prop · GX0334en · 2009-10-21 00:00:00 — The Swedish Reform Programme for Growth and Report 2009 The Swedish Reform Programme for Growth and Annual Progress Report 2009........................................................... 2.1Economic stability, economic and financial sustainability and increased employment........................... Well-functioning wage formation .................................... 3 Microeconomic policy.................................................................... Enhanced initiatives for competitive research.................. A sustainable information society for all ......................... 3.3Open well-functioning markets in a sustainable 3.4Environment and climate policy for sustainable 3.5Easier and more attractive to start and run a 3.6Sustainable infrastructure for increased competitiveness, growth and welfare............................... 4 Employment Policy ........................................................................ Targets for employment policy ........................................ A labour market for all..................................................... A well-functioning labour market.................................... Well-functioning wage formation .................................... 4.5Increased knowledge and quality in the educational 5 Programmes in for the programme period 20072013........................................................ Structural indicators for compared to other EU Member States year 2008.......................................... Indicators to monitor the employment policy ................ Contributions from social partners................................. 1The Swedish Reform Programme for Growth and Report 2009 Union's Strategy for Growth and , the strategy, is the EUs common framework for promoting long-term development with sustainable growth and full employment. It deals with the creation of macroeconomic stability and the enhancement of competitiveness in the EU by investing in research and education, improving the business climate and implementing the internal market. But it also deals with reforms to improve the functioning of the labour market in the EU and strengthen social cohesion as well as to safeguard environmentally sustainable development. Under the strategy, the Member States are to draw up national reform programmes showing how the strategy is being implemented at the national level. Reform Programme for Growth and 2008 2010 presented the Governments policy, which is to lay the basis for long-term sustainable economic development. It covers responsibility for public finances, for jobs and for the core welfare activities. These all aim to create room for increased welfare and meet the challenges of the future. The basis for the Reform Programmes and the Annual Progress Reports are the integrated guidelines (see Appendix 1). The integrated guidelines consist of the Broad Economic Policy Guidelines and the Employment Guidelines. Within the framework of the overall target for sustainable development, the guidelines address the most important challenges ahead, such as globalisation, the ageing population and environmental challenges. But they also focus on reforms to promote competitiveness and economic growth as well as more and better jobs. Under Articles 99 and 128 of the , the Council has been given the opportunity to make recommendations to individual Member States on the design of national policy. The aim is to strengthen the implementation of the strategy and fulfil the shared objectives in the strategy. For 2009, on the basis of the Commission's recommendations, the Council decided that no formal recommendations would be directed at . But it underlined (in its 'points to watch') that even though 's economy is strong and the economic reforms are progressing well, further measures are needed to strengthen competition and increase employment in specific groups. and the Commission argue that enhanced competition can help increase productivity and reduce the price gap between and other EU Member States. If succeeds in getting more long-term unemployed, people on sick leave and young people with a foreign background into the labour market, it may lead to increased growth and more sustainable public finances. also underlined that the implementation of the energy and climate change package that Council agreed must be followed carefully. One important aim in establishing national reform programmes is to get the national parliaments and other national stakeholders more involved in the effort to implement the strategy. The Governments Reform Programme for 2006 to 2008 Annual Progress Report 2009 is presented to the Riksdag as a (skr. 2009/10:34) at the same time that it is presented to Commission. During the work on the 2009 Annual Progress Report, the social partners, interest organisations and the relevant authorities were invited to make submissions on how their organisations had contributed to the implementation of 's reform programme in 20082009. Their submissions can be found in 4. To succeed in implementing the strategy, it is important for regional and local development work in to function well. The national strategy for regional competitiveness, entrepreneurship and employment 20072013 (see Section 3.3 Regional competitiveness and strong rural development and Chapter 5 Programme in for the programme period 20072013) and the regional development programmes that each county draws up, together with 's rural development programme for 20072013 and the associated regional implementation strategies are important instruments for increased interaction at the national and regional levels. The economic downturn in the past year has hit some parts of the country particularly hard and imposed major demands on regional development to meet the changes the counties face. From January 2008 to February 2009, the Government had given the regional dismissal notice coordinators in 21 counties the task of coordinating local and regional efforts on the Government's behalf. This task has been given to the County Governor and regional political representatives in those counties where they are responsible for regional growth matters. The regional dismissal notice coordinators' task is primarily to meet those businesses and people affected by layoffs and closures. By coordinating actors and existing resources at the local and regional levels, this work will ensure that becomes more competitive. The Government has on several occasions conducted a dialogue with all the coordinators. The proposals that the regional dismissal notice coordinators have made to the Government have been dealt with in the ministry concerned. 