Government urged to rein in spending, hike retirement age
The government's spending policies revealed in its spring supplementary budget are 'overly generous' and should be reined in, according to a fiscal policy watchdog.
In a wide-ranging report released on Monday, the Swedish Fiscal Policy Council described the government’s fiscal policy as poorly balanced and overly bullish, and made a series of recommendations on interest rates, household debt, employment and the retirement age.
One of the report's authors, chairman of the Swedish Fiscal Policy Council and professor in international economics at Stockholm University, Harry Flam, told Radio Sweden:
"The key finding is that we think that the government should save more now since we have a boom in the economy, to reach the target for the government budget over a business cycle."
The government has chosen to weaken the public finances this year. This is remarkable, and the government needs to justify its policy," the report said.
While the report acknowledged a broadly benign set of economic fundamentals in Sweden and abroad, it urged the government to adopt a more restrictive fiscal policy.
The report also cited the urgency of getting newly arrived immigrants into the labour market.
"Unless the integration of newly arrived immigrants into the labour market is considerably improved, asylum immigration will place a long-term burden on the public finances," the report said.
The report cast doubt on the government's pledge to bring down unemployment to the lowest level in the EU by 2020.
"This is partly because full-time students who are also looking for work account for a comparatively large proportion of unemployment in Sweden, and because immigrants are not being effectively integrated into the labour market," it said.
The report urged the government to "reformulate its unemployment target into separate targets for different groups, such as asylum immigrants, young people with poor qualifications, and the long-term unemployed."
The body also called on Sweden's retirement age to be gradually raised to improve public finances in the long term.
"The custom of retiring at the age of 65 needs to be changed," the report said.
Sweden's finance minister, Magdalena Andersson, hit back at the report's findings.
"To substantially increase taxes now, or fire teachers, doctors and nurses is not, in my judgment, well-balanced; and when you look at international assessments of the Swedish economy, such as by the OECD, the International Monetary Fund, and the EU Commission, they deem Swedish fiscal policy to be currently well-balanced," Andersson told Swedish Radio News.
She went on to accept, however, that more needed to be done to improve access to the labour market.