Council Opinion of 31 January 2000 on the updated convergence programme of Sweden, 1999 to 2002
Date: 2000-01-31
Institutions: Council of the European Union
Subjects: Sweden, economic convergence, public finance

2.3.2000

EN

Official Journal of the European Communities

C 60/5

COUNCIL OPINION

of 31 January 2000

on the updated convergence programme of Sweden, 1999 to 2002

(2000/C 60/05)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EC) No 1466/97 of 7 July
1997 on the strengthening of the surveillance of budgetary
positions and the surveillance and coordination of economic
policies (1), and in particular Article 9(3) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

envisages

government

the period to 2002 as

On 31 January 2000 the Council examined Sweden’s updated
Convergence Programme, which covers the period 1999 to
2002. The Council notes with satisfaction that the updated
Programme
surpluses
continued
throughout
the authorities make
further progress towards their medium term objective of a
budget surplus of 2 % of GDP over the cycle. The Council
considers this target appropriate and welcomes the emphasis
given by the Programme on macroeconomic stability. The
Council further notes with satisfaction that the debt ratio is
expected to fall over the Programme period, reaching 52 % of
GDP in 2002.

adjustment

from a high to a

The improvement of government finances in Sweden has been
impressive: from a deficit of about 12 % of GDP in 1993 the
budgetary position turned to a surplus of more than 2 % of
GDP by 1998. This budgetary consolidation process, together
with the
low inflation
environment, has laid the ground for solid economic growth,
which will be harvested during the period covered by the
programme. The updated Programme’s cautious assumptions
on economic growth, particularly towards the end of
the
period, augment
the probability of achieving the objectives
set for Government finances. The surpluses targeted in the
updated Programme provide a large enough safety margin for
to breach the 3 % of GDP
the general Government not

reference value in normal circumstances. The Council
considers
requirements of the Stability and Growth Pact.

thus
to comply with the

Sweden continues

that

Inflation has been low since 1996 and Sweden continues to
fulfil comfortably the convergence criterion. However, while
actual output is widely judged to have been below or close
to potential for a number of years, this will change in future
and efforts need to be maintained to keep inflation under
control. Continued wage moderation is of utmost importance,
perhaps particularly so in Sweden, and the wage negotiations
for 2001 will prove challenging in an environment of recent
high economic growth. In this context, the Council notes that
the fiscal policy stance followed since 1999 could become to
expansionary in the current high-growth environment.

Trends in Swedish long-term interest rates in recent years
clearly reflect the favourable development of economic funda-
mentals, which is expected to continue in the future. The
spread of Swedish long-term interest rates against euro rates
has remained fairly stable during 1999, with Sweden fulfilling
the interest
rate criterion. Regarding the exchange rate,
although the krona has displayed less volatility in recent
years, the Council reiterates that Sweden needs to demonstrate
its ability to stay in line with an appropriate parity between the
krona and the euro over a sufficient period of time without
severe tensions. To this end,
the Council, as stated in its
the 1998 Convergence Programme (2), expects
opinion of
Sweden to decide to join the ERM2 in due course.

In order to obtain sustainable economic growth, structural
measures are being undertaken with a view to enhancing the
supply side of the economy. In this context, the Council notes
with satisfaction that
the strategy adopted in the updated
Programe is consistent with the Broad Economic policy Guide-
lines, particularly the efforts to lower the very high tax burden.
To this end, both the benefit and taxation systems have been
scrutinised and efforts to reform the (cid:145)welfare(cid:146) state have been
taken. The Council welcomes these efforts and encourages the
Swedish Government to continue these initiatives with deter-
mination.

(1) OJ L 209, 2.8.1997, p. 1.

(2) Council Opinion of 8 February 1999 on the

convergence
programme of Sweden, 1998 to 2001 (OJ C 68, 11.3.1999, p. 4).