200 proposals on the labour market, education, infrastructure, business development, local government finances and financial markets have been received. The Government has accepted and implemented approximately a third of the proposals, a third are being given further consideration and a third of the proposals either are not the Government's responsibility or are deemed inappropriate in this situation. The way in which the regional dismissal notice coordinators work has turned out well. The work is usually organised based on the partnerships and cooperation groups established within the framework of the regional growth programmes. The measures and plans that have been carried out are largely based on regional strategies and programmes already developed in broad partnership with the counties and thus enjoy their support. The work with dismissal notices has demonstrated the value and importance of longterm regional strategies as the basis for prompt decisions on measures in a crisis situation. The coordinators' work has contributed to the focus and belief in the future on the part of local and regional actors in times of turmoil and crisis. The 2009 Progress Report is composed of three main sections Macroeconomic policy, Microeconomic policy and Employment policy. Under each heading covering one or more guidelines, the policys aims and orientations and the measures that the Government has taken to achieve them are reported. The Progress Report focuses on the most important measures taken by the Government on account of the financial and economic crisis. All the measures can be found in the Budget for 2010. As a small, open and export-dependent country, has been hit hard by the deepest and most widespread economic downturn since the crisis in the 1930s. In a short time, GDP has plummeted. Resource utilisation is low and continues to decline. Employment has fallen sharply. Redundancies and unemployment have increased. Public finances have weakened substantially. GDP is expected to fall by over five per cent in 2009. The recovery is expected to be slow. Governments and central banks around the world have taken exceptional measures to mitigate the crisis and prevent a collapse. interest rates have been lowered to historically low levels. Extensive fiscal stimulus packages have been implemented to stimulate demand and support the financial system. These measures have led to a substantial improvement in the financial markets and lessened the fall in global demand. In 2010, 's most important export markets are expected to begin growing again, albeit weakly. Aggregate demand is, however, expected to grow so slowly that employment will continue to decline in 2010 and stabilise first around the turn of the year 2010/2011. economic indicators, annual percentage change unless otherwise indicated Central government debt, per Sources: Statistics and . 2.As a percentage of the labour force, aged 15-74. 3.According to short-term wage statistics. 4.General government net lending as a per cent of GDP. The financial crisis and the subsequent deep economic downturn have led and other EU Member States to take a number of measures. The crisis has been ameliorated by measures that have stabilised the financial market and measures that have countered the fall in resource utilisation and employment, at the same time that they help increase the labour supply and employability when the economic situation improves. The measures are thus in line with the points to watch that the Commission and Council adopted for . Ensuring sound public finances in good times has enabled to radically change course in fiscal policy to one of the most expansive in the EU. At the same time, fiscal sustainability has been safeguarded. Together, the (discretionary) measures are expected to lead to a 2010 GDP about 1.7 percentage points higher than if they had not been taken and to about 52 000 more people employed than would otherwise have been the case. In addition, the automatic stabilisers, which are relatively strong in , provide a substantial stimulus. Thus these stabilisers are expected to contribute to an increase in GDP of about 1.4 percentage points over what it would have been otherwise and 43 000 more people employed. Like a number of other countries, faces the threat that growing unemployment will become permanently stuck at a high level and result in growing exclusion. The most important economic policy objectives in are getting more people in work, limiting exclusion, preventing employment from becoming persistent and safeguarding core welfare activities. At the same time, maintaining sustainable public finances is a part of the policy. 