EUROPEAN COMMISSION Brussels, 29.3.2022 SWD(2022) 102 final COMMISSION STAFF WORKING DOCUMENT Analysis of the recovery and resilience plan of Sweden Accompanying the document Proposal for a COUNCIL IMPLEMENTING DECISION on the approval of the assessment of the recovery and resilience plan for Sweden {COM(2022) 152 final}



Table of contents 1. Executive summary 2. Recovery and resilience challenges: scene-setter 2.1. Macroeconomic outlook and developments since the 2020 country report 2.2. Challenges related to sustainable growth, cohesion, resilience and policies for the next generation 2.3. Challenges related to the green and digital transition 2.3.1. Green dimension 2.3.2. Digital dimension 3. Objectives, structure and governance of the plan 3.1. Overall strategy of the plan 3.2. Implementation aspects of the plan 4. Summary of the assessment of the plan 4.1. Comprehensive and adequately balanced response to the economic and social situation 4.2. Link with country-specific recommendations and the European Semester 4.3. Growth potential, job creation, economic, institutional and social resilience, European Pillar of Social Rights, mitigating the impact of the crisis, and social territorial cohesion and convergence 4.4. The principle of ‘do no significant harm’ 4.5. Green transition 4.6. Digital transition

4.7. Lasting impact of the plan 4.8. Milestones, targets, monitoring and implementation 4.9. Costing 4.10. Controls and audit 4.11 Coherence Annex: Climate and Digital Tagging Table 1.Executive summary The COVID-19 pandemic has had a significant impact on the Swedish society and its economy although other Member States have been hit much harder. Sweden’s economy contracted by 2,9% year-on-year in 2020, with private consumption experiencing the largest decline. From the beginning of 2021, a strong recovery started, driven by private consumption and exports. With the pandemic receding somewhat and as policy support remained in place, real GDP grew by 4,8% in 2021. Already in the second quarter of 2021, Sweden’s economy had surpassed the pre-pandemic level. The existing macroeconomic imbalances have remained with house prices and private debt further increasing. An unprecedented policy response supported the economy. The budget balance went from a surplus of 0,6% of GDP in 2019 to a deficit of 2,8% in 2020. Several amending budgets contained measures addressing the fall-out from the crisis and the budget for 2021 already included response measures to be funded through the Recovery and Resilience Facility (RRF). The direct fiscal support reached around 3,5% of GDP in 2020 and around 2,5% of GDP in 2021, while liquidity and guarantee measures amounted to around 19% of GDP for both years combined. Public debt increased from 35% of GDP in 2019 to 39,7% in 2020. Sweden’s recovery and resilience plan amounts to EUR 3.3 billion. Sweden has requested only the non-repayable financial support under the RRF. This represents some 0,7% of 2019 GDP. The plan is structured along five components aimed at tackling Sweden’s structural challenges, which the COVID-19 crisis exacerbated. Measures included in the plan complement the national economic measures introduced by Sweden in response to the COVID-19 pandemic and the economic fall-out and are consistent with the 2021 National Reform Programme. The plan consists of 27 measures (12 investments and 15 reforms). The plan addresses a significant subset of structural challenges as identified in the relevant country-specific recommendations addressed to Sweden by the Council in 2019 and in 2020. It introduces reforms and investments to support the green and digital transitions, to increase the resilience of the health care system, to reduce the risk of money laundering, to lift the education and skills level as well as to strengthen research, development and innovation. The CSR related to the macroeconomic imbalances due to overvalued housing prices and high private indebtedness has only been addressed in a partly satisfactory manner. Sweden’s recovery and resilience plan covers comprehensively the six policy pillars as referred to in Article 3 of Regulation (EU) 2021/241, structuring the scope of application of the Recovery and Resilience Facility, with an appropriate overall balance between pillars. The plan follows a comprehensive approach to support recovery and potential growth, while improving socio-economic and institutional resilience. The plan explains in detail how its five components address the six pillars, focussing on the green transition, digital transition, human capital, as well as enhancing the broad resilience of the Swedish economy, in particular through tackling demographic challenges, ensuring the integrity of the financial system, and improving the functioning of the housing market. The reforms and investments included in the plan can be expected to significantly contribute to the green transition. Overall, 44,4% of the recovery and resilience plan’s total allocation contribute to the climate objectives. The climate measures are in line with the challenges identified in the National Energy and Climate Plan 2021-2030 and are expected to contribute to the 2030 energy and climate targets. The plan expands on existing efforts within the national carbon pricing framework through investments to decarbonise the industrial sector (‘Industry Leap’), investments in local and regional projects to reduce greenhouse gas (GHG) emissions (‘Climate Leap’), energy efficiency in buildings, investments in sustainable transport, as well as reforms increasing the price of carbon emissions and raising the renewable share in transport fuels. All measures in the Swedish plan have passed the ex-ante assessment of the ‘do no significant harm’ principle. The digital transition is expected to be accelerated through the plan’s measures. Overall, 20,5% of the recovery and resilience plan’s total allocation contribute to digital objectives. The planned expansion of broadband is expected to further increase high-speed internet access whereas the government’s common digital infrastructure should accelerate the public services’ digital transition. This is complemented by investments in vocational and higher education, with a particular focus on digital skills to meet the labour market needs of the future. The plan also incentivises the use of smart energy systems as part of building renovations, thereby making the best use of the synergies between the green and digital transition. The reforms and investments in the plan are expected to have lasting socio-economic impacts. Effects of reforms should contribute positively to higher employment levels, improved human capital formation and an extension of working life. Further, through competence development and labour market inclusion, the plan contributes to improving social cohesion and inclusion. Support to the roll-out of broadband in rural areas will help ensure that all citizens have access to high-speed connectivity and, thus, foster territorial cohesion. The implementation of the plan’s measures is expected to foster structural change in the economy. The prolongation of working life through adjusting the age limits in social security and tax systems should have a lasting impact on public finance sustainability and economic performance. The implementation of the plan will be monitored by the Swedish Ministry of Finance. Appropriate arrangements have been or will be put in place conditional on meeting the milestones setting out the responsibilities of ministries and agencies in charge of the implementation, monitoring, and reporting of the measures. The milestones and targets of the Swedish plan constitute an appropriate system for monitoring the plan’s implementation. The monitoring indicators are sufficiently clear and comprehensive to ensure that their completion can be traced and verified. The milestones and targets represent the key elements of the measures and as such can be considered relevant for their implementation. They reflect adequately the overall level of ambition of the plan and appear realistic. The verification mechanisms, data collection, and responsibilities described by the Swedish authorities appear sufficiently robust to justify adequately the disbursement requests once the milestones and targets are completed. The number of milestones and targets appears commensurate to the size of the reform and investment package.

Based on the assessment of individual cost estimates and related supporting documents, the estimated total cost of the plan appears to be reasonable and plausible to a medium extent. In the plan, the large majority of the individual cost estimates are assessed to be reasonable to a high extent because the calculations behind the cost estimate are comprehensible and based on sound underlying assumptions. The majority of cost estimates in the plan are deemed plausible to a high extent because the cost estimates are substantiated by reference costs for the key cost drivers, which are in turn supported by clear evidence and in line with comparable reforms or investments. However, for some measures the calculations of and/or the link between the cost and the justification thereof is not entirely clear, precluding a rating of ‘A’ for costing at the plan level. Overall, the amount of the estimated total cost of the plan is commensurate to the expected national economic and social impact and is in line with the principle of cost-efficiency. The plan includes adequate audit and control arrangements. The arrangements in the recovery and resilience plan to prevent, detect and correct corruption, fraud and conflicts of interest when using the funds provided under the Facility, including the arrangements aimed to avoid double funding from the Facility and other Union programmes, are assessed to be adequate conditional on the completion of predefined milestones prior to the submission of the first payment request. The overall strategy and the measures contained in the plan are coherent. The five components form a coherent package of investments and reforms, supporting the objectives to stimulate the recovery of the economy and foster sustainable and inclusive growth, to contribute to the twin transition and to increase resilience. Within each component, measures support and reinforce each other and reforms and investments across components are well aligned. Table 1: Summary of the Swedish recovery and resilience plan assessment for the 11 criteria set by the Recovery and Resilience Facility regulation (1)

Balanced Response (2)

CSRs (3)

Growth, jobs… (4)

DNSH (5)

Green target (6)

Digital target (7)

Lasting impact (8)

M & T (9)

Costing (10)

Control Systems (11)

