COMMISSION STAFF WORKING DOCUMENT Assessment of the 2012 national reform programme and convergence programme for SWEDEN Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on Sweden's 2012 national reform programme and delivering a Council opinion on Sweden's updated convergence programme, 2012-2015
Date: 2012-05-30
Institutions: European Commission
Subjects: Sweden, VAT rate, budgetary equilibrium, catering, innovation, job access, property market

EUROPEAN COMMISSION 

Brussels, 30.5.2012  
SWD(2012) 328 final 

COMMISSION STAFF WORKING DOCUMENT 

Assessment of the 2012 national reform programme and convergence programme for 
SWEDEN 

Accompanying the document 

Recommendation for a 

COUNCIL RECOMMENDATION 

on Sweden's 2012 national reform programme and delivering a Council opinion on 
Sweden's updated convergence programme, 2012-2015 

{COM(2012) 328 final} 

EN 

   EN 

 
 
 
 
  
 
 
CONTENTS 

Executive summary .................................................................................................................... 3 

1. 

2. 

Introduction .................................................................................................................. 4 

Economic developments and challenges...................................................................... 5 

2.1. 

2.2. 

Recent economic developments and outlook................................................... 5 

Challenges ........................................................................................................ 6 

3. 

Assessment of the policy agenda ................................................................................. 9 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

Fiscal policy and taxation................................................................................. 9 

Financial sector .............................................................................................. 12 

Labour market, education and social policy .................................................. 15 

Structural measures supporting growth and competitiveness ........................ 18 

Modernisation of public administration ......................................................... 21 

4. 

5. 

Overview table ........................................................................................................... 23 

Annex ......................................................................................................................... 25 

2 

 
 
 
EXECUTIVE SUMMARY 

In  2012,  the  Swedish  economy  is  expected  to  slow  down  as  compared  to  2011,  with  a 
foreseen  GDP  growth  of  0.3 %.  After  positive  labour  market  developments  in  2011, 
unemployment is expected to rise slightly to 7.7% in 2012. 

The performance of the Swedish economy is overall very good. Since the mid-1990s, Sweden 
has followed an ambitious agenda of fiscal and structural reform. Most recently, the reform 
efforts  have  focused  on  achieving  full  employment,  ensuring  a  strong  and  stable  financial 
sector,  improving  the  functioning  of  the  housing  market,  reforming  the  education  system, 
promoting  innovative  and  dynamic  businesses  and  tackling  the  environmental  and  climate 
change issues.  

However, several challenges still need to be tackled. Notwithstanding government measures 
in the area of the labour market integration of vulnerable groups, the unemployment rates of 
these  groups  remain  high.  While  the  housing  market  has  cooled  somewhat  since  mid-2011, 
several structural distortions persist that have contributed to house-price volatility in the past. 
Certain  aspects  of  the  Swedish  tax  system  could  be  made  more  effective,  efficient  and 
growth-enhancing.  Moreover,  Sweden's  competitive  position  is  threatened  in  the  medium 
term by falling business investment in R&D and inadequate commercialisation of innovative 
output. 

3 

 
 
1. 

INTRODUCTION 

Procedural aspects 
In June 2011, the Commission proposed three country specific recommendations1 (CSRs) for 
economic and structural reform policies for Sweden. In July 2011 the Council of the European 
Union  adopted  these  recommendations  which  concerned  public  finances,  housing  and  the 
labour market. 

In  November  2011,  the  Commission  published  its  Annual  Growth  Survey  for  2012  (AGS 
2012) in which it set out its proposals for building the necessary common understanding about 
the  priorities  for  action  at  national  and  EU  levels  in  2012.  It  focused  on  five  priorities  — 
growth-friendly  fiscal  consolidation,  restoring  normal  lending  to  the  economy,  promoting 
growth  and  competitiveness,  tackling  unemployment  and  the  social  consequences  of  the 
crisis, and modernising public administration — and encouraged Member States to implement 
them in the 2012 European Semester. 