2.1Economic stability, economic and financial sustainability and increased employment To secure economic stability for sustainable growth To safeguard economic and financial sustainability as a basis for increased employment To promote a growth and employment orientated efficient allocation of resources To promote greater coherence between macro economic, structural and employment policies One premise of Swedish economic policy is that the deficit resulting from the economic crisis must be temporary and manageable in order to maintain sustainable public finances in the long run. Sound public finances are to be preserved both in good times and in bad. A fiscal policy that is not sustainable in the long term leads to the build-up of public debt and in the long run risks shifting the focus in fiscal policy from measures that contribute to higher growth, welfare and employment to debt consolidation. entered the crisis with its public finances in good order. One important explanation is the fiscal framework consisting of several parts: a surplus target for general government net lending, a central government expenditure ceiling and a balanced budget requirement for local governments. For the Government, it is vital for the policy to be based in this framework even in the current situation, as the cyclical situation deteriorates. Confidence in the policy is thus maintained. To address the acute problems caused by the financial crisis, the Government's priority in autumn was to take measures swiftly to get the financial markets functioning better by ensuring financial stability. The financial system has a pivotal role in the economy and a loss of confidence in the system has repercussions throughout the economy. Without a functioning financial market, the rest of the stabilisation policy also becomes less effective. The Government's measures directed at the financial system aim at maintaining stability and sustaining the credit supply and restoring confidence in the financial markets. The Government has proposed and the Riksdag has decided to take the following measures to counter the financial crisis: -The deposit insurance guarantee has been raised from 000 to 000. -A new act on state aid to credit institutions has been introduced. It makes it possible for the Government to decide forceful measures for stabilising the financial market. Based on this act, the Government has decided: -A voluntary bank guarantee programme that guarantees borrowing by systemically important banks and financial institutions. -A voluntary capital injection programme for banks and other institutions to reduce the risk of a credit crunch. -The option of exercising squeeze-out rights over financial institutions in acute crisis. -A special stabilisation fund that has been allocated funding of billion. In addition to the measures directed at the financial sector, the Government's crisis measures are aimed at stimulating demand and stemming the fall in employment with cost-effective job creation measures. The measures can thus help both to lessen the impact of the crisis and speed up a recovery. Already in its 2009 Budget (Govt. 2008/09:1), the Government presented a number of proactive measures totalling billion, or about one per cent of GDP, for 2009. The measures included reduced taxes, particularly for lowand medium-income earners and for pensioners, reduced social contributions, and major infrastructure, health care, research and education initiatives. The measures in the 2009 Budget reported in the Swedish Reform Programme in autumn made one of those EU Member States that acted early with the strongest stimulus measures to fight the crisis. With the deterioration in the economic situation during late autumn , the Government, presented in the Government for and Adaptation (Govt. 2008/09:97, Committee Report 2008/09:FiU18, 2008/09:183) further measures totalling billion for 2009. The measures included additional infrastructure initiatives and an RMI deduction (repair, maintenance and improvement) and more resources for both the shortterm and long-term unemployed. To further reduce the impact of the financial crisis, the Government in the 2009 supplementary budget proposed increased resources for the local government sector in the form of a temporary countercyclical support of billion for 2010. In addition, a permanent increase in the general local government grant to municipalities and county councils by billion, beginning in 2011 was announced. Additional measures were taken totalling billion, which included an expansion in support for the short-term unemployed through increased resources to support the unemployed in their job search activities, more work experience places and more places in education and training. The number of places in the job and development guarantee and in the job guarantee for young people was also expanded. The low resource utilisation anticipated in the future and the falling employment spurred the Government to present additional crisis measures in . The measures were aimed at moderating the fall in employment, preventing unemployment from becoming persistent and safeguarding core welfare activities. The measures total billion for 2010. Measures that stem the fall in publicly financed employment are the most cost-effective crisis measures for stemming the fall in employment generally. The measures therefore include increased resources for local government equivalent to billion and some infrastructure measures amounting to billion. The measures also include more resources for the judicial systems and initiatives in health and care, elderly care and education. Measures increasing household disposable income will also stimulate demand and employment. A fourth step in the in-work tax credit is being introduced, social contributions by the self-employed are being reduced, pensioners' taxes are being reduced and the housing supplement for people with sickness and activity compensation is being raised. The in-work tax credit is a key part of the Government's policy to increase employment sustainably. In the 2010 Budget , the Government proposes that the in-work tax credit be expanded by SEK The proposal is justified for both structural and stabilisation A strengthening of the in-work tax credit will make it more worthwhile to take a job. It therefore contributes to higher employment and less exclusion in the long run. The in-work tax credit also induces more people to stay in the labour force in a downturn and improves mobility