The Swedish central bank said on Tuesday that it had decided to cut its key interest rate by 0.25 points to 1.75 percent.

The central bank said that "the economic outlook abroad has deteriorated and the Swedish economy is slowing down."

The central bank, the Riksbank, said: "There is considerable uncertainty concerning economic developments.

"The public-finance problems in the euro area in particular may become more serious and have more negative effects on the Swedish economy."

Sweden is a member of the European Union but not of the eurozone.