Sweden's "Mr Fix It" offers crisis lessons for Europe

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From a welfare basket case, Sweden emerged from its crisis as one of Europe's soundest economies - its public debt halving to around 40 percent of GDP since the crisis. It weathered a 2008-09 global crunch in part due to this trauma 20 years ago.

There are major differences - perhaps the most important being Sweden's ability to devalue its currency to boost its export economy - a tool unavailable for countries like Greece.

But Sweden avoided the political conflicts over austerity that Greece now faces and steered clear of the fiscal trap that has led to fears that countries like Spain will be plunged into a spiral of spending cuts, falling revenues and rising debt.

ANOTHER BUBBLE

By 1992, years of deregulation of credit markets had led to a property bubble in Sweden. With house prices rising, people were refinancing their mortgages to renovate, or buying boats to sail at the weekends on Stockholm's archipelago.

Officials paint a picture of a nation at first in denial. Like the United States later, few predicted how much a housing squeeze would spark fires in the rest of the financial system.

"I would get phone calls from Riksbank (central bank) officials and very senior politicians who just did not understand what was happening," said Knut Hallberg, an economist at Swedbank who worked in the finance ministry in the crisis.

When that bubble burst, it sparked a credit crunch. At one point overnight interest rates rose to 500 percent as the central bank tried to defend a peg of the crown against the German mark. The peg was eventually abandoned and the crown sank.

The economy contracted by its worst rate since the 1930s. Banks, on average, lost about 20 percent of their balance sheets. Unemployment rose to 12 percent.