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ECONOMY

Sweden’s welfare state ‘alive and kicking’

A wave of liberal reforms has swept across Sweden since the centre-right government came to power in 2006, notably with the sale last week of the state's crown jewel Absolut vodka, but the welfare state is still alive and kicking, analysts insist.

“Swedes are very pleased with, and very strongly support, the welfare state,” Barbro Hedvall, an editorialist in Sweden’s newspaper of reference Dagens Nyheter, told AFP.

Since winning a general election in September 2006, Prime Minister Fredrik Reinfeldt’s coalition has abolished wealth and property tax, cut income taxes, introduced tax breaks for domestic help, tightened rules for sickness benefits and announced plans to relax rent control in Stockholm.

It has also launched a privatization programme for the state’s holdings in six companies aimed at cashing in 150 billion kronor ($25 billion).

But job creation has been the government’s top priority, and one of its biggest moves has been to reform unemployment insurance to increase premiums and decrease payouts to the jobless, in a bid to encourage low-income earners to seek work rather than rely on benefits.

Despite all these changes, Sweden remains definitely a cradle-to-grave welfare state, with universal health care and free education, experts say.

Politicians and voters across the spectrum remain heavily influenced by decades of Social Democratic policies — the party that created the welfare state and governed Sweden for 64 of the past 77 years.

A recent proposal by the junior coalition member Centre Party to limit today’s universal child allowance payments to only needy families was swiftly and broadly rejected for violating the egalitarian principles on which Sweden’s modern society is built.

And when the unemployment insurance reform left almost a quarter of the labour force without jobless insurance, the government said it would introduce a mandatory scheme for all employees from July 2009.

“Values change slowly,” said Dick Kling of the right-wing think tank Timbro.

Hedvall agreed.

“The foundations of the welfare state have not changed, they’re still the same. We all pay into a joint pot for sickness insurance, parental leave, and when it comes to unemployment insurance it’s always been optional,” she said, adding that the rules have merely been tightened to combat abuses.

She recalled that even Social Democratic administrations have in the past introduced major reforms to modernize the system.

According to Kling and Hedvall, an across-the-board income tax cut that gives most Swedes about 1,000 kronor ($167 dollars) more in net salary at the end of the month has been the government’s most significant reform.

“That has been a drastic change … Usually when you talk about the welfare state you only talk about publicly financed welfare, but a lot of welfare is also stuff you can buy with your own money,” Kling said.

But Bo Rutström of the left-wing think tank Agora said the welfare state was slowly being dismantled.

“There are clear signals that we’re moving from universal, collective solutions to individual solutions,” he said.

“Lower subsidies leave people locked-in and cause passivity, which contrasts with the previous welfare model’s priorities of education and (job) training,” he added.

“There may be more people in the workforce now, but that’s mostly because we’ve been in a period of strong economic growth,” Rutström said.

Economic indicators suggest the government’s policies are paying off and the country is well-placed to face a potential global economic downturn.

The jobless level is falling and the goal of 80 percent employment is expected to be reached next year. Sick leave levels have decreased, public debt in 2007 was one of the lowest in Europe at 38 percent of gross domestic product, and the country reported a record budget surplus of 134 billion

kronor ($ 22.5 billion) last year.

The one thing not in the government’s favour? Opinion polls.

The four-party coalition has trailed far behind the Social Democrats for more than a year. A recent Synovate survey put support for the government at 41.6 percent, compared to 54.8 percent for the Social Democrats and their allies.

Rutström said the polls showed the 2006 election was largely “a protest vote” against former prime minister Göran Persson, in power for 10 years, where voters “didn’t really think about the consequences.”

Hedvall said meanwhile that tax cuts “are practically a sensation in Sweden, since our governments almost always raise taxes … and the strange thing is that that hasn’t made any (positive) difference in the polls. I can’t explain it.”

By AFP’s Pia Ohlin

ECONOMY

‘Tougher times’: Sweden’s economy to slow next year

Consumers in Sweden are set to crimp spending over the rest of the year, pushing the country into an economic slowdown, Sweden's official economic forecaster has warned in its latest prognosis.

'Tougher times': Sweden's economy to slow next year

A combination of record high energy prices over the winter, rising interest rates, and inflation at around 10 percent, is set to hit household spending power over the autumn and winter, leading to lower sales for businesses and dragging economic growth down to just 0.5 percent next year. This is down from the 1.2 percent the institute had forecast for 2023 in its spring forecast. 