Coherence A A A A A A A A B A A 2.Recovery and resilience challenges: scene-setter 2.1.Macroeconomic outlook and developments since the 2020 country report The Swedish economy has proved more resilient than the EU average during the COVID-19 pandemic. This is partly due to the strong macroeconomic starting position, but also reflected structural characteristics such as a favourable sectoral structure which, for instance, allowed large-scale teleworking and facilitated the operation of supply chains supporting total economic activity. In addition, in Sweden restrictions in response to the pandemic were less stringent than in several other EU Members States, while substantial and timely fiscal stimulus coupled with supportive measures by the monetary and macroprudential authorities helped cushion the pandemic-induced fall in economic activity and supported the recovery. Nevertheless, the initial impact of the pandemic led to a sharp contraction in real GDP in the second quarter of 2020 due to confinement measures, supply chain disruptions and the pandemic-related fall in trade volumes with major trading partners, whereas fixed capital formation and the housing market proved resilient. The subsequent recovery unfolded in 2021, driven by strong private consumption, investment and exports, with the time profile shaped by the easing of restrictions, extent of supply-chain disruptions, progress with vaccination, and the pace of improvement in the economic situation in major trading partner countries. In all, after a drop in real GDP of 2,9% in 2020, economic activity expanded by 4.8% in 2021, stronger than foreseen in the macroeconomic scenario outlined in the recovery and resilience plan (see Table 2). Real GDP is set to further expand by 3,8% in 2022 according to the Commission Winter Forecast 2022, in line with expected growth according to the macroeconomic scenario outlined in the plan. The fully fledged Commission Autumn Forecast 2021 (Table 2) expected a somewhat lower real GDP growth of 3,5% in 2022. Table 2: Comparison of macroeconomic developments and forecasts The Swedish government has put in place timely and appropriate measures to mitigate the negative economic and social impact of the crisis. Emergency measures included covering the costs of temporary unemployment and sick leave, fiscal support to cover turnover losses and fixed costs for firms and the self-employed, increased transfers to the regions and municipalities that are largely responsible for the provision of health care and social security coverage, as well as liquidity support and tax payment deferrals. The combined amount of direct fiscal support is estimated to be around 3½% of GDP in 2020 and around 2½% of GDP in 2021, while the liquidity and guarantee measures amounted to the equivalent of around 19% of GDP for both years combined. The combination of support offered by the pre-existing tax-benefit system and the emergency policy measures in response to the pandemic are estimated to have cushioned the impact of the pandemic in unemployment and households’ income as well as on poverty and inequality to a significant degree. In line with the relatively modest size of the plan, the estimated direct impact of fiscal support measures in the plan is relatively limited (at a cumulative 0,5% of GDP) and chiefly reflects direct-short term expenditure effects. The macroeconomic scenario contained in Sweden’s recovery and resilience plan expected a rebound of economic growth in 2021 following the COVID-19 induced contraction in 2020. The plan projects an increase in real GDP of 3,2% in 2021, picking up somewhat to 3,8% in 2022, before falling back to a more moderate rate of 1,9% in 2023 and 1,6% in 2024. According to the plan scenario, real GDP growth is driven by a recovery in private consumption and exports. Inflation is set to remain contained and stay between 1% and 2% in the plan’s economic forecast. Against this backdrop, the macroeconomic scenario expects unemployment to peak at 8,7% in 2021 before falling to 7,0% in 2026. The plan underlines that the COVID-induced unemployment and related income losses as an immediate consequence of the pandemic affected up to 1 million Swedish residents (around 10% of the population), in spite of extensive support measures. Persons already struggling to find employment before the pandemic like the low-skilled, young, and newcomers from non-EU countries face the highest risk of a deterioration in their position on the job market. The low-skilled and non-EU migrants also face the largest risk of social exclusion and poverty. While the negative impact of the pandemic on individuals could be substantial, the plan expects the overall increase in income inequality and long-term negative effects on overall skills levels to remain limited. This should be due to a combination of improved employment opportunities in the wake of the expected recovery and the effects of a range of supportive policy measures – which are broader than those included in the plan – aimed at mitigating not only negative employment and income effects but also at promoting education and training. For 2021, the plan expects that supporting measures for the economy reduced the unemployment rate by 1,3%. Employment is forecast to have grown slightly by 0,3% in 2021 and is expected to only revert back slowly to pre-crisis levels. Sweden remains a relatively equal society, with income inequality set to remain below the EU average over the horizon covered by the plan. The share of people at risk of poverty or social exclusion (17,7% in 2020) is below the EU average (21,94%). However, vulnerable groups are more likely to be at risk of poverty or social exclusion, including non-EU born, children, low-skilled workers, and people with disabilities. The crisis is expected to further accentuate those discrepancies inter alia in light of a lack of affordable housing. Government finances have been negatively impacted by the COVID-19 crisis. Nevertheless, the 2020 budget deficit of 2,8% of GDP was among the smallest in the EU. The plan does not present figures on fiscal aggregates over the full horizon it covers while the fiscal measures included in the plan form only a part of all support measures put in place by the authorities. After an increase in the debt-to-GDP ratio in the wake of the crisis due to the combined effect of shrinking GDP and fiscal stimulus, the Commission 2021 Autumn forecast expected the general government debt ratio to start falling still in 2021 as the recovery takes hold. The Commission services project debt to remain well below 60% of GDP in 2030.Hence, Swedish public debt continues to be on a sustainable path. Macroeconomic imbalances, chiefly rooted in high household debt and sharp increases in house prices, remain a risk. House prices accelerated significantly from the onset of the pandemic, including in the main urban areas where prices were already high. Credit to households continued to expand briskly, contributing to the household debt ratio rising further above prudential thresholds. Going forward, rising interest rates could put a strain on the finances of households that are exposed to high mortgage loans with variable interest rates. Policies implemented in recent years have not been sufficient to address these imbalances. The plan specifies a number of risks to the macroeconomic scenario. The plan notes that the macroeconomic and fiscal outlook continues to be affected by high uncertainty related to the COVID-19 pandemic and its economic consequences. The downside risks identified include persistence of unemployment leading to reduced matching in the labour market and negative effects of lower risks appetite on investment and productivity growth. Upside risks include impulses from enhanced schooling, digitalisation and reforms to lengthen the active working life. On balance, risks are seen to be tilted to the upside. Compared with the fully-fledged Autumn 2021 Commission forecast, the macroeconomic scenario in the plan is somewhat more pessimistic for 2021 and broadly in line for 2022.Similar to the Plan, the Commission expected domestic demand to be the main growth engine behind the recovery, foreseeing a somewhat stronger rebound in 2021. The differences between the Commission Autumn 2021 forecast and the macroeconomic scenario underpinning the plan are due to a combination of differences in external assumptions, in the assessment of budgetary measures and their impact on economic agents, and also to different cut-off dates. Labour market projections in the plan are more cautious than in the Commission forecast, whereas the path for expected inflation is very similar, allowing for differences in external assumptions. The macroeconomic scenario of the plan is cautious. Since the submission of the plan, the Swedish authorities have revised their overall forecast in the direction of a stronger recovery, similar to upward revisions in the Winter 2022 Commission forecast, allowing for the inclusion of additional outturn data and updated forward-looking indicators.

2.2.Challenges related to sustainable growth, cohesion, resilience and policies for the next generation The Swedish economy is among the most advanced within the EU in terms of wealth, equal opportunities, care for the environment and innovative capacity. Nevertheless, challenges exist across all policy areas and they are intertwined. Smart, sustainable and inclusive growth Labour market challenges include the integration of low-skilled people, non-EU migrants and people with disabilities, as well as labour shortages and a widening skills gap. Skills mismatches, a long-standing issue, is expected to lead to continued labour shortages in a broad range of sectors (including, but not limited to education, health care, social work, ICT, industry and construction) in the coming years. The COVID-19 crisis has increased the risk of long-term unemployment for groups that were finding it difficult to get and remain in employment already pre-COVID. Reskilling and upskilling will be important to allow unemployed to find permanent employment. Social and territorial cohesion Further integration of foreign-born requires an integrated approach to social, educational and employment policies linked with access to services. Specific attention is necessary for the obstacles foreign-born women face. Non-EU born people are more exposed to the risk of poverty or social exclusion than on average in the EU and this risk has increased in recent years. The gender gap is wide for foreign-born women, due to both higher inactivity and unemployment. Better integrating foreign-born into the labour force would support productivity growth in the longer run, social cohesion and equality of opportunities. Health, economic, social, and institutional resilience Macroeconomic imbalances in the housing market and high private debt persist. Sweden has received repeated country-specific recommendations over the last years concerning the housing market, the risk of high household indebtedness linked to the mortgage interest deductibility, as well as the need to foster investment in housing and increase the efficiency of the housing market. Sweden is one of the very few EU countries with tax relief on the full amount of mortgage interest paid. At the same time, there is a housing shortage, and in particular a lack of affordable housing. Despite the shortage, the number of people who are eligible for social housing, or who can receive housing benefits, is limited. Allowing more people access to housing benefits would potentially reduce homelessness and housing exclusion. It would also encourage more labour mobility and allow for people to move to a different location for studies/training. Reforming the rental market, while addressing incentives in the tax system favouring owner-occupation over renting, would increase economic resilience over the medium-term. Sweden has specific weaknesses with respect to the risk of money laundering. Sweden has allocated more resources to the competent institutions, strengthening in particular the capacity of its Financial Supervisory Authority. However, the Authority’s capacity is still low compared to the size of the Swedish financial sector. Challenges remain and the risk-based approach still needs to be fully implemented. Sweden has a good, tax-funded and generally effective healthcare system with a strong focus on outpatient and long-term care. The total healthcare spending as a share of GDP is higher than the EU average (10,9%; EU average 9,9%). Nevertheless, the availability of medical personnel and coordination between different levels of care could be further improved. The COVID-19 pandemic has highlighted existing structural weaknesses, such as shortages of healthcare workers, coordination gaps between different entities of the health administration as well as different levels of care (including long-term care) and geographical imbalances in the distribution of health care services. Immediate issues have been effectively resolved in Sweden’s crisis response. Nevertheless, in the medium term, Sweden could benefit from improving the availability, qualifications and working conditions of healthcare workers, especially care assistants and nurses, and from further development of eHealth solutions and IT systems for healthcare coordination. Policies for the next generation, children and young people, including education and skills. The main challenges for Sweden in the education area are a separation of native- and foreign-born students in different schools (leading to an educational gap between these two groups) and a growing teacher shortage. The move to distance education due to the COVID-19 pandemic has also had a stronger negative effect on the foreign-born students, due to language problems and lack of computers, internet access and IT skills. In addition, the accessibility of digital learning resources, their use by teachers, and access to technical and educational support varied significantly across schools. These developments have come on top of existing structural shortcomings. About 20% of teachers are not formally qualified. The share is even higher, over 50%, among teachers under 30, while participation in the formal qualification programme is, at 5,1%, far lower than the EU average (EU-22: 14,7%). Teacher shortages are the most pressing in rural areas of northern Sweden, and unqualified teachers are more common in schools with a higher share of non-native born pupils. Specific challenges related to policies for the next generation relate to labour market integration and housing affordability. With youth unemployment standing at 24% in December 2021, investments and reforms appear needed to support their job search, employment and bridge between education and the labour market. In addition, the housing shortage, especially in the segment of affordable housing and student housing, is posing a challenge to the younger generation. 2.3.Challenges related to the green and digital transition 2.3.1.Green dimension The recovery and resilience plan should contribute to the green transition and at least 37% of the financial allocation needs to contribute to climate objectives. The measures in the Plan shall contribute to achieving the 2050 climate neutrality objective, and the 2030 energy and climate targets, taking into account Member States’ National Energy and Climate Plans. The measures should also contribute to meeting environmental targets for waste, water, pollution control, sustainable mobility, biodiversity protection and restoration, marine and water resources, and support the transition to sustainable food systems as well as to a circular economy as appropriate, while ensuring that nobody is left behind. Sweden has been able to combine sustained economic growth with lowering greenhouse gas emissions over a longer period. Between 1990 and 2019, Sweden’s GHG emissions fell by 29% whilst its real GDP per capita increased by 54%. Sweden is among the EU Member States with the lowest GHG emissions per capita and is on course to meet its current EU 2030 targets under the Effort Sharing Regulation to reduce GHG emissions in sectors outside the EU’s Emission Trading System by 40% from 2005 levels. However, Sweden’s national objectives are even more ambitious: Sweden has set a national 2030 target to achieve at least a 50% reduction of GHG emissions in its effort sharing sectors compared to 2005. To reach its long-term domestic targets, Sweden would need to increase the annual rate of emission reductions. Transport is a key target for emissions reduction. The sector accounted for 31% of the national greenhouse gas emissions in 2020. While emissions from the industry and domestic transport have decreased, domestic transport is lagging behind industry and remains the single most important source of carbon emissions. The aim is for emissions from domestic transport (aviation excluded) to decrease by at least 70% by 2030 compared to 2010.

