Three independent Scandinavian countries, Denmark, Sweden and Norway, have different ways of solving the financial corona-crisis. The Danish government is covering 75 to 90 percent of all worker salaries, Norway uses stabilizing measures, such as deferred tax payments and tax relief and Sweden launches financial aid packages and political solutions. Read more about how Scandinavia is solving the economic corona-crises.
Political parties in Denmark from across the ideological spectrum have joined with labor unions and employers’ associations to unite and launch a rescue package covering 75 to 90 percent of all workers salaries over the next three months, provided that companies refrain from layoffs.
Counteracting reduced activity
The Norwegian government passed a crisis package to counteract reduced activity in the business sector. One of the measures adopted was to postpone the payment of advance tax by self-employed persons, from March 15 to the 1st of May.
Sweden has introduced a new system for shortening work hours, while the employees still retains 90 percent of their original pay. The state will cover a large portion of the costs. The state will also take on all the costs related to employee sick leave in April and May.
Paying rents for companies
The governments of Denmark and Norway have also agreed to cover costs like paying rent for companies and compensation for shortfall in revenues due to their lockdown of companies in fear of spreading the virus. Norway’s government has agreed a massive support package with opposition parties of 20bn Norwegian kroner (2bn USD) a month in support to companies hit by the lockdown.
The aim of the Scandinavia approach is to prevent the wrenching experience of mass unemployment and at the same time allowing businesses to retain their people rather than firing and hiring them again. Companies is supposed to be in a position to quickly resume operations and restoring economic growth once normalcy returns.
Expedite the return to normal
“If you can tide firms over by quickly produce exceptional initiatives and thereby reduce the severity of bankruptcies and firings, you can expedite the return to normal,” said Carl-Johan Dalgaard, an economist at the University of Copenhagen and chair of the Danish Economic Council.
The Norwegian rescue plan sees value added tax reduced to six percent for many industries up until 31 October 2020, and postpone payment of special taxes on the energy and brewing industries until June. The Norwegian package also intended to provide cash support for small businesses, such as hairdressers, which lost their income.
Sweden benefits from having had several years of a booming economy, but Sweden’s central bank, the Riksbank, has left the country’s key interest rate unchanged – but did not rule out cutting it below zero further down the road. Sweden, which has had a relatively softer approach to coronavirus lockdown than in many other countries is still expecting to be hit hard by the crisis. The Riksbank states that it is difficult to say at this stage exactly how deep the economic downturn will be.
Extraordinary amounts of government money
Part of the reason why Scandinavian countries could quickly pledge extraordinary amounts of government money is that they are already financing some of the world’s most generous social safety net programs.
In Norway, the government has agreed to provide an extra 5bn Norwegian kroner in funding for the country’s municipalities, and a billion kroner in extra infrastructure spending on roads and railways.
Sweden fears that unemployment could rise to 10.1 percent this year in the worst-case scenario, with a further rise to 10.4 percent next year. GDP meanwhile, according to the same estimate, could fall by -9.7 percent this year, and slowly climb back with a 1.7 percent recovery in 2021.
Various contagion measures
The Scandinavian countries have implemented various contagion measures that affect the economy differently. In Norway and Denmark, hairdressers, dentists, gyms and many restaurants had to close overnight due to the restrictions. In Sweden, these have remained open all the way. Although economic measures may indicate that Swedish companies can do better than their neighbors, it is too early to conclude.
How is Scandinavia Solving the Economic Corona-Crises? written by Tor Kjolberg