Swedes forecast end to Europe’s debt crisis by ‘summer 2012

Europe’s ongoing sovereign debt crisis is likely to be resolved by midway through 2012, according to a forecast published by the Swedish National Institute of Economic Research (Konjunkturinstitutet).

The prediction comes as part of its latest report into macroeconomic trends in the Swedish economy – which is largely given over to describing the effects of the European crisis on domestic GDP growth and as a cause of unemployment.

“Swedish exports surged during autumn, largely in response to strong demand from emerging markets, and GDP has also continued to increase at a healthy pace,” the Institute said.

“But the vigorous growth is only temporary. The escalation of the debt crisis early in August cast a shadow on sentiment in the economy. Since then both firms and consumers have become increasingly pessimistic. Somewhat surprisingly, domestic demand has slackened the most after the government debt crisis in Europe became acute.”

“Since the weak tendency in other countries appears to be continuing, Swedish exports are also expected to recede. As a consequence, unemployment will start rising at the outset of 2012 and average about 8 percent in 2013. Until a sustainable solution to the government debt crisis has been found, the uncertainty will continue, and growth will remain weak.”

However, it goes on to add that it the most likely outcome is a solution to the crisis being put in place by next summer.

“Most probably…the government debt crisis will be resolved in an orderly manner; it is therefore assumed that the debt crisis will become less acute around the summer of 2012.”

“Heightened uncertainty for a more substantial length of time would have a highly negative impact on the development of the macro economy, partly through lack of investment and a protracted period of higher unemployment.”

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