To prevent a new financial crisis amid a dire situation on the energy market, Sweden has announced liquidity guarantees to the tune of several hundred billion kroner to Nordic and Baltic energy companies.
According to Prime Minister Magdalena Andersson, this measure should reduce the risk of financial instability in the Nordic region. At a subsequent press conference, the government specified the guarantees at a maximum of SEK 250 billion ($23.5 billion), national broadcaster SVT reported.
The guarantees are estimated to be in place during Monday before the stock exchanges close, and cover all Nordic and Baltic actors registered with the Nasdaq Clearing AB.
Amid the sharp spike in prices on the energy market, Nasdaq Clearing is requesting more money in collateral from energy companies. This, in turn, has resulted in a lack of liquidity at the companies and increased the risk of them ending up in insolvency, Swedish Finance Minister Mikael Damberg explained.
Amid the sharp spike in prices on the energy market, Nasdaq Clearing is requesting more money in collateral from energy companies. This, in turn, has resulted in a lack of liquidity at the companies and increased the risk of them ending up in insolvency, Swedish Finance Minister Mikael Damberg explained.
“The energy companies' losses can then be spread to Nasdaq Clearing, which, in turn, could lead to disturbances in the financial system and thereby threaten all financial stability. That in turn would lead to consequences for Swedish households and companies,” Damberg said.
The announcement came after Russia announced it was cutting gas supplies through the Nord Stream 1 pipeline to Germany indefinitely, citing a faulty turbine and blaming EU sanctions and a violation of maintenance agreements. The closure is expected to lead to even higher production prices for the electricity companies.
“The reason is that [Gazprom's] announcement not only risks leading to a war winter, it also threatens our financial stability,” Magdalena Andersson said. “If we fail to act quickly, it could lead to serious disruptions in the Nordics and the Baltics,” she warned.
At the same time, the government announced further energy-saving measures in a bid to to reduce electricity consumption and lower prices. Among others, Sweden proposed that 200 government agencies implement energy-saving measures and report their electricity consumption every month to the Energy Agency. This could involve changing lighting sources to more energy-efficient technologies or controlling lighting and ventilation so that unnecessary electricity is not used at night. The measure has been welcomed by the nation's Energy Agency, which called for “wiser consumption.”
Earlier, Magdalena Andersson announced that she wanted to create a broad European coalition for lower electricity prices. The main idea is to decouple electricity prices on the European energy market from the price of gas.
“I am now working hard with my colleagues around Europe and with the European Commission to disconnect electricity prices from gas prices. That would more than halve electricity prices in southern Sweden. In addition, we can take measures in Sweden to reduce consumption and also bring down electricity prices,” Andersson said.
Earlier, Swedish and Danish consumers have been warned about possible power outages during the coming winter.
The energy crisis, exasperated by the West's misplaced sanctions war against Russian energy over Moscow's special operation in Ukraine, has affected all of Europe. Even countries where only a fraction of energy comes from Russian gas have been severely affected. For instance, seven in ten British pubs have said they may go out of business this winter, while NHS executives have warned they may have to cut back services and lay off staff as their energy costs are set to double or even triple.