Brisk reforms expected from Reinfeldt

Sweden's next prime minister, newly-elected Fredrik Reinfeldt, is expected to undertake brisk economic reforms he vowed to implement once in office, namely job creation, tax cuts and privatisations, analysts say.

• Record slump for Reinfeldt's government (21 Jan 07)
• Reinfeldt announces two new ministers (24 Oct 06)
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Reinfeldt's Moderate Party and the other parties of the Alliance for Sweden made job creation the main focus of the election campaign.

"They have a very ambitious plan for opening up the labour market with several economic incentives to get people into the labour market in the short term," SEB bank chief economist Klas Eklund told AFP.

The Alliance has proposed to cut taxes for low income earners, provide subsidies to companies that hire jobless workers, and reduce generous unemployment benefits to encourage people to go to work.

Some 50,000 jobs could be created in two or three years, said Håkan Frisen, head of economic research at SEB.

"If you have these three factors together, you could actually boost the labour market quite a lot," Eklund added.

In addition, the new government plans to make it easier for small and medium-sized companies to hire people by simplifying labour legislation and cutting corporate taxes.

The fiscal incentives are intended to make it easier to hire thousands of low-skilled or unskilled people, primarily in the services sector for jobs such as household help.

The issue is important in Sweden, where the labour market is dominated by highly-skilled workers, and where manual labour black market jobs represent seven to 10 percent of the Swedish economy, Eklund said.

"It's very expensive to hire people in Sweden because they pay very high taxes and also because of lots of legislation," he said.

Reinfeldt, who at 41 has no government experience and was largely unknown on the international scene just two weeks ago, made the battle against unemployment his top priority, accusing Prime Minister Göran Persson of offering generous handouts to the unemployed during his 10 years in government instead of helping them find work.

While official statistics put unemployment at 5.7 percent in August, experts put it closer to 17 percent when people on government job creation schemes, early retirement and long-term sick leave are taken into account.

The arrival of the right-wing in the place of the Social Democrats, who had been in power since 1994, also opens the door to a wave of sell-offs of the state's holdings in a number of companies.

The future prime minister will have a plethora of companies to choose from, with the state holding minority or majority shares in 57 companies.

"The target of (the first wave of) privatisations is 100 billion kronor during the next two years," Eklund said.

The new government is expected to first sell its holdings in listed companies, before moving on to unlisted companies.

At the top of the list are the state's 45.3 percent share in telecoms operator TeliaSonera, 21.4 percent share in the airline SAS, 19.9 percent share in banking group Nordea and 6.8 percent holding in OMX.

Reinfeldt has however not committed to a timetable for the sell-offs, noted Tomas Lindberg, chief economist at Öhman Investment Bank.

"He has said they want to get the best price possible" and will wait for the best market conditions, he said.

But the time is ripe for change and the announced measures have been welcomed by the markets, economists note.

Reinfeldt takes over the country during a period of strong economic growth, in stark contrast to the last conservative government headed by Carl Bildt which took power in 1991 and immediately faced a crippling economic crisis.

Delphine Toitou - AFP