The finance ministry said it would keep up its fight to ward off a budget deficit.
“We will use the strength of our public finances to energize and support a recovery. At the same time we will maintain safety margins. Laying a firm foundation for recovery is key to driving unemployment down,” Finance Minister Anders Borg said in a statement after meeting with fellow ministers at the prime minister’s summer residence Harpsund.
Borg told reporters that he as yet did not have details on how he would support the recovery of Sweden’s export-oriented economy, which has stayed relatively buoyant through the financial crisis but has nonetheless been hit by weak demand.
“Expenditure ceilings and surplus targets will be maintained and secured,” the finance ministry said in a statement. “The return to a 1 percent surplus will be gradually achieved as unemployment decreases and resource use approaches balance.”
In June, however, the National Institute of Economic Research (NIER) estimated that Sweden had about 6 billion, not 25 billion, to play with in its autumn budget.
In the early 2000s, Sweden adopted a target of an annual net lending surplus of one percent over the business cycle.
“There is currently a deficit in the general government sector, largely due to the recession. If tax cuts or expenditure increases of 25 billion are implemented next year, consolidation measures are needed to meet the 1 percent target in the medium term” NIERs Head of Public Finance Analysis Erik Höglin told the Local.
“It is not impossible to enact reforms of 25 billion, but there will be a need to make savings later.”
Borg told the Svenska Dagbladet newspaper on Friday that he did not share NIER’s outlook on the situation. He also cited recent statistics on household consumption to support his position.
“The reasonable starting point is in supporting growth and households, and we see a better performance for households,” Borg told reporters on Friday afternoon. “We want to strengthen the conditions for jobs and growth.”
The plans were criticized, however, by the shadow finance minister Magdalena Andersson.
“What the government is doing is borrowing for tax cuts and it’s not a responsible economic policy,” the Social Democrat financial spokeswoman told the TT news agency in reference to the prime minister’s promise that Swedes would soon have a new income tax reduction on their plates.
“If you want to borrow, you should invest in schools, education, and jobs,” she said.
Union boss Karl-Petter Thorwaldsson also joined the choir of naysayers, asking instead that Sweden increase spending.
“If you want to get at unemployment, you have to increase expenditure at a higher rate the coming years,” Thorwaldsson told TT. “The government has chosen to solely use income tax reductions and that has a very small effect.”