“I don’t want to be alarmist,” Ylva Hedén Westerdahl, forecasting head at the Swedish National Institute of Economic Research, said at a press conference announcing the new forecast. “We don’t expect the sort of economic slowdown that we saw during the financial crisis or the pandemic, where unemployment rose much more. But having said that, people who don’t have a job will find it tougher to enter the labour market.” 

She said that a shortage of gas in Europe over the winter, will push electricity prices in Sweden to twice the levels seen last winter, while the core interest rate set by Sweden’s Riksbank is set to rise to two percent. 

As a result, Sweden’s unemployment rate will rise slightly to 7.8 percent next year, from 7.7 percent in 2022, which is 0.3 percentage points higher than the institute had previously forecast. 

On the plus side, Westerdahl said that she expected the Riksbank’s increases in interest rates this year and next year would succeed in getting inflation rates in Sweden under control. 

“We expect a steep decline in inflation which is going to return to below two percent by the end of 2023,” she said. “That depends on whether electricity prices fall after the winter, but even other prices are not going to rise as quickly.” 

After the press conference, Sweden’s finance minister, Mikael Damberg, said he broadly agreed with the prognosis. 

“I’ve said previously that we are on the way into tougher times, and that is what the institute confirms,” he told Sweden’s state broadcaster SVT. “There’s somewhat higher growth this year, at the same time as fairly high inflation which will hit many households and make it tougher to live.”

Damberg called on Sweden’s political parties to avoid making high-spending promises in the election campaign, warning that these risked driving up inflation. 

“What’s important in this situation is that we don’t get irresponsible when it comes to economic policy,” he said. “Because when parties make promises left, right and centre, it risks driving up inflation and interest rates even more, so Swedish households have an even tougher time. Right now, it’s important to prioritise.” 

 The call 

Sverige är på väg mot lågkonjunktur enligt Konjunkturinstitutets (KI) senaste prognos. Enligt finansminster Mikael Damberg (S) är det därför viktigt att Sverige sköter sin ekonomi ansvarsfullt och vågar prioritera.

– Jag tror att alla partier behöver vara lite återhållsamma och inte lova för mycket, säger han.

Mikael Damberg tycker att KI tecknar en realistisk bild av Sveriges ekonomiska verklighet.

– Jag har sagt tidigare att vi går mot tuffare tider och det är väl det som KI bekräftar. Något högre tillväxt i år men sämre tillväxtförutsättningar nästa år samt fortsatt ganska hög inflation som slår mot många hushåll och gör det tuffare att leva, säger han.

Och vad vill regeringen göra åt det?

– Det är viktigt att vi i det här läget inte är ansvarslösa i den ekonomiska politiken. För när partier lovar vitt och brett till allt riskerar vi att driva upp inflationen, öka räntan ytterligare och svenska hushåll får det svårare. Nu måste man våga prioritera.

Se intervjun med Damberg om konjunkturläget klippet ovan.

“Electricity prices are going to be twice as high as last winter,” said 

Elpriserna kommer att bli dubbelt så höga som förra vintern, säger Ylva Hedén Westerdahl, chef för Konjunkturinstitutets prognosavdelning, på en pressträff.
Den lågkonjunktur som KI ser framför sig kallar hon trots det för en mjuklandning. Den handlar främst om att människor kommer att ha mindre pengar att konsumera.

“Brist på gas i Europa gör att energipriserna ser ut att bli rekordhöga under vintern”, skriver KI, och ser att inflationen kommer att närma sig 10 procent.

Deras prognos för styrräntan är att den ligger på 2 procent vid årsslutet, vilket gör att inflationen faller tillbaka snabbt under nästa år och Riksbanken låter då räntan ligga still.

KI tillägger att de offentliga finanserna är fortsatt starka och de bedömer att det finns ett budgetutrymme på runt 120 miljarder kronor för de kommande fyra åren.

Vad gäller BNP spår KI en blygsam tillväxt på 0,5 procent nästa år – en nedskrivning från tidigare 1,2 procent.

Prognosen för arbetslösheten under 2023 är 7,8 procent, 0,3 procentenheter högre än tidigare prognos.

Fredrik Fahlman/TT
Johanna Ekström/TT

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