Land use, land use change and forestry (LULUCF) is an important sector in Sweden due to its large forest area. The sector is a significant carbon sink and is considered an integral part of Sweden’s climate strategy. It is also a key contributor to the economy, providing renewable energy sources, harvested wood products and other materials. The intensification of logging in Sweden has raised concerns for both the climate and biodiversity, in particular where logging may target old-growth forests. Greenhouse gas emissions vary widely regionally, mainly due to differences in the business structure. The steel industry in Upper Norrland is an important industry and emitter, but is in a transformation process to become fossil-free by 2035. Fossil carbon dioxide emissions from the steel industry mainly come from the production process and internal transport, leaving further scope for the rollout of innovative and low-emission processes (e.g. hydrogen). Renewable share Sweden has the highest share of renewables in energy consumption in the EU. The share of renewable resources in final energy consumption increased from 41% in 2005 to 60,1% in 2020. Biofuels are the largest renewable source and used mostly for heating, whereas hydropower is the dominant renewable source for electricity generation. Hydropower is not expected to provide additional renewable energy sources, but Sweden will rather expand other renewable technologies to increase its share of renewable energy and to contribute to the EU’s 2030 target for renewable energy by reaching 65% of renewable energy. Energy efficiency Sweden has presented a comprehensive set of energy efficiency measures for the buildings sector in its national long-term renovation strategy. Implementing this strategy will go a long way in increasing energy efficiency, but as the final energy consumption in 2020 was higher than the target value, more efforts are needed to reach energy efficiency targets. In addition, Sweden plans to carry out the renovation of its building stock in stages, depending on the age of the building. In particular, priority would need to be given to improve the energy efficiency of the worst performing buildings and to reduce energy poverty. Sweden intends to be carbon-neutral by 2045 and have net zero emissions thereafter. Achieving this objective will require sizeable investments, notably in the buildings sector, in infrastructure for the electrification of road transport and in innovative low-carbon technology in energy-intensive industry sectors, such as steel. On the government’s initiative, several energy-intensive sectors of the industry have come forward with roadmaps for becoming climate neutral by 2045 while also increasing their competitiveness. Environment In July 2020, the Swedish government adopted a national strategy for a circular economy. It sets out the direction and ambition for a long-term and sustainable transition of the Swedish society. The strategy fits in with the country’s goal of becoming the world’s first fossil-free country. It focuses on sustainable production and sustainable ways of consuming. The shift from a linear to a circular economy model should promote the use of safe, non-polluting and sustainable materials and processes. Sweden is advanced as regards waste management, but more effort is needed to comply with EU recycling targets for the post-2020 period, for example through lowering energy recovery from waste, shifting municipal waste away from incineration and towards recycling. Construction and renovation initiatives in Sweden need to further encourage material efficiency and life-cycle processes. To enhance its overall good environmental performance, Sweden needs to improve air and water quality and support biodiversity related measures. These measures concern habitats restoration (grassland, wetlands, marine ecosystems), as these areas still remain challenging from environmental and human health perspective. Table 3 below gives an overview of Sweden’s objectives, targets and contributions under Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the Governance of the Energy Union and Climate Action. Table 3: Overview of Sweden’s energy and climate objectives, targets and contributions National targets and contributions Latest available data 2020 2030 Assessment of 2030 ambition level Binding target for greenhouse gas emissions compared to 2005 under the Effort Sharing legislation (%) -29 -17 -40 More ambitious National target of at least -50 National target/contribution for renewable energy: Share of energy from renewable sources in gross final consumption of energy (%) 60.1 49 65 Sufficiently ambitious (Above RES Formula level of 64) National contribution for energy efficiency: Primary energy consumption (Mtoe) 41.7 43.4 40.2 Modest ambition Final energy consumption (Mtoe) 30.9 30.3 29.7 Modest ambition Level of electricity interconnectivity (%) 26 28 27 N/A Note: Preliminary data for 2020 indicate that Sweden’s GHG emissions under the Effort Sharing legislation dropped by 29% in 2020 compared to 2005. Sources: Assessment of the final national energy and climate plan of Sweden, SWD-(2020) 926 final and Eurostat data from specific years, Commission staff working document accompanying the Climate Action Progress Report 2021, SWD(2021) 298 final.

