism has begun to
grow, housing prices are beginning to increase again, especially in the major cities. The
Riksbank will closely monitor developments in the period ahead with regard to both the
housing market and the market for commercial properties.
The Swedish banks can cope with large losses in the Baltic states
In the deep recession that we are now experiencing, it is not possible to dismiss the fact that
the Swedish banks are facing significant loan losses. During the first six months of this year,
these losses amounted to SEK 30 billion, which translated into annual figures is equivalent to
0.84 per cent of total lending. A large part of these losses, 44 per cent, stem from the
Swedish banks' operations in the Baltic states. The Riksbank's assessment in the main
scenario of the latest Financial Stability Report is that loan losses are expected to amount to
just over 2 per cent of the banks' lending in 2009 and 2010. In a stress scenario that
assumes a much worse situation in Sweden and in the Baltic states, the loan losses could
amount to 4.3 per cent of lending during these two years. Almost 40 per cent of these losses
in both the main scenario and the stress scenario can also be related to the banks' lending to
the Baltic states and the rest of Eastern Europe. These are significant losses, even though
they are not as large as those suffered during the Swedish bank crisis in the period
19911994 when losses amounted to 13 per cent of lending.
The banks' losses will certainly be largely related, in this crisis as in all others, to the situation
on the property market. This is because most of the banks' collateral volume consists of
property. However, the problems usually relate primarily to commercial properties, not to
housing. The households service their interest and amortisation payments in most cases,
even though they may sometimes have to negotiate a respite with the bank. Neither in
Sweden nor in the Baltic states can households, as they can in the USA, give up the property
they have provided as collateral and thus get rid of their debts. Not even during the crisis of
the 1990s did the households account for a significant part of the banks' losses. However,
although loans for housing seldom constitute major problems for the banks, they may mean
disaster for individual households that suddenly find it difficult to make the payments. At
present the interest rate is very low. However, our forecast indicates that the Riksbank,
following a period with a low interest rate, will need to raise the interest rate quite quickly in
the period ahead. It is therefore particularly important that the banks check that every
household that borrows money can cope with the expected interest rate increases and
potential losses of income.
The major Swedish banks have strengthened their capital bases and in international terms
appear to be well capitalised. Three of the four major banks have carried out new issues
since last autumn and Swedbank will soon conduct an additional new issue - all on the
private market and without government guarantees. In many countries, where the banking
systems have been affected by the current crisis to a greater extent, this has been
impossible. In addition, all four major banks have strengthened their capital by reducing or
cancelling dividends to shareholders for the previous year. It should be pointed out, however,
that the danger has not yet passed. If the situation deteriorates more than expected, credit
ratings may come under pressure and the banks may experience funding difficulties once
again.
The Riksbank's measures safeguard financial stability
Since the financial crisis broke out, the Riksbank has entered into swap agreements with two
of the Baltic states. We have made it possible for the Estonian central bank to swap Estonian
kronor for Swedish kronor should the need arise, and for the Latvian central bank to borrow
euros direct from the Riksbank. The aim of these agreements is to make it easier for the
central banks in Estonia and Latvia to safeguard financial stability in the respective countries.
Entering into these swap agreements also serves to safeguard financial stability in Sweden.
In order to secure the supply of liquidity, the Riksbank has also lent kronor and dollars to the
Swedish banks when they have not been able to acquire funding on the market. These loans
have been provided at longer maturities than normal and with a broader spectrum of
collateral.
In Europe and other parts of the world, central banks and supervisory authorities have faced
many new problems over the last 12 months, not least with regard to banks that have
operations in several countries. The experience gained is now the subject of intensive
discussion. I am convinced that in the future we will see major changes regarding the
supervision and regulation of the banks and other financial operations. But I will gladly speak
about this on another occasion.
Concluding remarks
Over the last 12 months we have experienced a financial crisis that is exceptional in many
respects in the sense that it has hit more players, markets and types of asset than any
previous crisis.
Since the beginning of the summer, the real economy has begun to show signs of
stabilisation, although from very low levels. In Asia, and not least in China and India, growth
has begun to pick up again and this is having a noticeable effect at those companies that
export to these countries. World trade is beginning to stabilise and the fall in GDP has
slowed down. The reports of the banks and companies for the second quarter have also
been less negative than expected, which has given rise to somewhat greater optimism about
the future. There are also signs that the financial markets are working more effectively. This
is reflected, for example, in the fact that the credit spreads, that is the difference between the
interest rates on corporate bonds and the interest rates on government bonds, have returned
to the levels that applied before Lehman Brothers filed for bankruptcy protection. The
difference between interbank rates and the expected policy rate has also decreased (see
Figure 15). The credit markets are also steadily improving. Companies that just a few months
ago found it difficult to issue bonds now have access to the market again. Companies with a
good credit rating can now borrow at a lower cost, at longer maturities and with lower
collateral requirements than before the summer. It thus appears that the situation on the
financial markets is beginning to ease and that confidence is slowly returning. This is in turn
a precondition for the continuation of the recovery of the real economy. Global monetary and
fiscal policy is still highly expansionary and there is plenty of spare capacity in most
countries. It is not unreasonable to assume that a rapid recovery of the financial markets can
also facilitate a more rapid recovery in the real economy.
There are thus several reasons why it is reasonable to be cautiously optimistic. We must also
remember, however, that we are still emerging from a severe recession and it may therefore
take time before global demand recovers completely. Many banks in the world also have a
lot of work to do before their balance sheets are free of impaired assets. From a Swedish
perspective, economic development in the Baltic states still constitutes a significant risk.
The Baltic region