Against  this  background,  Sweden  presented  its  national  reform  programme  (NRP)  and 
convergence programme (CP) on 20 April 2012. These programmes give details on progress 
made since July 2011 and plans going forward. The two documents outline in an integrated 
manner  the  fiscal  consolidation  efforts  on  the  one  hand  and  key  structural  reforms  and 
reforms underpinning macroeconomic stabilisation on the other. The CP is in conformity with 
the Code of Conduct and the NRP follows the guidance provided by the Commission. Sweden 
has ensured close coherence between the two programming documents. Sweden is invited to 
set  in  its  next  NRP  a  numerical  target  for  reducing  social  exclusion  to  supplement  the  EU 
target of reducing the number of persons at risk of poverty/social exclusion by 20 million. 

Before  adopting  the  NRP  and  the  CP,  the  Government  conducted  extensive  consultations, 
particularly  at  the  local  and  regional  level.  Responding  to  requests  from  interested  civil- 
society  groups,  such  organisations  were  consulted  at  an  early  stage  of  the  NRP  process. 
Consultations  also  took  place  in  the  framework  of  a  special  reference  group  composed  of 
Government  ministries  and  social  partners,  including  both  trade  unions  and  employers' 
associations.  These  efforts  have  clearly  contributed 
to  enhancing  ownership  and 
understanding of the Europe 2020 strategy. 

This  Staff  Working  Document  assesses  the  state  of  implementation  of  the  2011 
recommendations  as  well  as  the  AGS  2012  in  Sweden,  identifies  current  policy  challenges 
and, on that basis, examines the country’s latest policy plans. 

Overall assessment 

Sweden  has  only  partially  implemented  each  of  the  Council  recommendations.  The  fiscal 
policy stance is regarded as prudent, and is likely to ensure that Sweden fulfils its medium-
term  objective  (MTO)  as  from  2012.  However,  this  is  mainly  due  to  the  fact  that  the 
government has lowered the MTO from +1% of GDP to -1% of GDP as of 2012. In 2011, the 
more  ambitious  MTO  was  not  fulfilled.  In  the  area  of  the  housing  market  and  household 
indebtedness,  the  measures  taken  by  the  government  are  relevant,  but  focus  mainly  on 
strengthening the resilience of the financial sector. So far there has been less attention paid to 
measures  to  foster  prudent  lending  or  to  diminish  the  debt  bias  in  the  financing  of  housing 
investment. Despite some promising first steps, the stringent rent regulation and constraints in 
the housing supply remain in place. As regards the labour market, the government has taken a 
large number of measures aimed at fostering the labour market participation of young people 
and  other  vulnerable  groups,  but  it  is  still  too  early  to  assess  the  effectiveness  of  these 

1  

SEC(2011) 806 final of 7 June 2011 

4 

 
                                                 
measures. Measures to increase flexibility at the lower end of the wage scale and to ease the 
difference in employment protection legislation for temporary and permanent workers are at 
the stage of a political debate. 

Although  Sweden’s  economic  performance  is  very  good,  reflecting  its  ambitious  fiscal 
consolidation and structural reform agenda since the mid-1990s, several challenges still need 
to  be  tackled,  namely  in  the  labour  market,  the  housing  market  and  the  tax  system. 
Notwithstanding  government  measures  in  the  area  of  the  labour  market  integration  of 
vulnerable  groups,  these  groups  have  not  fully  benefited  from  the  observed  cyclical 
improvement  in  the  employment  situation.  While  the  housing  market  has  cooled  somewhat 
since  mid-2011,  several  structural  distortions  persist  that  have  contributed  to  house-price 
volatility in the past. In line with the analysis set out in the Commission’s AGS 2012, certain 
aspects  of  the  Swedish  tax  system  could  be  made  more  effective,  efficient  and  growth-
enhancing. In particular, the current design of the taxation of both housing and VAT leaves 
room  for  improvement;  improving  the  former  could  also  help  to  address  the  challenges 
associated with housing-related indebtedness. 

The policy plans submitted by Sweden are relevant and credible, but in some areas lack the 
ambition  to  address  these  challenges  comprehensively.  The  strategy  to  contain  the  risks  of 
high  household  debt  by  strengthening  the  resilience  of  the  financial  sector  could  be 
accompanied by measures to foster prudent lending and flexibility of housing supply. Policy 
plans in the field of labour taxation are conditional on the available fiscal space and overlook 
the possibility of budget-neutral tax shifts linked, for example, to reviews of tax benefits for 
debt  accumulation  and  the  VAT  structure.  Finally,  according  to  the  NRP  the  Government 
intends  to  continue  with  active  labour  market  policy  measures  as  the  main  approach  to 
ensuring  the  participation  of  vulnerable  groups  in  the  labour  market,  whereas  a  more 
determined policy response in other areas, such as employment protection legislation or wage 
formation, would also be warranted. 