2.3.2.Digital dimension The recovery and resilience plan should contribute to the digital transition and at least 20% of the financial allocation needs to contribute to digital objectives. The measures in the plan should, inter alia, contribute to the digital transformation of the economic and social sectors (including public administration, public services, and the justice and health systems). The objective of the measures in the plan should be to improve not only the competitiveness, but also the resilience, agility and security of companies and public actors, all while ensuring inclusiveness. Sweden is one of the top-performing EU countries as regards the digital dimension according to the European Commission’s Digital Economy and Society Index (DESI). 72% of the population has at least basic digital skills and 46% has above basic digital skills. In 2017, the Swedish government adopted the Digitalisation Strategy, which sets out the pathway for Sweden to become the world leader in harnessing the opportunities offered by digitisation in skills, security, innovation and infrastructure. Sweden’s human capital is one of its strongest competitive advantages, but the country needs to address the unmet demand for digital experts to keep its technological edge. Irrespective of a high digital skill level among the broad population and a high number of information and communication technology (ICT) specialists (7,5% of individuals), 55,1% of enterprises who tried to recruit ICT specialists report hard-to-fill vacancies (EU average: 55,4%), constraining growth and productivity. Additional efforts and investments are needed to allow higher education institutions to attract more students, offer new courses and further increase the number of graduates in science, engineering and computing, to further improve Sweden’s top standing in innovation and digital technologies. Sweden is also a front-runner for ultrafast connectivity in Europe, but still faces challenges in the roll-out of broadband and coverage of remaining sparsely populated areas, as well as the timely assignment of 5G bands. To reach its goal of 98% coverage of high-speed internet access by 2025, Sweden would need to address the difficulties of ensuring roll-out and coverage of the remaining sparsely populated areas. To this end, an existing public funding scheme will continue to support projects deploying high-speed broadband infrastructure with a speed of at least 1 Gbps in areas where there is no existing Next Generation Access (NGA) network or where no NGA deployment is planned within 3 years. The successful deployment of 5G in Sweden depends on the timely availability and assignment of the 5G pioneer bands. In January 2021, the Post and Telecom Authority successfully resumed and completed the 5G spectrum auction through which it awarded frequencies. This is an important step for the 5G rollout in Sweden. It will also have synergies with Sweden’s intention to improve connectivity on trains, which demand stable connectivity to improve conditions for telework and commuting. The public sector is digitally mature, but there is room for improvement on open data and the reuse of public data. E-government services are widespread in Sweden, with 88% of internet users able to submit forms online in 2020. E-identification is also prevalent. However, in 2021 the country was for the first time over the EU average with 84% of the maximum score on open data. Many initiatives in the digitalisation strategy aim at harnessing the availability of open data and increasing the innovative use of digital technologies to create value-adding services both to the public and to businesses. The Agency for Digital Government (DIGG), which was established in 2018, has together with other agencies been assigned several tasks related to open data and the use of new technologies. DIGG has now been tasked to coordinate and support digitisation across the public sector in order to make it more efficient and fit for purpose. Sweden encourages SMEs to embrace new technologies faster. The Swedish smart industry strategy supports the digital transformation of SMEs. Although the share of Swedish firms planning high-growth as a result of increased digitalisation is above the EU average, overall SMEs need to become more aware of the advantages of digital technologies and speed up their adoption as they are behind large enterprises when it comes to digital intensity and ICT skills of their staff. Innovative solutions and upskilling their workforce would enable Swedish SMEs to participate to the fullest in the Single Market. Investments in (sustainable) technologies can enhance Sweden’s competitiveness during the green transition, including expanded innovative solutions in energy, production and distribution. Starting from 2021, Sweden is strengthening research and innovation into digitalisation until 2024 with the Research and Innovation Bill. The bill, which is financed by the national budget outside the RRP, indicates the cross-cutting societal challenges on which research and innovation in Sweden will focus. These are climate and environment, health and welfare, digitalisation, skills supply and working life, and a democratic and empowered society. The R&I-related digitisation efforts include research on the societal implications of digitalisation, an innovation programme in the fields of business and AI, research into information and cybersecurity, and collaborative programmes in the field of digitalisation, as well as e-infrastructure investments. Note: EU aggregate corresponds to EU28, based on 2020 DESI report. Box 1: Progress towards the Sustainable Development Goals Overview table of the overlap between the Sustainable Development Goals and the four dimensions underpinning the recovery and resilience plan. The objectives of the Sustainable Development Goals (SDGs) are integrated in the European Semester since the 2020 cycle. This provides a strong commitment towards sustainability in coordination of economic and employment policies in the EU. In that respect, this section outlines Sweden’s performance with respect to SDGs with particular relevance for the four dimensions underpinning the 2021 Annual Sustainable Growth Strategy and of relevance to the recovery and resilience plans (green transition, fairness, digital transition and productivity, and macroeconomic stability), indicating possible areas where investments and reforms in line with the objectives of the Facility could further accelerate the progress on the SDGs. Green Transition Sweden performs well on many SDGs related to the green transition. For instance, Sweden is among the EU Member States with the lowest per capita net greenhouse gas (GHG) emissions (1.2 tonnes in 2020), well below the EU average (7 tonnes). The share of renewable energy in gross final energy consumption is relatively high in Sweden (60,1% in 2020), compared to the EU-average (22,1%). Further reducing the carbon-intensity of the Swedish economy would lead to progress on SDG 7 ’Affordable and clean energy’ and SDG 13 ’Climate action‘. Fairness

Sweden shows generally high rankings on indicators assessing the fairness of society and economy. For instance, Sweden performs well with respect to SDG 1 'No poverty'. The rate of people at risk of poverty or social exclusion (17,7% in 2020) is below EU average (21,9%). Sweden is also among the best performing Member States on ‘Good health and well-being’ (SDG 3), while its performance has deteriorated recently on ‘Reduced inequalities’ (SDG 10). Sweden shows good performance on ‘Quality education’ (SDG 4), with comparably low rates of young people neither in employment nor training/education, and high rates of adult participation in learning. The gender employment gap (SDG 5) is very low in Sweden. Digital transition and productivity Sweden performs well what concerns ‘Decent work and economic growth’ (SDG 8) and ‘Industry, innovation, and infrastructure’ (SDG 9). With 3,5% of GDP allocated to R&D in 2020, Sweden has the highest R&D spending in the EU. The investment share is also higher than the EU average (24,8% in 2020, compared to 22,3%). By intensifying policy efforts, Sweden could make further progress on the SDGs related to the digital transition and productivity. Macroeconomic stability Sweden performs very well on SDG 8 and achieves good scores on indicators measuring ‘peace, justice, and strong institutions’ (SDG 16), although some indicators relating to ‘peace and personal security’ have declined slightly. 3.Objectives, structure and governance of the plan 3.1.Overall strategy of the plan The plan is part of the country’s large restart package to support the socio-economic recovery and long-term development after the COVID-19 pandemic. The fiscal support measures in the package, contained in the 2020, 2021 and 2022 budgets and budget amendments, aims to foster a climate-friendly and highly digitalised society, supporting inclusion and facilitating people to get back into employment. Reforms and investments should accelerate the green transition and digitalisation supporting lasting structural improvements. Funds allocated in the plan, which are in addition to the national funds, will help stimulate the economy and support jobs and companies in the short term while helping speed up the green transition, digitalisation, social priorities and regional cohesion in the medium to long term. The plan is made up of five components, focussing on (i) the green recovery, (ii) education and transition, (iii) better conditions for addressing demographic challenges, (iv) broadband expansion and digitalisation of public administration, and (v) investment for growth and housing. The plan has a strong focus on the green transition, with dedicated reforms and investments aimed at inter alia carbon-intensive sectors, such as transport and industry, thus contributing to the national climate target for Sweden to have no net emissions of greenhouse gases by 2045. A dedicated component contains measures to improve employment opportunities by increasing human capital among the unemployed, educating and training the labour force, complemented by a set of reforms to increase flexibility in the labour market and increase the transition into employment. The plan also aims at addressing demographic challenges and securing the integrity of the financial system, with reforms in the health sector, the pension system and the fight against money laundering. A digital component provides for the roll out of high-speed broadband in rural and sparsely populated areas as well as further digitalisation of the Swedish public administration. Finally, the plan has also dedicated measures to improve housing supply and foster investments in the housing market. The plan does not include cross-border or multi-country projects. The reforms and investments in the plan are well in line with the Facility’s objectives to promote cohesion, by including fostering growth and employment, strengthening social and territorial cohesion and supporting the green and digital transformation. Table 4: Overview of the plan, its components and associated estimated costs Component Costs (EUR million) I: Green recovery 1552 II: Education and transition 504 III: Better conditions for addressing demographic challenges 452 IV: Broadband expansion and digitalisation of public administration 485 V: Investment for growth and housing 296 3.2.Implementation aspects of the plan Governance The Ministry of Finance will oversee coordination, monitoring and reporting on the plan’s implementation. Sweden's recovery and resilience plan is based on goals and instruments decided by the Parliament. The Riksdag's Committee on Finance was on two occasions, on 6 and 27 April 2021, informed by the Government about the design of the plan. The Ministry of Finance ensures compliance with Union law, monitors the full and timely fulfilment of the plan’s strategic and operational objectives through milestones and targets, prepares and submits requests for payment based on the necessary information from the competent authorities and reports to the Commission, ensures the evaluation of the results of the plan and the dissemination of outputs; and provides the competent authorities with technical assistance. The Ministry of Finance will also be responsible for coordinating control and audit systems, for issuing the management declarations, for the preparation and submission of the requests for payment to the European Commission, for conducting controls on the line ministries’ implementation of the recovery and resilience plan, and for handling and ensuring a central reply to requests for information and access to data on final recipients. Specific mandates have been issued to the Swedish National Financial Management Authority (ESV) to ensure coherence of audit and control aspects across the decentralised Swedish governance system, as well as to develop an audit strategy covering all RRF. The ESV is responsible for collecting the data for monitoring the achievement of milestones and targets, thereby assisting the Ministry of Finance in its overall coordination responsibilities. While in its capacity as overall coordinating entity the Ministry of Finance monitors the implementation of the plan and is responsible for exchanges with the Commission, the responsibility for implementing the individual components (including operational responsibility for audit and control) lies with the public authorities (myndigheter). The main part of the government policies is carried out by the public administration. The number of state authorities in Sweden is relatively large and entities have a high degree of autonomy. Although the authorities report to the Government, they are not organisationally part of the Government Offices. The authorities responsible for managing and monitoring the use of EU funds in Sweden other than RRF funds will thus have a key role for the effective and efficient implementation of the plan. The authorities that have the greatest role in that work are the Swedish Agency for Economic and Regional Growth (responsible for ERDF), and the Swedish Energy Agency (manages the “Industry Leap”). Their experience, capacity and technical expertise should facilitate the effective implementation of the recovery plan. Through contacts between directly responsible authorities and other relevant bodies, the plan is expected to be implemented effectively, in accordance with the requirements of applicable Union law. Funding from the RRF and additional national or Union funds should be disbursed at central level. The Technical Support Instrument (TSI) can provide expertise in building capacities to implement the plan in a number of areas such as energy, green transition, healthcare, education or anti-money-laundering. Equality