in the labour market. The in-work tax credit also contributes to greater job search activity, which also promotes a stronger increase in employment in the next upturn. Moreover, the tax credit results in higher disposable income for households with low or average These households can be expected to consume a relatively large part of the increase in disposable income which contributes to a higher aggregate consumption and demand. This stems the fall in employment and speeds up the recovery in the labour market. Demand stimulation measures can only stem the decline in employment, but they are not enough to prevent unemployment from In the 2010 Budget , the policy is therefore supplemented by other measures to prevent unemployment from becoming persistent at a high level and to support a strong and sustainable increase in employment in the next upturn. achieved by measures that improve the employability of the unemployed and make it more worthwhile to stay in the labour force and take a job and that improve the business climate. (These measures are discussed in more detail in Chapter 4). The Government will have allocated a total of about billion for 2009, or 1.6 per cent of GDP, and a further billion for 2010, or 1.1 per cent of GDP, since summer 2008 to combat the crisis. clearly exceeds the EU Commission's recommendation of 1.2 per cent of This means that the measures taken by the Government since summer 2008 to counteract the economic crisis total billion, or 2.7 per cent of GDP. To ensure long-term fiscal sustainability, a large number of the crisis measures are temporary. This applies, for example, to the increased resources to local government, new activation measures and new places in education and training. Plans are thus to revoke these measures when the economic situation improves, the local governments' aggregate tax base strengthens and the need for extra places in education and training The aim is for general government net lending to increase to its target level equivalent to one per cent of GDP over a business cycle. Fiscal sustainability in the long run is crucial. therefore intends to conduct a tight expenditure policy for the next few years so that the budget deficit remains temporary and manageable. To indicate its intention, it proposes setting the expenditure ceiling for 2012, excluding technical adjustments, billion lower than the estimate in the 2009 Spring Fiscal Policy . To ensure that wage developments contribute to macroeconomic stability and growth The deterioration in the labour market situation is expected to lead to limited increases in wages from 2008 to 2009, which are estimated to largely coincide with the agreement reached in the sectoral wage agreements in the Swedish labour market, i.e. about 3 per cent. As the weak labour market is predicted to continue, wage negotiations after 2009 are expected to result in what are in historically low wage increases. Hourly wage increases are therefore estimated to be limited to about 2 per cent in both 2010 and 2011. A number of the mechanisms that give rise to persistent high employment may be partly considered a wage formation problem. Wage formation plays a leading role when the business cycle turns upwards. Increased demand for labour normally then results in both increased employment and higher wages. For wage developments compatible with a good growth in employment, it is crucial to take unemployed people looking for work into account in wage formation. An important task of economic policy is therefore to facilitate wage formation and make it more effective. It is important in labour market policy to ensure that unemployed people compete effectively for jobs both by helping them to maintain or acquire skills that make them employable and by helping them and inducing them to conduct effective job searches. In recent years, the Government has taken a number of measures aimed at motivating participation in the labour force. The in-work tax credit is an important measure in this connection. It increases the labour supply and improves wage formation and mobility in the labour market. To increase employability and thus promote a sharp and rapid upturn in employment when the economy improves, new proposals have been presented in autumn for temporary education and training initiatives, expansion of labour market programmes by putting more focus on work experience placements and practical skills development, labour market training and intensified employment services (coaching). These measures are discussed in more detail in Chapter 4. has a small, open economy that has been affected by the global The aim of its microeconomic policy is to strengthen 's growth to enable the Swedish economy to meet the challenges posed by the economic downturn, as well as to be well prepared when the economy turns upwards. Swedish economy are dependent on a good business climate, conditions that encourage innovation, and high quality education and research. the Government's opinion, the work-first principle should also be maintained in bad times. A dynamic business sector in all parts of the country enabling entrepreneurs to operate under good conditions, helps maintain employment and strengthens the work-first principle. forward-looking energy and environment policy and economically viable and environmentally sustainable transport systems enable economic growth to go hand-in-hand with long-term sustainable growth. 's EU Presidency, an environmentally friendly economy as an integrated approach has become a top priority. The Government has presented a comprehensive stability plan to reduce the effects of the financial crisis that has spread around the world in recent years. The deposit insurance guarantee has been increased and the Government has introduced both a guarantee scheme for medium- term borrowing and a recapitalisation scheme for the banks. fund has been established to finance the crisis measures. In addition, the