Sweden budget bill sparks heated debate

Swedish Finance Minister Anders Borg defended the government's 2013 budget proposition on Thursday, in the face of tough criticism from unions and opposition politicians.

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"We're presenting this year's budget proposal in very uncertain times. But with this budget, Sweden will have perhaps the strongest finances in Europe," Borg told reporters during a morning press conference.

"The budget includes long-term, necessary investments. But the starting point is that we're in a tough situation. We have countries like Greece, Spain, and Italy that give reasons for great concern."

The government announced reforms totalling 22.7 billion kronor ($3.47 billion) aimed at stimulating growth and employment next year, including investments in infrastructure, research and development, and programmes to improve job opportunities for young people.

It also plans to cut the corporate tax rate from 26.3 to 22 percent to improve prospects for new jobs and investment.

Borg lamented that Europe would likely grow at no more than one percent in the coming decade, but added that Sweden is well-equipped to weather the persistent economic slowdown.

"Even if the Swedish economy grinds to a halt, if the global economy stops, we have room to implement needed measures," said Borg.

Borg said he expected Sweden's strong economic growth rate -- 3.9 percent in 2011 -- to slow in 2012 but maintained his forecast of 1.6 percent this year, 2.7 percent next year, and 3.7 percent for 2014.

He added that Sweden, which has in recent years presented a balanced or surplus budget, can expect a deficit of 0.3 percent of gross domestic product this year and 0.6 percent next year, before returning to a slight surplus of 0.3 percent in 2014.

The country is also in the enviable position of having a falling debt level: in 2011 it had public debt of 38.4 percent of GDP, which is expected to fall to 37.7 percent in 2012, 36.9 percent in 2013 and 34.7 percent in 2014.

"We have much higher growth numbers than the rest of Europe. And we haven't had any unpleasant surprises in our public finances," he said.

The government also expects unemployment to drop from 7.5 percent next year to 6.7 percent in 2014.

According to the government's calculations, the budget will add 0.4 percent to GDP growth in 2014 as well as 17,000 jobs.

In presenting the budget at the Riksdag, Borg painted a picture of the Swedish economy as being "a little better" than other countries when it came to growth, employment, and public debt.

However, the opposition was quick to pounce on the minister, with Social Democrat Fredrik Olovsson grilling Borg about the government's decision to scrap the goal of maintaining a budget surplus.

"That's been a strength of Sweden's that we've had a broad backing of this financial framework. Now the government's own expert agency has warned that policies aren't going to fulfill parts of that framework; that they won't reach the goal of maintaining a surplus," said Olovsson.

"You're not going to maintain a surplus, but you're still going ahead with a huge reduction in corporate taxes. Why?"

Borg refused to answer, however, instead launching a counterattack on the Social Democrats.

"We have Europe's strongest finances, stronger than Germany's, Finland's, the Netherlands' and Austria's. In that situation, when we take responsibility for protecting Sweden, investing in the future; when we choose infrastructure, research, corporate taxes; then Fredrik Olovsson says that's too much because they are too pessimistic and because they've already proposed everything," the minister responded.

"I don't think I've seen a more incoherent economic policy ever presented in this chamber. The only words that come to mind are political opportunism."

Meanwhile, the Green Party's Per Bolund slammed Borg for thinking more about the 2014 elections than the economic challenges facing Sweden.

"Anders Borg seems to be looking more at the election cycle than the business cycle," he said.

There was also plenty of criticism for Borg and the budget from outside the Riksdag chambers, with Social Democrat economic policy spokesperson Magdelana Andersson taking issue with the minister's employment forecast, which she argued was too optimistic.

"Anders Borg seems to be in a parallel universe; you could call it wishful thinking," she said.

She slammed the government's corporate tax cuts, expressing doubts as to whether the government would be able to keep Sweden's public finances in order.

Ulla Andersson of the Left Party said the budget showed that Borg and the government had "chosen sides".

"He's choosing by cutting corporate taxes and increasing big companies' profits instead of tackling unemployment," she said.

"In so doing, he's also rejected reforms that create jobs," she added, questioning whether lower corporate taxes would create more jobs as the government claims.

Union groups were also quick to express their displeasure over the 2013 budget.

Anders Ferbe, head of the IF Metall manufacturing union, argued the budget was "immoral and unacceptable" for not devoting any of the surplus funding to the ill and unemployed.

Karl-Petter Thorwaldsson, chair of trade union federation LO, also pointed to what he saw was a lack of measures to help combat unemployment.

"It's remarkable that the government doesn't take this opportunity to fight mass unemployment when 400,000 people are outside the labour market. The government's budget has huge deficiencies and isn't going to create the jobs we need," he said in a statement.

Business groups were more positive toward the government's budget, however, with Urban Bäckström, head of the Confederation of Swedish Enterprise (Svenskt näringsliv), praising the government's focus on reforms.

"Sweden needs more reforms that strengthen competitiveness and allow more ideas to be turned into profitable companies," he said in a statement.

"The government has taken several steps in the right direction."

Meanwhile Robert Berqvist, chief economist with the SEB bank, said the government's growth forecasts where "at the high end of the scale".

"His forecast is 2.7 percent and we're at about 1.5 percent. That's a big difference," Berqvist told the TT news agency.

TT/The Local/dl
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