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Though Sweden's economy is quite strong, the government is safeguarding against Swedish banks' exposure to the Baltic states.

Sweden on Oct. 20 announced a plan to guarantee more than 1.5 trillion Swedish crowns (US$205 billion) of borrowing by financial firms and banks until April 2009. The plan will also include fees the banks will have to pay the government for the guarantees. The government also announced a 15 billion crown (more than $2 billion) stabilization fund that banks will be able to draw from in case of solvency crises.

Sweden’s fiscal position is quite positive, but Swedish banks’ exposure to the Baltic states is problematic.

Sweden is one of the most competitive European economies, with a sound manufacturing sector on par (in relative terms) with Germany’s. Brands that call Sweden home — IKEA, Volvo, Saab, Electrolux, Scania — read like a who’s-who of European industrial power. What was once the most debt-ridden country in the world is now one of the most efficient. Stockholm has slashed spending on social welfare — though it still has one of the world’s most generous systems — and has brought its government debt to only 40.7 percent of gross domestic product (GDP), which is one of the lowest figures in Europe. Sweden is also running a budget surplus of 3.5 percent and abides by the rules of the eurozone even though it has not adopted the euro. It has therefore retained control over its own monetary policy, giving it some room to maneuver in the global financial crisis without depending on the European Central Bank (ECB). As such, Sweden is one of the few European countries whose fiscal position is favorable.