Sweden’s Recovery and Resilience Plan (RRP) has a strong focus on gender equality, as the impact of every measure on women and men is carefully assessed. Sweden describes existing national challenges in terms of gender equality, whether they result from the pandemic - young and foreign-born women are particularly affected - or are more structural. The plan describes to a lesser extent challenges related to equal opportunities for all, with an emphasis on the access to the labour market for young people, foreign-born and persons with disabilities. The plan presents the mechanisms and governance structures ensuring that equality will be duly taken into consideration during its implementation. Those include gender budgeting, gender mainstreaming in public authorities and higher education institutions and state authorities’ responsibility for the implementation of disability policies. The plan presents to a large extent data disaggregated by gender. Consultation process Sweden carried out stakeholder consultations. In April 2021, the parliamentary Committee on Finance was informed about the design of plan. A broad range of stakeholders were consulted along the preparation of the plan and provided proposals for measures Government entities at various levels as well as the main social partners were involved in the preparation within the framework of the national co-ordination on the European Semester, including two high-level meetings with representatives from these main social partners and meetings with representatives of the regions (under the auspices of Association of Local Administrations and Regions). Finally, a dedicated meeting has also been held with representatives of civil society. Where applicable, the stakeholders will continue to be involved in the implementation of the respective measure, to ensure that the authorities have ongoing contact with e.g. companies, municipalities and regions. Communication strategy The Government has made it possible for the public to access information about Sweden's plan by publishing it on its website ( www.regeringen.se ). The Government will follow up with information about future reports made to the Commission and keep the website updated as Sweden's plan is implemented. The Government will commission authorities and executive bodies involved making the RRF funding visible to the public. For projects supported by the RRF, the relevant authorities will be instructed, when applicable, to show the emblem of the Union and an appropriate declaration of funding with the words “Funded by European Union - NextGenerationEU” through appropriate communication channels. The Government also intends to take the necessary decisions to ensure that the provisions of Article 22(2), point (f) and Article 34(2) of the RRF Regulation are complied with in the implementation of the measure for all actions. The plan indicates a clear commitment by the authorities to meeting the RRF Regulation’s requirements on communication. This refers in particular to making public information regarding the implementation of the Plan and the labelling of projects as financed by the RRF (‘funded by the European Union – NextGenerationEU’). The implementation of the plan could give rise to additional communication opportunities; it will be up to the Swedish authorities, in cooperation with the Commission, to seize such opportunities. State aid State aid and competition rules fully apply to the measures funded by the Recovery and Resilience Facility. Union funds channelled through the authorities of Member States, like the RRF funds, become State resources and can constitute State aid if all the other criteria of Article 107(1) TFEU are met. When this is the case and State aid is present, these measures must be notified and approved by the Commission before Member States can grant the aid, unless those measures are covered by an existing aid scheme or comply with the applicable conditions of a block exemption regulation, in particular the General Block Exemption Regulation (GBER) declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 TFEU. When State aid is present and it requires notification, it is the duty of the Member State to notify State aid measures to the Commission before granting them, in compliance with Article 108(3) TFEU. In this respect, the State aid analysis carried out by Sweden in the recovery and resilience plan cannot be deemed a State aid notification. In as far as Swede considers that a specific measure contained in the recovery and resilience plan entails de minimis aid or aid exempted from the notification requirement, it is the responsibility of Sweden to ensure full compliance with the applicable rules. In addition to complying with the EU’s State aid rules, measures taken under this framework should be compatible with the EU’s international obligations, in particular under World Trade Organization rules. Security self-assessment The plan does not explicitly indicate the use of security self-assessments. However, related concerns are alleviated by the fact that there is no measure that would relate to 5G deployment. 4.Summary of the assessment of the plan 4.1.Comprehensive and adequately balanced response to the economic and social situation The plan follows a holistic approach to recovery and reinforcing socio-economic resilience, taking into account the specific challenges and financial allocation of Sweden. The plan aims to support the recovery and potential growth, while improving socio-economic and institutional resilience. The plan explains in detail how it addresses the six pillars referred to in Article 3 of the RRF Regulation, namely: (i) green transition, (ii) digital transformation, (iii) smart, sustainable and inclusive growth, (iv) social and territorial cohesion, (v) health and economic, social and institutional resilience, and (vi) policies for the next generation. The plan contains 27 measures (15 reforms and 12 investments) divided into five components, focusing on the green transition, digital transition, human capital, as well as enhancing the broad resilience of the Swedish economy, in particular through tackling demographic challenges, ensuring the integrity of the financial system, and improving the functioning of the housing market. Sweden submitted its National Reform Programme on 28 May 2021. The information provided in the National Reform Programme is being considered and jointly assessed in this Staff Working Document together with the recovery and resilience plan. All pillars are covered by at least one component, while a component may contribute to several pillars. The range of actions of the plan corresponds to the one of the Facility with an appropriate overall balance between pillars. The coverage of the Swedish plan’s components toward the six pillars is summarised in Table 5. Table 5: Coverage of the six pillars of the Facility by the Swedish recovery and resilience plan components Green transition Digital transformation Smart, sustainable & inclusive growth Social and territorial cohesion Health, and economic, social and institutional resilience Policies for the next generation C1: Green recovery ● ○ ○ ○ C2: Education, training and conversion ● ○ ○ ○ ● C3: Better conditions to meet the demographic challenge and ensure the integrity of the financial system ● ○ ● ○ C4: Broadband roll-out and digitalisation of public administration ● ○ ● ● C5: Investment for Growth and Housing ○ ○ ○ ● Key: “●” investments and reforms of the component significantly contribute to the pillar; “○” the component partially contributes to the pillar.

Green transition Facilitating a green recovery is one of the main policy objectives underlying the plan. Measures focus on decarbonising the industry and transport in Sweden. In particular, component 1 contains dedicated measures to decrease process-related emissions and decarbonise the industry through research and development projects and to support local and regional projects on CO2 emission reductions, including electric charging stations. Moreover, component 1 is expected to help protect valuable nature and thus biodiversity in Swedish forests by establishing formally protected areas of nature reserves. In addition, component 5 includes investment support for energy efficiency and building renovation, to reduce primary energy consumption and carbon dioxide emissions in the housing sector. Digital transformation The Swedish plan has a strong digital dimension, with three of its five components contributing to the second pillar of the RRF Regulation. A dedicated component 4 should support investment into high-speed broadband networks, with a focus on filling connectivity gaps in less populated areas, which is expected to increase opportunities and preserve economic activity in those areas. The plan is also expected to support e-government, digital public services and local digital ecosystems with investments into a joint digital infrastructure for public administration Measures in the plan are expected to foster digital skills, with a focus on professions that will play a key role in the digital transition. Component 2 on education and training includes measures to support human capital and digital skills by supporting both higher vocational education as well as universities and other higher education institutions. A focus is put on fields relating to data/IT or other areas that are expected to foster the digital transition in Sweden, which is expected to help re- and up-skill the labour force for the challenges and requirements of the labour market in a digitalised society. Measures fostering the green recovery are also expected to contribute to the digital transition. In particular, component 1 includes public support to incentivise the use of smart energy systems as part of building renovations, which will make best use of the synergies between the green and digital transition. Overall, the Swedish plan is expected to contribute to pillar 2 in all relevant dimensions, with targeted measures to make both businesses, citizens, and the public sector fit for the digital age. Smart, sustainable and inclusive growth, including economic cohesion, jobs, productivity, competitiveness, research, development and innovation, and a well-functioning single market with strong SMEs The plan extensively covers the third pillar as all components are expected to contribute to smart and sustainable growth. The support to the development and application of new technologies in the green domain is expected to help the Swedish economy to grow in a smart and sustainable way. This includes both support to research and innovation in key technologies for the decarbonisation of industry, as well as support to incentivise the application of new technologies, for instance in the area of building renovations. Specific support for re- and upskilling will help ensure inclusive growth for all. By equipping the labour force with the necessary skills for the future (component 2), the plan will help improve the labour market transition and thus contribute to allow all citizens to make best use of the opportunities of the twin transition. A strong and competitive labour force also lays the foundation for future technological advances and is thus fundamental to ensure productivity growth in the long-run. Measures aimed at tackling the demographic challenges will help ensure the sustainability of the Swedish economic and social model. Notably, this includes measures related to the pension age limit and social security and tax systems (component 3), which aim at making the Swedish model future-proof in light of increasing life expectancy. SMEs can benefit from horizontal support schemes to help them better achieve the green transition. This includes the “Industry Leap” and the “Climate Leap” measures, which provide investment support to promote research and development projects on decarbonising the industry, as well as support for local and regional projects to reduce CO2 emissions. Furthermore, SMEs would benefit indirectly from the comprehensive measures to increase the number of study places in higher education and foster vocational training and education. Social and territorial cohesion Several components in the plan support social and territorial cohesion. In particular, the measure aimed at supporting the broadband roll-out in rural areas will help ensure that all citizens have access to high-speed connectivity and thus enable them to reap the benefits of digitalisation independently of their location (component 4). Digital connectivity is a prerequisite for an inclusive digital transition and the expansion of high-speed broadband networks is expected to provide a substantial contribution with a view to territorial cohesion in that regard. Investments to substantially upgrade railway in Sweden (component 1) will allow more citizens and enterprises to use railway as a means of transportation, thus fostering territorial cohesion. Social cohesion will be fostered through measures aiming at education and training, directly contributing to the implementation of the European Pillar of Social Rights. In particular, the measures targeting vocational education (component 2) are expected to have a positive impact on social cohesion, especially for adults in transition and for foreign-born individuals looking for permanent employment. By ensuring the long-term sustainability of the pension system and by improving the skills of staff in elderly care centers (component 3), the plan will also contribute to ensure the welfare of older people and thus help improve social cohesion. Measures to increase the housing supply (component 5) have the potential to make housing more affordable, with positive consequences for social cohesion. Health, and economic, social and institutional resilience The resilience of the Swedish health system is expected to be improved through targeted measures in the plan. In particular, the plan includes a reform to incentivise municipalities to offer vocational training in health- and social care in combination with Swedish language training (component 2). This measure is expected to shorten the study period and foster the transition into employment and thus help to increase the supply of properly trained staff in the Swedish health and social sector. The resilience of the Swedish economy is expected to be improved with measures tackling to some extent inefficiencies in the housing market. The interplay of the Swedish housing market and private indebtedness is a crucial factor from a viewpoint of economic resilience. The measures in the dedicated component 5 on the housing market are expected to contribute to addressing these inefficiencies, by increasing housing supply in the rental market and student housing, increasing competition in housing construction and reducing bottlenecks in the permit procedure. The plan is expected to contribute to social resilience by fostering the transition prospects on the labour market. To this extent, the measures aiming at re- and up-skilling both foreign and Swedish-born as well as increasing study places and resources of higher educational institutions will contribute to a competitive labour force with higher transition probabilities into and between jobs and thus foster social resilience (component 2). Transition into employment will also be fostered through the reform and modernisation of the employment protection legislation (component 2). Measures aimed at timely addressing the impact of changing demographics, in particular the elderly care initiative and the pension age adjustment, will also contribute to economic and social resilience (component 3). Measures to foster the digitalisation within the public administration will benefit institutional resilience, as it will help prepare public institutions for the challenges within a digitalised society (component 4). Efforts to combat money laundering and financing of terrorism (component 3) will also contribute increasing institutional resilience by ensuring that relevant authorities have the necessary rights and information to better enforce the regulatory framework. Policies for the next generation

