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.
The Swedish economy remains strong although major injections will be needed to cope with welfare over the next few years.
In Finance Minister Magdalena Andersson’s latest forecast, most of the curves indicate a positive trend. Growth is high, unemployment is low and the strength of the global economy is helping fatten up Sweden’s finances. Only small adjustments have been made in the forecast since December and unemployment and GDP growth are at the same level.
The finance minister expects the big issue to be securing quality in welfare. “Our assessment is that SEK 20 billion in general state contributions will be needed to be able to meet the demographic challenge. In addition we have ambitious increases. We have presented five more billion for healthcare and six billion to education.”
The Moderates believe the government ought to have used the strong economy to prepare Sweden for the next recession. “We have a very strong economy but a weak government. There is now a reason to save even more for when things change,” says Elisabeth Svantesson the party’s economic spokesperson.
Negotiations over the EU’s long-term budget could be tough. Finance ministers meet on Tuesday and EU leaders on Friday and Brexit, refugee policy and controversial laws in Poland and Hungary are causing divisions.
Finance Minister, Magdalena Andersson expects the negotiations to be long and complicated. “We think that the countries that do not take responsibility for the decisions that we have made jointly, do not need support from structural funds,” she says.
Sweden is unlikely to get its wish for a smaller EU budget, as countries such as Germany have said they are prepared to pay more.
The government’s declaration of foreign policy from 2017 dedicates only 18 words to China. The new declaration, to be presented on Wednesday, coincides with a war of words between China and Sweden over the imprisoned publisher Gui Minhai and Sweden’s relationship with China is at a crossroads, writes DN’s Torbjörn Petersson.
In the most recent turn of events, Gui Minhai appeared in the Chinese media saying he was being used as a pawn by the Swedish government to create problems for China’s government. Previously, one of his colleagues, Lam Wing-kee has said that they were forced to read a script when they were arrested previously at the same time in 2015.
Foreign Minister Margot Wallström has sharpened her tone towards China recently. And since then, China has stepped up its attacks on Sweden. Petersson writes, “Challenging China is not without its risks. Norway experienced that when the Nobel Prize committee awarded the Chinese regime critic and author Liu Xiaobo the Peace Prize in 2010… China bullied Norway in all possible ways after Liu Xiaobo’s Nobel Prize.” He continues, “It is not unlikely that China could try and use the same kind of language of power if Sweden does not fall in line,” and adds that Sweden’s choice of direction may well be glimpsed in this year’s declaration of foreign policy.
The Swedish Armed Forces’ main argument for the purchase of Patriot is that the air defence system protects Sweden against ballistic missiles.
However this week the New York Times published an article in which the Patriot’s capacity against ballistic missiles was put in doubt. On 4 November Houthi rebels in Yemen fired a Burqan 2 missile towards the capital of Saudi Arabia. As it flew towards Riyadh it was met by four Patriot missiles. Debris was strewn across the centre of the city and the official version is that the debris proves the missile was shot down.
However missile experts who have analysed pictures and film say the missile detonated close to the terminal building at Riyadh’s airport.
Only three days after the attack, Sweden’s government decided to choose the Patriot system and instructed the Swedish Defence Materiel Administration (FMV) to begin negotiations with the US.
Dagens Industri (DI) reports that its sources have said the Armed Forces can afford to buy 60-70 missiles for the Patriot system, and only a few of the advanced PAC-3 MSE, which cost SEK 50 million each. Last week DI reported that France and Eurosam quoted EUR 850 million for a package with SAMP/T, which covers Sweden’s entire air defence needs.
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