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Spring budget warns of tough times ahead

Spring budget warns of tough times ahead

Published: 15 Apr 2009 09:54 GMT+02:00
Updated: 15 Apr 2009 09:54 GMT+02:00

As the parliament prepares to debate the spring budget proposal on Wednesday finance minister Anders Borg emphasized the precarious financial situation and warned of tough times ahead.

"Probably the worst (situation) in the world economy since the depression," Borg said to news agency TT on Wednesday.

"The government's job in this situation is to safeguard the public finances and core welfare services as well to hinder the advance of unemployment," he continued.

With a recent forecast indicating that unemployment is set to top 11.7 percent in 2011 the government is set to present a budget focused on helping the unemployed and young into work.

The public employment agency's (Arbetsförmedlingen) costs are expected to rise from 16 billion kronor ($1.95 billion) in 2008 to 42 billion in 2011.

The government will therefore increase provisions in the spring budget for unemployment insurance payments by 10 billion kronor for 2009 and allocate an extra 781 million to the jobs guarantee scheme.

"We are now going to conduct a significant update of labour-market measures. It is a question of 45-95 billion kronor over the coming years," Anders Borg said.

The number of places in the job guarantee program is expected to expand by 100,000 on the government's projection in the autumn budget.

By 2011 around 250,000 Swedes are expected to be engaged in various employment training programs, up from an average 85,000 in 2008.

The government proposals have been roundly criticized by the opposition Social Democrats.

"What the government is now doing is hiding 220,000 people in purely passive programs, those that are typically called job and development guarantees. It is an unfortunate strategy as it excludes people and humiliates people," Thomas Östros, the Social Democrat finance policy spokesperson said on Wednesday.

Anders Borg responded that sound state finances must come first and refused to get into a bidding war with the opposition. He underlined that the budget initiatives were not simply an attempt to massage the statistics.

Borg underlined that the crisis is not over and new surprises could be around the corner. He did not rule out raising taxes to shore up public finances but underlined that it is not something that is currently under consideration.

The government's macro-economic forecasts were presented in the beginning of April and the figures presented in the spring budget were in line with prior projections.

TT/Peter Vinthagen Simpson (news@thelocal.se)

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