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Swedish PM’s meeting with Erdogan paused for EU talks

Monday night's crunch Nato talks between Prime Minister Ulf Kristersson and Turkish President Recep Tayyip Erdogan were paused after just two hours, so that Erdogan could meet the President of the EU Council.

Published: 10 July 2023 19:29 CEST

Swedish PM's meeting with Erdogan paused for EU talks

NATO Secretary-General Jens Stoltenberg (top-C), Turkish President Tayyip Erdogan and Swedish Prime Minister Ulf Kristersson (R) react during a meeting, on the eve of a NATO summit, in Vilnius on July 10, 2023. (Photo by Yves Herman/ AFP

The meeting with the Charles Michel, President of the EU Council, came after Erdogan surprised negotiators for Sweden and Nato by pegging its acceptance of Sweden’s Nato membership to Turkey’s long-stalled ambitions to join the EU.

Earlier Erdogan rattled preparations for Nato’s Vilnius meeting by declaring that he would only back Sweden’s candidacy for the Western alliance if European Union members — most of whom are also Nato allies — agree to revive Turkey’s negotiations to join the EU.

The Turkish leader held talks with Nato Secretary General Jens Stoltenberg and Swedish Premier Ulf Kristersson in Vilnius in a push to get Ankara to lift its year-long block on Stockholm.

Diplomats said that meeting was then put on hold while Erdogan sat down with European Council head Michel.

It was unclear what Michel, who heads the body representing the EU’s 27 leaders, could offer to Erdogan to help break the deadlock.

German Chancellor Olaf Scholz, an EU and Nato heavyweight, has insisted there is no link between Stockholm’s quest to join the Western military alliance and Ankara’s long-stalled application to enter the EU.

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'Swift and Eurovision': Swedish inflation fell less than expected in May

This is a drop of just 0.2 percentage points in so-called CPI inflation since April. Experts had predicted that inflation would fall by twice as much, to 3.5 percent.

“This is a setback,” Alexandra Stråberg, chief economist at Länsförsäkringar, told the TT newswire.

According to Statistics Sweden, inflation in May was primarily affected by increased housing costs, mainly due to rising interest rates for household mortgages, which pushed up the inflation figure. This was mitigated by some extent by lower electricity, and fuel prices have also had an effect.

“The inflation rate fell in May, even though most service prices increased,” Statistics Sweden statistician Caroline Neander said in a press statement. “It was electricity prices which mainly contributed to the decline.”

Month-on-month, May saw a rise in the prices of transport services – like car rentals, train travel and flights – as well as increased prices for hotel stays, package holidays and food.

This could be due to two major events which took place in Sweden in May: Taylor Swift concerts in Stockholm and the Eurovision Song Contest in Malmö.

“There could be a temporary Swift or Eurovision effect here,” Stråberg said.

The head analyst from Nordea, Susanne Spector, said that this could partially explain the rise, but added that it wouldn’t explain the rise in the cost of services too.

“That’s a risk factor for the central bank,” she told TT.

What does this mean for interest rates?

On June 27th, Sweden’s Riksbank central bank is set to make its next announcement on Sweden’s key interest rate, just one month after it lowered the rate for the first time in eight years.

Even before these inflation figures were announced, Riksbank governor Erik Thedéen made it clear that the bank is not planning on lowering interest rates, stating there would need to be “very large changes” to even begin to discuss it in June – and unexpectedly low inflation figures for May would not be enough on their own.

Now that inflation rates have dropped less than expected, it looks even less likely that the Riksbank will lower the key interest rate in two weeks’ time.

Spector from Nordea believes that the next interest rate drop will be in the autumn.

Länsförsäkringar still predicts three further drops to the interest rate this year, although Stråberg said these figures had increased the likelihood of the bank only cutting the rate twice.

“It depends on next month. There are a lot of months to go which need to confirm the fact that inflation is on a downward trajectory,” she said.

According to chief economist Robert Boije, the most important takeaway from the new figures is the fact that year-on-year inflation did not rise.

“Today’s inflation figures for May from Statistics Sweden don’t give any reason not to believe the conclusion that the spectre of inflation in the Swedish economy has been vanquished,” he told TT.

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