Denmark

Estonia

Finland

Latvia

Lithuania

Poland

Sweden

Germany
Swedish banks in the Baltic states
June 2009
Baltic operations' share of
lending and operating profit in
each bank
Market shares public lending
Population Population Population
Lending
1.3 million 2.3 million 3.4 million
SEB 11%
100%
19%
Swedbank
39%
80%
47%
14%
16%
60%
10%
24%
Nordea 3%
14%
40%
29%
Operating profit, latest four-quarter
15%
period
43%
20%
25%
22%
SEB Neg
0%
Estonia Latvia Lithuania
Swedbank
Swedbank SEB Nordea Other
Neg Nordea
1%
Sources: Bank reports and the Riksbank
Real GDP in the Baltic region and global
Annual percentage change
6
4
2
0
00 01 02 03 04 05 06 07 08 09 10
-2
-4
-6
-8
Denmark Finland Sweden Germany World
Source: Reuters Ecowin
Real GDP in the Baltic region
Annual percentage change
15
10
5
0
00 01 02 03 04 05 06 07 08 09 10
-5
-10
-15
-20
-25
Estonia Latvia Lithuania Poland
Source: Reuters Ecowin
Unemployment in the Baltic
states
Per cent
20
18
16
14
12
10
8
6
4
2
0
sep-00 sep-01 sep-02 sep-03 sep-04 sep-05 sep-06 sep-07 sep-08
mar-00 mar-01 mar-02 mar-03 mar-04 mar-05 mar-06 mar-07 mar-08 mar-09
Estonia Latvia Lithuania
Source: Reuters Ecowin
Current account in the Baltic
states
Percentage of GDP
5
0
-5
-10
-15
-20
-25
-30
sep-01 sep-02 sep-03 sep-04 sep-05 sep-06 sep-07 sep-08
mar-01 mar-02 mar-03 mar-04 mar-05 mar-06 mar-07 mar-08 mar-09
Estonia Latvia Lithuania
Source: Reuters Ecowin
Harmonised index for consumer prices
Annual percentage change
20
15
10
5
0
-5
jan-01 jan-02 jan-03 jan-04 jan-05 jan-06 jan-07 jan-08 jan-09
Estonia Latvia Lithuania
Source: Reuters Ecowin
Nominal wages in the Baltic states
Annual percentage change
35
30
25
20
15
10
5
0
-5
-10
sep-01 sep-02 sep-03 sep-04 sep-05 sep-06 sep-07 sep-08
mar-01 mar-02 mar-03 mar-04 mar-05 mar-06 mar-07 mar-08 mar-09
Estonia Latvia Lithuania
Source: Reuters Ecowin
Corporate debt, the Baltic states and
per cent of GDP
Sweden
70
60
50
40
30
20
10
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Estonia Latvia Lithuania Sweden
Source: Reuters Ecowin
BIS Review 105/2009
Household debt, the Baltic states and
Sweden
Per cent of GDP
80
70
60
50
40
30
20
10
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Estonia Latvia Lithuania Sweden
Source: Reuters Ecowin
Apartment prices and number of transactions in
Tallinn
Number of transactions with apartme nts in Tallinn and
median price
1 400 28 000
1 200 24 000
1 000 20 000
800 16 000
600 12 000
400 8 000
200 4 000
0 0
2004 2005 2006 2007 2008 2009
nu m b er of tra n s a ctio ns (lhs ) m e d ian p rice (EEK/m 2, rh s )
D ata : L an d Boa rd
* f inal transac tion data must be published latest 10 days after the transac tion date
Sources: Land Board and Eesti Pank
BIS Review 105/2009
Real prices of office premises in city
centres, Sweden
Index:1981=100
500
450
400
350
300
250
200
150
100
50
0
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09
Stockholm Göteborg Malmö
Sources: Newsec and the Riksbank
Average yield levels for modern office
premises in city centres, Sweden
Per cent
16
14
12
10
8
6
4
2
0
85 87 89 91 93 95 97 99 01 03 05 07 09
Stockholm Göteborg Malmö Five-year government bond yield
Sources: Newsec , Reuters Ecowin and the Riksbank
Real government bond yield, 5 years
Per cent
10
9876543210
-1
85 87 89 91 93 95 97 99 01 03 05 07 09
Sources: Reuters Ecowin, SCB and the Riksbank
Real house prices
Index 1980=100
450
400
350
300
250
200
150
100
50
0
1980 1985 1990 1995 2000 2005 2010
Sweden Denmark Norway UK Spain USA
Sources: SCB, OFHEO, Case-Shiller and Reuters Ecowin
Basis spread
The difference between three-month interbank rate and
expected policy rate
Basis points
400
350
300
250
200
150
100
50
0
jan07 apr07 jul07 okt07 jan08 apr08 jul08 okt08 jan09 apr09 jul09
USA Euro-area UK Sweden
Sources: Reuters Ecowin and Bloomberg