Sweden has the solution to save America’s banks and exchange traded funds (ETFs). And the country should know – they’ve been through this before and came out the other side.

So, what’s their plan?

The Nationalization Plan. In the early 1990s, Sweden’s banks were nearly bankrupt. However, the government managed to act quickly that ultimately led to taxpayers making money, says Carter Dougherty for The New York Times. These former officials now say it’s the only way the United States can solve its own crisis.

Sweden placed the troubled assets of its banks into a “bad bank,” where they could be held and sold over time as conditions improved. By contrast, the United States has bailed out banks without receiving large equity stakes in return.

Unemployment. Meanwhile, Sweden is still grappling with the effects of the current credit crisis. It has been announced that Sweden’s unemployment rate rose from a less than expected 6.2% in November to 6.4% in December, according to Forbes. It is calculated that unemployment was elevated by 5,000 in December.

The main consensus is that the upward trend for unemployment is likely to continue into 2009.

Tax Breaks. After the announcement of the unemployment rate, Sweden offered companies a two-month tax respite to ease small company’s financial strains, reports Joel Sherwood for The Wall Street Journal. This move was made in light of the eminent risk of bankruptcies in the coming months and to deal with liquidity issues.

  • iShares MSCI Sweden Index (EWD): down 8% for the last month

ETF EWD performance

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.