Sweden moves to scrap debated budget goal

The Swedish government announced on Tuesday that it wants to scrap the country's budget-surplus target, aiming to axe a policy that critics consider outdated.

Sweden moves to scrap debated budget goal
Sweden's Finance Minister Magdalena Andersson at a press conference on Tuesday. Photo: Janerik Henriksson/TT

The goal – to maintain a surplus of one percent of GDP over each business cycle – was introduced by a previous Social Democrat government in 1997 to offset the future burden of an ageing population.

But now Sweden has earned a reputation of solid fiscal management, the current ruling centre-left coalition has said it was time to reconsider the surplus target.

"The idea was never that the public sector should run a budget surplus for eternity," Prime Minister Stefan Löfven and Finance Minister Magdalena Andersson wrote in Swedish newspaper Dagens Nyheter on Tuesday.

They ordered a financial authority to consider a target of balancing the budget and other alternatives.

"In the long-term room will be cleared to make needed public investments in infrastructure, housing, adaptation to climate change, research and education," they added.

Andersson, who entered office in October, had accused her centre-right predecessor of leaving the public coffers empty after tax cuts, preventing new public investments.

Surprise growth spurt for Sweden's economy

The surplus goal "played an important role for many years. It doesn't any more," economist Klas Eklund at the SEB bank told AFP.

"The world looks different from when it was introduced. Then we had large public debt. Now it is among Europe's lowest," he added.

Some in the centre-right opposition however called for fiscal conservatism.

"It is a bad idea to change foot and abandon the surplus target," the conservative Moderate Party's economic spokesperson Ulf Kristersson told news agency TT.

"I think one should be very cautious and not abandon the idea that a surplus is better than a deficit."

The growth of Sweden's gross domestic product  – forecast by the central bank at 2.7 percent for 2015  – and low interest rates will enable its public debt to drop by 0.5 percentage points this year to 41.1 percent, according to government forecasts.

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