Swedish financial crises due to Coronavirus? Where does the socioeconomic measures avoid macro defragmentations over missed buffers?

Even though most of my network here on Linkedin resides in Sweden and is Swedish by default, I will write this article in English with the hope to collect as many opinions possible, since I am curious if I am the only one thinking this.

Covid-19 pandemi keeps lastring in the world, having changed already its epicenter 3 times.(WHO20). From Asia, to Europe and now US, the socioeconomic disruptions have raised the possibility over a global economic recession, and with it, a huge impact and damage to society and the financial system.

Which premium economic policies are in place and what can be done when the damage becomes clear and the virus pandemi disappears?

Even if there is a huge degree of insecurity and limited information, the experience and knowledge from previous economic crises will help, influence and force some possible politic and economic policies. From banks, to finance regulators and economic analysts and governments, it is my strong belief that the following three measures are the ones that require the most attention.

1.The government must be ready for the ultimate loss and break from all economy as well the banking system.

2. The European Committee must as well take measures thinking about influencing the allocation of European crises buffer and possible penalties in all countries members..

3. Moreover, the crises and measures adopted should be clear and influence a climate of confidence and trust, and not the other way around.

The situation as it is.

COVID-19 and the disruption it has caused, and continues to cause, constitute an enormous shock to both economies and financial sectors. This is being reflected in financial market distortions, mis-aligned prices (which arbitrage should make unsustainable in normal times) and funding concerns for many market participants, including banks.

The problem shows up when the households have no earnings during this time, and as a consequence cannot keep paying mortgages and private credit lines. The feeling of fear is as well related with the buying intention, and even small and middle companies feel an economic loss and recession, that will not be covered by their own crisis buffer (if they even have one). A lots of companies will open insolvency, mostly startups and companies with less than 3 million Swedish crowns per year. Layoffs starts being a common word, and it is at all impossible to deny the economic crisis.

Proactive measures are required

Which measures should both companies and banks plan and take, to prevent the insolvency processes? Enterprises, banks Property Developers/Owners and companies with open shares, have proactive measures in place to avoid these situations. One of these measures is to include in their yearly budget plan, a so called crisis buffer budget as it was an insurance (without premiums) to when this "once in a century" crises happen. It is almost impossible to avoid layoffs, but the companies are secured and have the possibility to avoid the insolvency process and, in special situations, to reduce the loss on internal/positional market shares.

Regarding small companies, the story is a little bit different. When a limited company is created, there is currently a huge amount of possible "company insurance", however none of these insurances cover a buffer for this kind of situations. For insurance companies it is surely a big win (since the same would be bankrupt if they would be covering and offering these buffers) however, the same companies should be obliged by political measures to provide such buffers. Economically speaking, the insurance industry would crash, while at the same time, the market base level (small companies) would be alive and doing business, creating a market flow and generating more capital. Should not the government take measures and put a stop on the winnings from insurance companies in order to save a bigger picture (and smaller companies) ?

Governments have other deep measures that are possible to control and reduce the crisis. It is important to provide crisis packages to all companies that are financially affected by the Corona crisis, but there must exist a check on companies that are actually affected. The Swedish government has now allowed a deferral of taxes and fees to ease the business crisis, however why not control the amount of information released by the Press & Media in order to reduce the market fear of spreading and the amount of fake news?

On an economic outlook, if governments open the chance for the 10 major Swedish companies to become public, profit dividends must be also banned on corporate profits exceeding SEK 3 million. Measures and modifications to the Employment Protection Act, LAS (Act 1982: 80) and the Act on Co-determination in Working Life (Co-determination Act or MBL) (1976: 580) are required. Public grants and state acquisitions allow companies to hold taxation capital and avoid mass layoffs.

What about EU?

On an European perspective, the most important action that all governments can take is not related with economic. The fear affected the entire market and buying process of both companies and individual people. The most important thing then is that governments gain confidence in society in order to reduce the crisis and the fear/insecurity, while at the same time contributing to keep the market alive. Control over Press and information must be a reality so that people are not scared of all the big and fake numbers going around the Corona virus. Measures that prevent global information can actually save a society from being gripped by panic

There are several to financial measures. Crisis packages for governments that have used their crisis budget must be activated from the ECB (European Central Bank), EIB (European Investment Bank) and IMF (International Monetary Fund) and all interest rates must stay below 2% for governments that will need such grants and crisis packages.

Where are we and what will happen then?

In Sweden we are living a time where almost all offices are empty but at the same time people are on the street or trying to work from home. The Government has an active track of how situation progress and already took measures to prevent the crisis of spreading faster.

For small businesses and middle-sized corporations, it is a time to rethink the entire business-model. Selling physically becomes difficult and alternate sources of income must be provided so that companies can survive. Governments should implode companies that conduct business related to restaurant and entertainment industry, making it easier for companies to manage their debts. These measures constitute one of the single pyramid basis and their implosion can produce 30% reduction in their finances and actually control partially financial hit. But what measures are in fact independent of governments and can remain a source of income?

It may be time to renegotiate insurance contracts and convert debts into profits. The real estate market is getting strong with this crisis and shares in biopharmaceutical companies are rising. Just saying....

Nevertheless, I am just a man with an opinion and some suggestion. Let me read yours.