Council opinion of 19 January 2001 on the updated convergence programme of Sweden, 2000 to 2003
Date: 2001-01-19
Institutions: Council of the European Union
Subjects: Sweden, coordination of EMU policies, economic convergence, economic policy, public finance

6.3.2001

EN

Official Journal of the European Communities

C 73/1

I

(Information)

COUNCIL

COUNCIL OPINION

of 19 January 2001

on the updated convergence programme of Sweden, 2000 to 2003

(2001/C 73/01)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Com-
munity,

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

continued government

On 19 January 2001 the Council examined Sweden’s updated
convergence programme, which covers the period 2000 to
2003. The Council notes with satisfaction that the updated
programme
surpluses
throughout the period to 2003 as the Swedish authorities
maintain their-medium term objective of a budget surplus of
2 % of gross domestic product (GDP) on average over the
business cycle. The strategy of lowering the expenditure ratio,
aided by tight expenditure ceilings and a balanced budget
requirement for local governments,
is accompanied by a
lowering of the tax ratio. The Council considers this budgetary
strategy appropriate. The Council further notes with satisfac-
tion that the debt ratio is expected to fall below the reference
value of 60 % of GDP in 2000, and to continue to fall
substantially over the remainder of the programme period.

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

The macroeconomic scenario presented in the programme,
with GDP growth of 3,9 % and 3,5 % for the years 2000 and
2001, appears realistic but for the years 2002 and 2003 no
forecasts are presented and the update assumes a cautious
2,1 % GDP growth, considered to be the trend growth rate.

The budgetary surpluses targeted in the updated programme
provide a large enough safety margin for the general govern-
ment balance not to breach the 3 % of GDP deficit reference
value in normal circumstances. The Council considers that
Sweden continues to comply with the requirements of the
Stability and Growth Pact. Furthermore, the Council welcomes
the attention given in the programme to the long-term
sustainability of public finances. The Council notes that
Sweden’s strategy on this hinges on maintaining a surplus of
2 % of GDP over a period of 15 years. By lowering debt and
interest payments this will make room to cover much of the
costs of ageing to be faced in later years. The Council
also encourages Sweden to pursue other routes to restrict
expenditure, since the programme recognises that Sweden
may have difficulties in maintaining a tax ratio that is markedly
higher than in most other countries.

The Council notes that Sweden at present comfortably fulfils
the convergence criterion on price stability and that the
continued achievement of the domestic inflation target is likely
to be consistent with the European Central Bank objective for
price stability. Trends in Swedish long-term interest rates in
recent years clearly reflect the favourable development of
economic fundamentals, which is expected to continue in the
future. Following from this, the spread of Swedish long-term

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Official Journal of the European Communities

6.3.2001

interest rates against euro rates has narrowed during 2000,
and Sweden continues to fulfil the interest rate convergence
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 opinion on the updated
1999 convergence programme (1), expects Sweden to decide
to join the ERM2 in due course.

In an environment of strong economic growth, continued
wage moderation remains an important factor of stability and
a moderate outcome of the wage negotiation round for
2001 and 2002 will be crucial in this respect. The indications
are that new wage agreements should result in only slightly
higher wage increases, but the risks are on the upside. In this
context, the Council encourages Sweden to direct fiscal policy
so that it supports monetary policy in the achievement of the

inflation target,
in line with the broad economic policy
guidelines. While inflationary pressures have remained low in
2000 and are expected to be contained during 2001, there is
a risk that the economy might overheat and threaten price
stability if wage moderation were to weaken. In such a case,
an expansionary fiscal stance in 2001 and 2002 would be
inappropriate in the face of an economy where output is above
or close to potential.

In order to obtain higher and sustainable economic growth, the
strategy of previous programmes is continued and structural
measures are being undertaken with a view to enhance the
supply side of the economy. Among these measures, the
lowering of the very high tax burden will provide better
incentives to encourage people to work, consistent with the
broad economic policy guidelines. The Council welcomes
these structural measures and encourages the Swedish Govern-
ment to continue these initiatives with determination and
especially continue to reduce the high tax burden.

(1) Council opinion of 31 January 2000 on the updated convergence
programme of Sweden, 1999 to 2002 (OJ C 60, 2.3.2000, p. 5).