Thursday, October 23, 2014

Sweden's New Coalition Reveals "Compromise" Budget

Via The Local:

Prime Minister Stefan Löfven's Social Democrat-led coalition has revealed its first budget proposal, listing plans to spend more than 20 billion kronor.

The coalition, which also includes the Green Party, was formed after elections in Sweden in September.

Key policies that the grouping has promised to commit money to include setting up more primary schools, lowering taxes for pensioners and improving the country's railways.

Amid calls for stepped-up spending by European nations which can afford to do so, Sweden will now let its deficit rise to 2.2 percent of economic output, the highest level since 1996.

Sweden has also seen falling prices that has sparked concern of a dangerous deflationary spiral setting in that could lead to a recession, but so far is still expected to grow 2.1 percent this year.

The budget forecasts 3.0 percent growth next year.

Sweden is one of the few nations that has room to take on more debt under European rules, and despite the increased deficit its debt ratio is still expected to dip to 40.2 percent next year.

Social Democratic Finance Minister Magdalena Andersson put the blame for the increased deficit on unfunded tax cuts by her conservative predecessors rather than additional spending.

The policies of the previous government, in power from 2006 until its election defeat this autumn, had resulted in "an empty coffer", Andersson said on Thursday.

She added that it would be impossible to balance the budget before 2017.

Finance Minister Magdalena Andersson stressed the importance of fighting youth unemployment and reducing class sizes in school.

"The priorities are to reduce unemployment and increase employment, we have to reverse the negative trend in the Swedish school results, especially for the young children, but also invest more in our environment and to fight climate change", she said.

She explained that the moves will be funded by tax increases.

Expectations had built up around the announcement of defence spending figures, after the Swedish military's shortcomings were exposed during a fruitless hunt for a suspected foreign submarine off the Stockholm coast since last Friday.

However, the government proposed to increase defense spending by 3.1 percent, less than the 4.3 percent rise in 2014 and below the overall public spending hike for next year of 3.7 percent.

The coalition has also included the Left Party in some of its discussions and this has influenced a decision to put two billion kronor toward increasing the number of staff in elderly care homes and raising maintenance payments for single parents.

In order for Stefan Löfven's coalition to remain in government, the budget must be passed by parliament and a rival center-right budget also being presented must be rejected.

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