(repeats storu first issued on June 16)
OSLO, June 16 (Reuters) - The Nordic nations' generous welfare state has so far held up well during the global credit crisis, providing vast public transfers to the jobless -- but at the cost of swelling budget deficits and rising debt.
Following are key issues for investors in the Nordics:
UNEMPLOYMENT/PUBLIC FINANCES
The Nordic welfare model means a rise in the number of jobless automatically triggers new state spending, putting state budgets under pressure.
Public deficits in Sweden, Finland and Denmark are all seen around 5-6 percent of GDP next year -- a 10-point swing compared to 2007 -- and may deteriorate further if economies remain weak into 2011. Norway is a special case because it runs comfortable budget surpluses on the back of its vast oil and gas revenues.
However, the Nordic states have not had any major financing troubles so far, and rating agencies continue to list them as top-rated AAA issuers.
Employment rates across the region are higher than in many other developed countries, in part because of high participation by women. Once export-oriented jobs are lost, it may be difficult to regain them.
BALTIC BANKING CONTAGION
Nordic banks, especially Swedish lenders, have large exposure to the Baltic states of Latvia, Lithuania and Estonia, which have been hit hard by the global crisis.
Sweden's financial regulator said last week that stress
tests of Nordea
But worries that Latvia might devalue its currency have hurt
Swedish banking stocks and the crown
THE EURO QUESTION
With the exception of euro-member Finland, the other Nordic states maintain their own currencies. But their independent approach may be changing because of the crisis, which has put pressure on smaller currencies worldwide.
Denmark seeks another vote on euro zone accession in 2010, some 10 years after it rejected membership. Sweden's government will no doubt carefully follow the Danish euro debate and consider if it should follow suit, especially if Denmark joins.
Norway and Iceland, the fifth Nordic state, are not even in the European Union. But outsider status accelerated the crisis in Reykjavik when its top banks collapsed last year, so Iceland may soon start EU entry talks, which would leave Norway as the odd man out and could rekindle a debate there on membership.
PROTECTIONISM WATCH
The Nordics have embraced globalisation and become standard-bearers for free trade as their companies have reached far beyond their own small, mature markets.
This has helped the region grow faster than the EU average in recent years, but it also makes the small, open Nordic economies more vulnerable if large countries and trading blocs become more protectionist as a result of the global recession.
For a story on politics and economic policy in the Nordic region during the credit crisis, click [ID:nLF288097] (Reporting by Wojciech Moskwa; Editing by Andrew Torchia)