The Swedish plan is expected to contribute to pillar 6 through its dedicated component 2 on training and education. For the programme combining Swedish language training with vocational training within elderly care, priority will be given to recently unemployed or young people with no prior job experience. Additional resources for education at universities and other higher education institutions will also benefit the next generation, by enabling a greater number of full-time students and help match peoples’ skills with demand from the job market (including the Elderly Care initiative in component 3). This measure is complemented by an investment scheme to increase the supply of student housing (component 5). The reform of the employment protection legislation (component 2) is also expected to benefit those without extensive professional experience and will thus help increase job prospects for the younger generation. Taking into consideration all reforms and investments envisaged by Sweden, its Recovery and Resilience plan represents, to a large extent a comprehensive and adequately balanced response to the economic and social situation, thereby contributing appropriately to all six pillars referred to in Article 3 of the RRF Regulation, taking the specific challenges and the financial allocation of Sweden into account. This would warrant a rating of A under the assessment criterion 2.1 in Annex V of the RRF Regulation. 4.2.Link with country-specific recommendations and the European Semester The plan is expected to address a significant subset of the challenges identified in the relevant country-specific recommendations. The plan addresses most of the outstanding country-specific recommendations (CSRs) from the 2019 and 2020 exercises in a satisfactory manner. It introduces reforms and investments aimed at addressing the green and digital transitions, the resilience of healthcare, and research and development. As such, and taking into account the size of the financial contribution, the plan contributes to a large part of the economic and societal challenges that Sweden faces. However, the country-specific recommendation related to the macroeconomic imbalances of overvalued houses and continued rise in household debt has only been addressed in a partly satisfactory manner. Sweden has also taken additional measures outside the scope of the plan that address policy challenges covered by the recommendations in 2019 and 2020, such as in the policy areas of anti-money laundering, research and innovation and resilience of the health care system. The plan only partially addresses the macroeconomic imbalances in the housing market and private debt (CSR 1 of 2019). The latest in-depth review identified overvalued house price levels coupled with a continued rise in household debt as house prices increased fast in 2020. The plan contributes somewhat to addressing these risks through a few measures that aim to increase mobility and reduce housing costs. The plan has a focus on the supply-side of the housing market through investment subsidies for rental and student housing and easing building regulation. On the demand side, the initiatives leading to lower taxes on deferred capital gains should foster demand but may also contribute to higher prices, while they can be expected to help promote housing mobility to some extent. In all, the measures in the plan can be expected to have only a limited impact on the dynamics of the housing market and household debt. Measures to improve on education and skills (CSR 2.1 of 2019 and CSR 2.2 2020) are included in its plan. The plan has investment measures to both increase the number of study places in vocational training and in higher education as well as an increase in the number of training places. Specifically for health care, the plan foresees training for existing staff in the Elderly Care initiative to increase their education and skill level. The measure modernising labour law, and adapting employment protection legislation, will provide further incentives to scale up human capital. At the same time, additional efforts will be needed in the future to address specific further challenges, notably the educational disadvantage of pupils with a migrant background and growing teacher shortages. Investment in sustainable transport is strengthened in the plan, in particular in railways (CSR 2.2 of 2019, CSR 2.7 and CSR 2.8 of 2020). The plan foresees EUR 148 million in investments to upgrade railway infrastructure over 2021-2023. The investments should lead to increased reliability and capacity of the railway infrastructure, supporting the transition from road to rail. Several reforms in Component 1 (Green recovery) aim at increasing the environmental taxation of conventional fuels, thereby encouraging the consumption and production of more sustainable alternatives. The plan contains several measures to support the digital transition (CSR 2.3 of 2019 and CSR 2.1 of 2020). The plan includes expansion of the broadband network to more remote areas and the digitalisation of public administration. Investments in the broadband network will improve the conditions for the digital transition in larger parts of Sweden. The digitalisation of public administration directly contributes to the digitalisation of the public sector but will also make the use of digital services more common. Educational measures will support the digital transition by enhancing digital skills and providing skilled labour for the professions related to the digital transition. The 5G network’s auction in early 2021 is deemed key for the digital transition is addressed outside the plan (CSR 2.6) as are the investments in research and innovation via the Research and Innovation Bill financed from the national budget (CSR 2.5). The plan contains two measures to reduce the risk of the financial system being used for money laundering that complement steps taken outside of the plan (CSR 3 2019 and CSR 3 2020). For the first measure, an inquiry commission has identified the remaining gaps in the financial supervision to prevent money laundering. The second measure addressed an earlier identified opportunity to enhance efficiency in the information exchange by establishing a database for holders of accounts and deposit boxes of financial undertakings that can be checked directly by the supervisory authorities. The information that financial undertakings are obliged to make directly and immediately available in the system will enhance the effectiveness of financial supervision on money laundering. The plan includes measures aimed at increasing the accessibility and capacity­ of the health care system (CSR 1.2 of 2020). The Swedish government has taken many measures outside the plan to address the COVID-19 crisis and started to address the limitations that became obvious through the pandemic. In the plan, Swedish health care benefits from training of elderly care professionals, the augmented number of study places in Vocational Education and Training (VET - Yrkesvux) and in introducing a protected title for assistant nurse to make health care jobs more attractive. The plan contributes to the overall policy package designed to use the pandemic as an opportunity for transformative investments (CSR 1.1 and CSR 1.2 of 2020). The funds received from the RRF are part of a larger stimulus package designed to address the pandemic and make the economy fitter and more resilient. Public investments are mostly directed in the plan to the green recovery (climate leap, industrial leap, rail infrastructure) with investments in the industrial leap are expected to contribute to green innovation. The investment developing and establishing a joint digital infrastructure for public administration is another, albeit modest, addition to public investment. The aid for energy efficiency in multi-dwelling buildings (green recovery component), the broadband deployment investment aid (digitalization and broadband component) and investment aid for rental and student housing (housing component) should work to strengthen private investment. The green transition is a core element of the plan, via dedicated investments (including on research and development) and reforms (CSR 2.3 2019, CSR 2.1 of 2020 and CSR 2.5 of 2020). Investments envisaged in the plan aim to further decarbonize the economy with 44,4% of spending funded by the RRF allocated to the green transition. The plan contains investments in research and development to decarbonize the industrial sectors and investments in local and regional projects to reduce CO2 emissions. The plan also aims to reduce GHG emissions through investments to improve the energy performance of multi-dwelling buildings, protection of valuable nature and the upgrading of the rail infrastructure. The plan contains several reform measures to promote the green transition: an increase in the energy tax, adjusting the calculation of the car benefit in taxation to reflect better the car’s carbon footprint and increasing the renewables shares in fossil fuels used by the transport sector. The reforms and investments of the plan are aligned with the European “flagship initiatives” of the 2021 Annual Sustainable Growth Strategy: power up (including the promotion of innovative technologies for fossil-free solutions in energy-intensive industries), renovate (including aid for energy efficiency improvements in multi-dwelling buildings as well as for rental and student housing), recharge and refuel (including a package of reforms that discourage the use of polluting cars), connect (including the rollout of rapid broadband services), modernise (including the digitalisation of public administration), and reskill and upskill (including the promotion of the development of digital skills). Taking into consideration the reforms and investments envisaged by Sweden, its recovery and resilience plan is expected to contribute to effectively addressing a significant subset of challenges identified in the country-specific recommendations, or challenges in other relevant documents officially adopted by the Commission under the European Semester, and the recovery and resilience plan represents an adequate response to the economic and social situation of Sweden. This would warrant a rating of A under the assessment criterion 2.2 in Annex V of the RRF Regulation. Table 6: Mapping of country challenges identified in 2019-20 country-specific recommendations and the Swedish recovery and resilience plan components[1] Country challenges Associated CSR (2019-2020) and European Semester recommendations Component 1- Green recovery Component 2- Education and transition Component 3- Better conditions for addressing demographic challenges Component 4- Broadband expansion and digitalisation of public administration Component 5- Investment for growth and housing (as identified in Section 2) Macroeconomic imbalances in the housing market and household debt 2019 CSR 1 Address risks related to high household debt by gradually reducing the tax deductibility of mortgage interest payments or increasing recurrent property taxes. Stimulate investment in residential construction where shortages are most pressing, in particular by removing structural obstacles to construction. Improve the efficiency of the housing market, including by introducing more flexibility in rental prices and revising the design of the capital gains tax ○ Education and skills 2019 CSR 2 focus investment related economic policy on education and skills 2020 CSR 2 support education and skills development. ● ● Sustainable transport 2019 CSR 2 maintaining investment in sustainable transport to upgrade the different transport modes, in particular railways, [2] 2020 CSR 2 focus investment on sustainable transport. ● Research and development 2019 CSR 2 focus investment related economic policy on research and innovation, taking into account regional differences 2020 CSR 2 Foster innovation. 2020 CSR 2 high tech and innovative sectors [3] ● ● Anti-money laundering 2019 CSR 3 Ensure effective supervision and the enforcement of the anti-money laundering framework[4]. 2020 CSR 3 Improve the effectiveness of anti-money laundering supervision and effectively enforce the anti-money laundering framework.[5] ● Health care 2020 CSR 1 Enhance the resilience of the health system, including by ensuring sufficient critical medical products and addressing the shortage of health workers.[6] ● Green and digital transition 2020 CSR 2 Focus investment on the green and digital transition, in particular on clean and efficient production and use of energy, […], 5G networks ● ● Key: “●” investments and reforms of the component significantly address the challenge; “○” the component partially addresses the challenge [1] The recommendations related to the immediate fiscal policy response to the pandemic can be considered as being addressed outside the plan. Sweden has generally responded adequately and sufficiently to the immediate need to support the economy through fiscal means in 2020 and 2021, in line with the provisions of the General Escape Clause. [2] This CSR was addressed by the adoption of measures not included in the plan. [3] This CSR was partially addressed by the adoption of measures not included in the plan. [4] This CSR was addressed by the adoption of measures not included in the plan.

