Sweden will take on its first presidency of the EU in the latter half of 2001. Sweden advocates strong support for reform efforts in the former Soviet Union and the Baltic republics and, while public polling indicates majority disinterest in joining NATO, is active in NATO's Partnership for Peace initiative. Aided by peace and neutrality during World War I through World War II, Sweden has achieved an enviable standard of living under a mixed system of high tech capitalism and extensive welfare benefits. Until recent years, however, this favourable picture has been clouded by budgetary difficulties, inflation, growing unemployment and a gradual loss of competitiveness in international markets. Consequently, since 1991, Sweden pursued a policy of economic austerity aimed at restoring budgetary balance and reducing the national debt.
Conditions are favourable for continued steady growth.
Activity within the export industry will be weak while the domestic parts of the economy will continue to develop favourably. In the budget presented to parliament in September 1999, the government proposed a range of income tax cuts for both individuals and corporations, and, while it raises energy taxes, it did not include any proposals for further spending cuts, giving rise to concern about inflationary pressure. The Swedish economy will remain heavily trade dependent, characterized by a well-developed and internationally successful industrial sector, which evolved from the country's natural resources. Sweden's personal income taxes are among the world's highest. The government has recognized the problem and is seeking ways to reduce the tax burden without further eroding services.