Winter comes early to Sweden, but the snows of recession are still melting, says Nick Hood.

Stockholm has been plunged into traffic chaos by the premature arrival of winter 2009, just as the bar-room banter turned to the desperate thought that Sven-Göran Eriksson might be the answer to an abject failure to qualify for the 2010 World Cup in South Africa.

But in the recovery departments of Swedish banks, the talk is about what has happened to the anticipated surge of bad debts and insolvencies.  Why, they ask, are we not busier? Are we missing something? Surely there must be more problems lurking in our loan books, especially when Saab is reporting a 61.7% drop in car sales to Europe in September?

Others are more bullish. The Stockholm stock market OMX index is at a high for 2009 and house prices in Stockholm surged nearly 5% in the third quarter of 2009, taking them close to their previous peak in August 2008. The super-wealthy Wallenberg family’s investment company, Investor, has just reported a $1.8bn net profit as asset valuations rebounded upwards, reflecting rising confidence across the whole of the economy.

Certainly there are serious problems to be faced, not least the carnage in the Baltic economies where Swedish financial institutions dominate and control the local banking sectors.  Trouble there means heavy write downs for some Swedish banks.  Latvia is a particular worry, with the Government and the IMF seriously at odds over austerity measures.

But Swedish investors are not just supporting their own economy, they are looking to take advantage of regional opportunities, too. Agricultural land in Russia is popular, with Swedish company Black Earth Farming buying huge tracts of farmland in the Voronezh region south of Moscow, to exploit the fertile soil and reverse the current 70% fallow ratios.

Sweden is also basking in the warm glow of interest in its model socialist society - from America of all places. President Obama has been accused of adopting Swedish-style policies, with critics suggesting that his aim is to create a higher tax regime to support increasing state welfare benefits.  

Ironically, this comes just as Sweden heads enthusiastically towards a more capitalist approach. In September, the government started selling off state-owned pharmacies as the latest step in an ambitious liberal reform programme started some three years ago.  Some 80% of schools are now privately run, as is the entire railway and subway system and the post office network.  One academic recently described Sweden as a laboratory for privatization.

And Sweden has some very capitalist issues, with its Unemployment Insurance Board reporting that almost half of the country’s jobless have no unemployment benefit because of increased premiums.  

Judging by the throng of Friday night revellers jostling to join in the sing song round the grand piano in the Cadier bar in Stockholm’s Grand Hotel, the general public is less concerned about the economy than their compatriots in the banking sector. Only time will tell how many commercial corpses they will find when the snow thaws next spring.