[5] This CSR was addressed by the adoption of measures not included in the plan. [6] This CSR was addressed by the adoption of measures not included in the plan. 4.3.Growth potential, job creation, economic, institutional and social resilience, European Pillar of Social Rights, mitigating the impact of the crisis, and social territorial cohesion and convergence Fostering economic growth and jobs The plan is expected to contribute positively to GDP growth. The measures are frontloaded with an emphasis on 2021-2023, when the direct positive impact of the plan on growth is expected to be stronger as firms are expected to benefit from the investment incentives and from government-financed training and skilling facilities. According to the plan, additional spending is set to increase GDP by about 0,5% in 2021-2023, reflecting mainly the direct expenditure effects. From 2024 onwards, the GDP growth effect is expected to be limited, due to the expiration of the largest part of supportive expenditure under the RRF. Over the medium and longer term, the plan is expected to enhance productivity and contribute to long-term growth. There is no national estimate of the long-term impact. According to the Commission’s QUEST model, the long-term real GDP effect is 0,1% (see box below). The plan is also expected to contribute to employment, notably in 2021-2022. The most significant persistent positive effects on growth, productivity and fiscal sustainability over the medium to long run should stem from reforms in the plan, notably reforms of social security and pensions and changes in labour market legislation. Their impact is, however, difficult to quantify and the plan does not present estimates. Overall, the plan is expected to actively contribute to the implementation of the EU update of the 2020 new industrial strategy. Box 2: Stylised NGEU impact simulations with QUEST – Sweden Model simulations conducted by the Commission using the QUEST model show that the economic impact of the NGEU in Sweden could lead to an increase of GDP of between 0,2% and 0,3% by 2026[1] After 20 years, GDP could be 0,1% higher. Spillovers account for a substantial part of such impact. According to these simulations, this would translate into more than 4000 additional jobs. Cross border (GDP) spillovers account for 0,1 pps in 2026, showing the value added of synchronised expenditure across Member States (line 2). Even in a scenario with a lower productivity of NGEU funds, it would still lead to a significant impact (line 3).[2] Table 1: QUEST simulation results (% deviation of real GDP level from non-NGEU case) Scenario 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2040 Baseline 0.1 0.2 0.3 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.1 of which spillover -0.1 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Low productivity 0.0 0.1 0.1 0.2 0.2 0.2 0.1 0.1 0.1 0.1 0.0 This stylised scenario does not include the possible positive impact of structural reforms, which can be substantial. A model-based benchmarking exercise shows that undertaking structural reforms that would result in halving the gap vis-à-vis best performers in terms of indicators of structural reforms could raise Sweden’s GDP by 3½% in 20 years’ time[3] Due to the differences in the assumptions and methodology, the results of this stylised assessment cannot be directly compared to the numbers reported in chapter 4 of Sweden’s recovery and resilience plan. [1] RRF amounts to roughly 90% of NGEU, which also includes ReactEU, Horizon, InvestEU, JTF, Rural Development and RescEU. [2] Technically, the low productivity scenario considers a significantly reduced output elasticity of public capital. [3] Varga, J, in 't Veld J. (2014), “The potential growth impact of structural reforms in the EU: a benchmarking exercise", European Economy Economic Papers no. 541. http://ec.europa.eu/economy_finance/publications/economic_paper/2014/pdf/ecp541_en.pdf . Strengthening social cohesion The plan addresses social disparities that have increased during the COVID-19 pandemic. Investments and reforms in education, digitalisation, and health are proposed to address these disparities, thus contributing in several ways to equal opportunities and better access to the labour market, in line with the guidelines of the European Pillar of Social Rights. In the short run, limited distributional effects are expected once new measures are in place. However, the long-run full-scale positive impact of the investments made in education and training, going beyond the implementation of the plan, is likely to be more marked, as is inherent to investments in human capital. The proposed labour market reform is expected to help increase labour market chances of the more vulnerable groups. Scaling up vocational education and higher education potentially boosts employment, in particular among disadvantaged groups and in areas with labour shortages. Expenditure aimed at increasing the supply of vocational education across the country is partly directed at the non-EU born population, which has a high share of people in a disadvantaged labour market position (lower occupational levels, higher barriers of entry to employment, lack of relevant skills/education). In addition, higher education, as well as vocational education measures assign a strong emphasis to the digital dimension with the aim of alleviating the shortages and improving the transition opportunities for the unemployed. Together, these measures should support employment and productivity. Sweden’s plan contains a series of measures that are expected to effectively address the country’s challenges in the area of gender equality and equal opportunities for all. These include several reforms and investments in the area of education, training and reskilling targeted at young people and foreign born, in particular women. Provisions are also foreseen to support access to education for students with disabilities, for instance by providing specific pedagogical assistance. Reforms and investments in the health and care sector aim at improving the quality of care and lives for older persons. Measures to improve skills and staffing of elderly care and the regulation of the profession of nurse are expected to benefit women and foreign born, who represent the large majority of health and social workers. Investments in student housing are targeting young people. While many measures contribute to equal opportunities for all, equality considerations could have been integrated even more comprehensively throughout the plan and presented more prominently, for instance in the case of measures dealing with the green transition and digital transformation. All individual investments and reforms are assessed against their impact on gender equality. However, Sweden does not detail the overall impact of its plan on the gender employment and gender pay gaps. Dedicated measures are addressed to the older and younger generations. The increased supply and quality of the long-term care services expected after the successful training period of the staff working in the municipal elderly care centres should positively impact the lives of the old, while the special supportive measures targeting students and low-income families taken under the 5th Component (Housing), should improve the standing of these two groups in the housing market. Reducing vulnerability and increasing resilience Further progress with digital and green transition should help to improve resilience against external shocks. Due to its advanced digital infrastructure, Sweden was able to rely on distance working and continued service activity across several sectors. The emphasis in the plan on measures conducive to digitalisation, such as broadband expansion give a further boost to the digital transition of work that should reduce vulnerabilities to supply-chain disruptions. Measures on the digitalisation of public administration can increase the institutions’ ability to adjust to and withstand shocks. The measures to improve matching on the labour market and close skill gaps should help to maintain Sweden’s strong competitiveness and facilitate adjustments in the event of adverse economic circumstances. In addition, and not least important, the plan’s emphasis on environmentally sustainable initiatives can be deemed to reduce exposure to unsustainable economic activities at risk of obsolescence. In all, the plan contributes to the wider range of trends and policies that has put Sweden on a comparatively advanced trajectory for green and digital transitions, promoting an industry structure heavy in agile and innovative economic activities, conducive to resilience. Cohesion and convergence The initiatives in the plan to promote learning, digitalisation and innovation, including on green technologies, are conducive to territorial cohesion and convergence. In comparison, regional disparities in Sweden are less marked than in several other EU countries. The plan contains several measures that contribute to a balanced regional development. Broadband expansion is tilted towards outer regions without connections. Expanding broadband should improve access to the labour market and scope for businesses to interact with suppliers and customers regardless of location. Training and schooling programmes in the educational component of the plan are accessible in less densely populated areas across the country while upgrading transport infrastructure should also help diminish regional dispersion. Initiatives focusing on innovation and the green transition could provide fresh impulses to growth, jobs and innovation in parts of the country outside the historical economic centres, thus enhancing territorial cohesion. For example, the launch of fossil fuel-free steel production has propelled Sweden to global leadership in green innovation in the steel industry. The pioneering production facilities are located in the north of the country, contributing to a dynamic new regional growth pole. Taking into consideration all reforms and investments envisaged by Sweden, its recovery and resilience plan is expected to have a high impact on strengthening the growth potential, job creation, and economic, social and institutional resilience of the Member State, on contributing to the implementation of the European Pillar of Social Rights, including through the promotion of policies for children and youth, and on mitigating the economic and social impact of the COVID-19 crisis, thereby enhancing the economic, social and territorial cohesion and convergence within the Union. This would warrant a rating of A under the assessment criterion 2.3 of Annex V of the RRF Regulation.

