At the start of the election year, the government and the opposition are competing to “take responsibility” for public finances and any reforms proposed should be financed under the mantra, “krona for krona”. The framework for the state surplus is that it should amount to one third of a per cent of GDP on average over an economic cycle. However, the framework has become an axiom, whose advantages and disadvantages are outside of critical review, writes Nordea’s head analyst Andreas Wallström in Dagens Industri (DI) today, which is surprising considering Sweden’ exceptionally strong public finances.
Internationally, Sweden has low debt, around 40% of GDP. The framework places a singular focus on debt in the public sector. But, no company builds success on reducing its debts. A strong balance sheet is not necessarily the one with the lowest debt.
The stabilisation argument of austerity during an economic boom does not take into account the cost of postponing investment to the future. Every year of poorly functioning public transport or damaging taxes entails a cost. These costs ought to be weighed up against the stability argument. However, he sees no opening for a review of the fiscal policy framework on the political horizon.
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