Sweden's move comes after other countries have intervened

Sweden's government has set out a plan to back up its financial system, with credit guarantees and a bail-out fund.

Under the package, Sweden will guarantee new medium-term liabilities of banks up to a level of 1.5 trillion kronor (£117.2bn; $205bn).

Sweden's central bank also said it would issue a $10bn (£5.7bn) loan on Wednesday to help the credit markets.

The moves are aimed at boosting confidence in the financial sector, after recent market jitters.

Sweden has become the latest in a series of governments to have taken steps to boost liquidity in the wake of recent market turmoil.

Restoring confidence

"The government is proposing powerful new measures to ease the effects on Swedish households and companies of the financial turbulence," said the country's finance markets minister Mats Odell.

The aim of guaranteeing the money banks borrow in the medium term, was to "improve bank's financing and lower their borrowing costs," he said.

In addition the government will put 15bn kronor into a fund that will be used in case a bank needs emergency capital.

Announcing its loan, the Riksbank, Sweden's central bank, said that the government's stability plan would serve to strengthen confidence and help to improve the functioning of the markets.

Although conditions in Sweden were better than in many other countries, the central bank said, Sweden and Swedish banks had been affected by not having access to long-term funding.

The Riksbank said there was "an urgent need" to restore confidence in the credit markets, and it said the government's proposed borrowing guarantee would contribute to this.



