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FINANCIAL CRISIS

Swedes’ unpaid debts continue to pile up

Swedes’ cumulative unpaid debts reached a new record of 62.2 billion kronor ($7.9 billion) in June, with Swedes at the higher end of the earnings scale finding it increasingly hard to pay their bills.

In the past year, the level of unpaid debt registered with Sweden’s Enforcement Agency (Kronofogden), which assists creditors and merchants in the collection of unpaid debts, has risen by 10 percent, the Dagens Nyheter (DN) newspaper reports.

At the end of June, there were 361,000 individuals in Kronofogden’s register, an increase of 2.6 percent since last year.

“Certainly a number of groups have taken on more credit when the economy was strong,” Jonas Åkerman, deputy CEO of the Soliditet business information company which carried out the study, told the newspaper.

“The financial crisis has led to bankruptcies and layoffs. More people are finding it hard to pay their debts.”

Two groups which have seen their presence on Kronofogden’s register balloon considerably are women, and those earning more than 400,000 kronor ($50,000) per year.

In the last year, the number of women with difficulties paying their debts has increased by 40 percent more than the corresponding figure for men, the study showed.

Similarly, the number of people earning just above Sweden’s average monthly white-collar private sector wage of 32,000 kronor has increased by 27 percent.

“This group normally has the ability to pay but is now going through a change in their income. If you go from a monthly salary of 40,000 kronor to unemployment insurance payments, it can often be difficult to keep up with paying things like a mortgage and consumer debt,” Åkerman told DN.

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COVID-19

Court turns down AfD-led challenge to Germany’s spending in pandemic

The German Constitutional Court rejected challenges Tuesday to Berlin's participation in the European Union's coronavirus recovery fund, but expressed some reservations about the massive package.

Court turns down AfD-led challenge to Germany's spending in pandemic

Germany last year ratified the €750-billion ($790-billion) fund, which offers loans and grants to EU countries hit hardest by the pandemic.

The court in Karlsruhe ruled on two challenges, one submitted by a former founder of the far-right AfD party, and the other by a businessman.

They argued the fund could ultimately lead to Germany, Europe’s biggest economy, having to take on the debts of other EU member states on a permanent basis.

But the Constitutional Court judges ruled the EU measure does not violate Germany’s Basic Law, which forbids the government from sharing other countries’ debts.

READ ALSO: Germany plans return to debt-limit rules in 2023

The judgement noted the government had stressed that the plan was “intended to be a one-time instrument in reaction to an unprecedented crisis”.

It also noted that the German parliament retains “sufficient influence in the decision-making process as to how the funds provided will be used”.

The judges, who ruled six to one against the challenges, did however express some reservations.

They questioned whether paying out such a large amount over the planned period – until 2026 – could really be considered “an exceptional measure” to fight the pandemic.

At least 37 percent of the funds are aimed at achieving climate targets, the judges said, noting it was hard to see a link between combating global warming and the pandemic.

READ ALSO: Germany to fast-track disputed €200 billion energy fund

They also warned against any permanent mechanism that could lead to EU members taking on joint liability over the long term.

Berenberg Bank economist Holger Schmieding said the ruling had “raised serious doubts whether the joint issuance to finance the fund is in line with” EU treaties.

“The German court — once again — emphasised German limits for EU fiscal integration,” he said.

The court had already thrown out a legal challenge, in April 2021, that had initially stopped Berlin from ratifying the financial package.

Along with French President Emmanuel Macron, then chancellor Angela Merkel sketched out the fund in 2020, which eventually was agreed by the EU’s 27 members in December.

The first funds were disbursed in summer 2021, with the most given to Italy and Spain, both hit hard by the pandemic.

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