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Swedish economy

Report: Government too cautious on public spending

Updated måndag 14 maj 2012 kl 16.22
Published måndag 14 maj 2012 kl 12.43
Lars Calmfors, the chairman of the Fiscal Policy Council, presented the report on Monday. Photo: Scanpix

Sweden has strong public finances – but the safety margins in the economy are too wide, Sweden's Fiscal Policy Council's report for 2012 claimed on Monday. The report also criticizes the decision to redice the VAT (or sales tax) rates for restaurants.

The Fiscal Policy Council, a government agency, claims that the decision to lower VAT rates for restaurants appears a measure to support a certain industry rather than to, as the government has claimed, boost employment.

Bu the finance minister, Anders Borg of the Moderate Party, said that the lowered VAT rates have had positive effects and "improved conditions to lower youth unemployment", according to a press release.

Borg estimated that restaurant prices have decreased by four percent since the reform.

"It's interesting that the Council describes this measure as one to support a particular industry. We have also claimed this," the opposition Social Democrat party's spokesperson on economic and political issues, Magdalena Andersson, told news agency TT about the findings in the report.

The Council also believes that the income-tax reductions that the government announced in the spring of 2011, which were later abandoned, could have been implemented.

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