When certain countries, such as France, announce drastic budgetary restrictions to try to reduce a public deficit which continues to widen, Sweden takes the opposite decision. On Thursday October 17, six of the eight parties represented in Parliament – the Conservatives, the Christian Democrats, the Liberals and the Sweden Democrats (extreme right), who make up the majority, as well as the Social Democrats and the centrists, in the opposition – announced that they had agreed to definitively renounce the “budget surplus objective”, adopted twenty-five years ago, in the wake of the economic and financial crisis which had brought down the kingdom in the early 1990s.
According to this rule, the Swedish government, regardless of its political color, is obliged to present a budget in surplus, up to 0.33% of gross domestic product (GDP). A complementary mechanism requires parties in power to keep public debt below 35% of GDP over the medium term. In 2023, it was at 31.5% of GDP, one of the lowest levels in the European Union.
As a reminder, in 1996, the public deficit amounted to 11% of GDP, and the public debt had reached almost 70% of GDP, compared to 37.8% six years before. From 1999, successive governments were forced to present a budget surplus of 2% of GDP, then 1% from 2007, and 0.33% since 2019.
Fear of huge delays
For a long time, consensus reigned. The trauma caused by the disastrous state of public finances following the crisis of the 1990s left its mark on an entire generation of political leaders, for whom budgetary orthodoxy is the only path. But in recent years, this sacrosanct principle has begun to be called into question. By the far left and the unions, first. Then economists, certain right-wing parties and even employers, who are worried that reducing the debt at any price will cause huge investment delays.
In a report published in June 2022, the Swedish Business Confederation estimates that the renovation of roads and the development of the rail system require at least 70 billion crowns (6.14 billion euros). If investments are delayed, the amount will double by 2033. And that's not all, since the defense budget more than doubled between 2020 and 2024 and is expected to increase by another 50% by 2030, while electricity production will have to be at least doubled by 2050.
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Source: Lemonde