The trajectory of economic development over the past decade in Sweden has been very positive. Sweden chose not to join the euro zone but its economy has consistently fared better than the euro zone countries in terms of key parameters such as inflation rate, unemployment and budgetary balance. Both the previous and the current governments can be described as financially conservative; reform is influenced by a constant close look at the economy and a fear of building up budgetary deficits.
In 2006, the center-right government inherited a flourishing economy and pursued two economic goals. First, the government launched further measures to increase employment. The main pillar of this strategy is the gradual introduction of an earned-income tax credit scheme. Second, the center-right government pursued further privatization measures of the large public sector in Sweden. And the government announced its intention to reassess the core welfare programs, to provide more choice in welfare services (education, health services etc.) and to reduce the number of persons permanently on welfare support.
The main economic problem in Sweden is how to combine economic change with economic growth and generous welfare programs. The corner stone of the Swedish model is the capability to tax Swedish firms and citizens in order to maintain fiscal solidity in an encompassing welfare state.
Since 2008, the center-right government implemented far-reaching crisis packages in order to dampen the impact of the global financial crisis. Immediate policies targeted stabilizing the Swedish financial system with an openness towards volatile East-European financial systems. In a second step, the government introduced discretionary fiscal stimuli in order to stabilize domestic demand and employment. However, the government implemented fiscal crisis policies rather slowly. As a consequence, the budgetary deficits increased slightly. The government forecasts a rapid return to balanced budgets and fiscal consolidation. This will depend on the development of the international economy and the development of open unemployment in Sweden, which has increased significantly since 2008.
Finanspolitiska rådet. Svenskt finanspolitik 2010, Stockholm: Finanspolitiska rådet (http://www.finanspolitiskaradet.se /download/18.6c09f59d1287ef288f9800 067863/Svensk+Finanspolitik+2010.pd f)
Fiscal Policy Council. Swedish Fiscal Policy, Stockholm, 2009
Jochem, Sven. Sweden Country Report, in: Bertelsmann Stiftung (Hg.), Managing the Crisis. A Comparative Assessment of Economic Governance in 14 Economies, Gütersloh: Bertelsmann Stiftung 2010.
OECD, Economic Survey: Sweden, Paris: OECD, 2008.
World Economic Forum. The Global Competitiveness Report 2009-2010