Box 3: Employment and social challenges in light of the Social Scoreboard accompanying the European Pillar of Social Rights Sweden performs well on most of the indicators of the Social Scoreboard supporting the European Pillar of Social Rights. Although it has slightly declined after the initial impact of the COVID-19 crisis, the employment rate remains among the highest in the EU at 81,0% (Q3 2021). There has been an increase in the unemployment rate of 0,9 percentage points, from 7,2% in January 2020 to 8,1% in January 2022. On the other hand, long-term unemployment has increased significantly, from 1.1% in Q1 2020 to 2.2% in Q3 2021. The level of digital skills among the population is very high. The good overall results reflect Sweden’s advanced welfare model with efficient active labour market policies, a robust social protection system, and long-standing and well-established social dialogue. However, already before the crisis the country faced challenges in terms of increasing the labour market participation of the low-skilled and foreign-born, in particular women. These groups are also among the most impacted by the COVID-19 crisis. In Q3 2021, the unemployment rate of the low-skilled was 28.1% compared to 4.3% of the high-skilled, while unemployment of the non-EU born stood at 22.5% against 5% of those born in Sweden. Sweden continues to improve its policies to facilitate labour market integration. Public employment services have long been implementing policies to make the labour market more inclusive and to encourage enrolment in education and training. The previously announced “intensive year” (intensivår) for newly arrived migrants was launched in April 2021. The intensive year is based on a personalised plan of activities developed by the Public Employment Service together with the participant. Participants can for example study Swedish at a fast pace or do an intensive full-time internship in order to find work quickly. They are also be encouraged to meet up with a mentor and take part in other activities in their spare time that will help them learn Swedish. After finishing the Intensive Year, participants will be given a certificate of knowledge, which describes what they have achieved and their language and occupational skills. The recovery and resilience plan submitted by Sweden addresses some of the employment and social challenges relevant for the implementation of the Pillar. To foster equal opportunities and access to the labour market, the plan focuses heavily on VET and higher education. As there is a large skills mismatch in Sweden, with many of the unemployed lacking the necessary skills, focusing on upskilling and reskilling is key. Some of the measures proposed in the plan include increased study places in higher vocational education and regional adult vocational education, as well as the creation of shorter higher vocational education courses and programmes to ease job transitions. To ensure a better integration of migrants, the plan also includes a measure to increase compensation for vocational training in combination with courses in Swedish for Immigrants and Swedish as a second language. The plan also envisages measures to support affordable housing, with investment in construction of houses with special requirements ensuring favourable rental conditions. This should benefit students, people in socially vulnerable situations who need rental support to access the regular housing market, as well as young people below 31 years old. However, the educational disadvantage of pupils with a migrant background and the challenges of the teaching profession are not addressed. 4.4.The principle of ‘do no significant harm’ The Regulation establishing the Recovery and Resilience Facility provides that no measure included in the recovery and resilience plan should lead to significant harm to any of the six environmental objectives within the meaning of Article 17 of the Taxonomy Regulation. In line with the RRF Regulation and the Technical Guidance on the Application of ‘do no significant harm’ under the Recovery and Resilience Facility Regulation (hereafter ‘DNSH Technical Guidance’), Member States provide a ‘do no significant harm’ (DNSH) assessment, on which basis the Commission assesses whether each measure of the plan complies with the DNSH principle. Sweden has included a detailed DNSH assessment for each measure included in its plan. The evidence provided on the design of measures is sufficient to conclude that no measure in the plan is expected to do significant harm to any of the environmental objectives. By selecting measures that either contribute substantially to environmental objectives, or have no or an insignificant foreseeable impact on environmental objectives, many measures in the plan can be considered DNSH compliant from the outset. This includes, for example, measures on education, labour market, public administration and anti-money laundering. For measures requiring a substantive DNSH assessment in accordance with the DNSH Technical Guidance (e.g. sustainable mobility and broad support schemes), Sweden has provided evidence and assurances substantiating that the measures will not lead to significant harm to any of the six environmental objectives. As a first step, Sweden seeks to ensure that the activities supported by the plan comply with DNSH by committing to the application of all relevant EU and national environmental legislation. The national environmental code contains provisions applicable to individuals as well as businesses that ensure the protection of the environment through several principles that notably transpose relevant EU Directives. These include, but are not limited to, the precautionary principle, principles to prevent or discourage an activity from causing harm to human health or the environment, principles to save and reduce waste and energy, using renewable energy as a priority. The environmental code also contains environmental quality standards that set a minimum acceptable quality for soil, water, air and the environment. Moreover, the environmental code stipulates that certain measures must be subject to an environmental impact assessment, in line with the Environmental Impact Assessment Directive. Component 1 (Green recovery) of the plan foresees investment support in projects at local and regional level to reduce CO2 emissions (‘Climate Leap’) and investments in innovative R&D projects to reduce industrial emissions (‘Industry Leap’). For any action funded by these programmes that may fall under the EU Emissions Trading System (ETS), Sweden has among other conditions sought to ensure DNSH compliance by showing that the selection of supported projects is conditional upon achieving GHG emissions that are substantially below the relevant benchmarks established for free allocation. With one exception, activities covered by the EU ETS are not eligible for funding from the ‘Climate Leap’. Waste heat in industry for use in district heating is eligible as Sweden considers waste heat to be a resource-efficient way of meeting heating needs, which is not sufficiently incentivised by existing instruments, including the EU ETS. Waste heat is expected to indirectly reduce GHG emissions as it often replaces fossil fuels, electricity and fuels from biomass by feeding into the district heating network and replacing more emission-intensive heat production. Any such funding for waste heat shall have projected greenhouse gas emissions significantly below the heat benchmark established in Commission Implementing Regulation (EU) 2021/447. Furthermore, (i) activities and assets related to fossil fuels, including downstream use; (ii) activities and assets related to waste landfills, incinerators and mechanical biological treatment plants; and (iii) activities and assets where the long-term disposal of waste may cause harm to the environment are also excluded from financing. Investments under the ‘Industry Leap’ may concern activities under the EU ETS but do not distort the price signals put in place by the ETS. The objective of the ‘Industry leap’ is to radically shift the industry sector to become fossil-free and contribute to the set ambitious climate goals in line with Sweden’s target of achieving net zero emissions by 2045. Such industrial transition requires investments in completely new technologies that are costly and for which the allowance price in the EU ETS is currently well below what is needed for such investments. It is therefore considered that the ‘Industry Leap‘ is an additional policy instrument that does not distort the price signals put in place by the ETS. Moreover, the selection criteria for projects that can receive funding from the ‘Climate Leap’ or the ‘Industry Leap’ are sufficiently stringent to ensure that no project includes fossil fuels (including downstream use). It should be noted that (i) activities and assets related to waste landfills, incinerators and mechanical biological treatment plants; and (ii) activities and assets where the long-term disposal of waste may cause harm to the environment, are also excluded from financing. In order to ensure full compliance with DNSH, the plan specifies that certain measures shall comply with DNSH requirements as outlined in the DNSH Technical Guidance. This is the case, for example, for measures supporting innovative R&D projects (‘Industry Leap’) that may cover installations under the EU Emissions Trading System (ETS) in Component 1 (Green recovery) and broad support schemes spanning across sectors and activities (‘Climate Leap’) in Component 1. The DNSH compliance of these measures is included in the description of the measures in the Council Implementing Decision. The plan also includes measures to improve the energy efficiency of buildings. Although these type of measures have a positive impact on the reduction of emissions, they are susceptible to creating significant amounts of construction waste. Sweden ensures no significant harm will be done to the circular economy objective by detailing in the plan for each of the measures that at least 70% (by weight) of the non-hazardous construction and demolition waste generated on the construction sites will be prepared for reuse, recycling and other material recovery. Taking into account the assessment of all the measures envisaged, no measure for the implementation of reforms and investments projects included in Sweden’s recovery and resilience plan is expected to do significant harm to environmental objectives within the meaning of Article 17 of the Taxonomy Regulation (EU) No 2020/852 (the principle of ‘do no significant harm’). This would warrant a rating of A under the assessment criterion 2.4 of Annex V of the Recovery and Resilience Facility Regulation. 4.5.Green transition Climate target The Swedish plan dedicates EUR 1.46 billion to the climate objectives, which represents 44,4 % of the plan’s total allocation in non-repayable financial support. This exceeds the minimum climate target of 37% as set out in the RRF Regulation. Table 7 below presents the contribution of all measures that contribute to the climate change objectives. The investments included in the ‘green‘ component (Component 1) make up for the largest share of of the total climate contribution of the