2. 

ECONOMIC DEVELOPMENTS AND CHALLENGES 

2.1. 

Recent economic developments and outlook 

Recent economic developments 

After  growth  of  6.1 %  in  2010  the  Swedish  economy  continued  its  rapid  recovery  in  2011, 
reaching  annual  growth  of  3.9 %.  Most  sectors  of  the  economy  contributed  to  this 
performance, with household consumption and investment particularly strong in the first half 
of the year and net exports booming in the third quarter. Positive labour market developments 
in  the  wake  of  the  strong  recovery  in  2010  continued  in  2011,  with  the  seasonally  adjusted 
unemployment rate falling from 9 % in spring 2010 to 7.3 % in September 2011. In the second 
half  of  2011,  however,  the  fallout  from  the  sovereign  debt  crisis  sapped  consumer  and 
corporate  confidence  and  the  worsening  international  economic  outlook  affected  Swedish 
exports,  which  plummeted  in  the  fourth  quarter.  Households  increased  their  saving  rate  as 
they saw their wealth affected by a fall in stock prices and declining house prices. 

For  early  2012,  various  indicators  send  mixed  signals.  On  the  one  hand,  both  business  and 
consumer confidence have rebounded noticeably in the first months of the year and household 
expectations about future house price developments have also recovered strongly, helped by 
interest-rate cuts by the Riksbank.. On the other hand, the latest industrial production data and 
new orders have been disappointing, showing a sizeable contraction in February and March.  

5 

 
 
The seasonally adjusted unemployment rate increased temporarily around the turn of the year 
but dropped again to 7.3 % in March 2012. 

Inflation has been low and has declined over the past year with HICP (harmonised index of 
consumer prices) inflation averaging at 1.4 %. The impact of high commodity prices has been 
mitigated by the lagged effects of currency appreciation, which continued until spring 2011. 
At the same time, low core inflation (HICP excluding energy and unprocessed food) reflected 
subdued unit labour costs, stemming from reasonable productivity growth and modest wage 
increases. 

Public finances are strong, with the general government budget ending the year with a slight 
surplus of 0.3 % in 2010 and 2011 and gross government debt falling to 38 % in 2011. In view 
of  increasing  uncertainty  and  the  intention  to  achieve  fiscal  targets  with  a  margin,  the 
government  adopted  a  rather  cautious  fiscal  approach,  abandoning  most  of  its  expansionary 
plans  for  the  2012  budget.  Against  a  backdrop  of  strong  fiscal  fundamentals,  Swedish 
government  bonds  are  increasingly  being  considered  as  a  safe  haven  investment,  with  the 
effect of strengthening the Swedish krona towards the end of 2011. 

Economic outlook 

The Commission’s interim forecast  predicts that growth will  remain subdued in early  2012, 
before  gradually  picking  up.  GDP  growth  is  expected  to  reach  0.3 %  in  2012  and  2.1 %  in 
2013.  In  the  short  term,  the  outlook  for  export  growth  is  rather  subdued,  as  a  number  of 
trading  partners  are  weighed  down  by  the  fallout  from  the  sovereign-debt  crisis  in  the  euro 
area. Private consumption should also grow less briskly, with household spending expected to 
be  held  back  by  bleaker  employment  prospects  and  greater  perceived  uncertainty, including 
with respect to house prices. Some relief is expected from a more accommodative monetary 
policy stance and stronger real wage developments, whereas fiscal policy is not expected to 
do much to boost demand in the short term. 

Sweden’s convergence programme contains one main macroeconomic scenario, which is also 
the main scenario of the NRP. It foresees that real GDP growth will slow down from 4.1 % in 
2011 to 1.3 % in 2012, before accelerating again to average 3.7 % annually over the 2013-15 
period. The macroeconomic scenario is plausible for the 2011-12 period, when a broad-based 
deceleration  is  expected,  whereas  it  looks  favourable  for  the  later  years,  when  the  strong 
acceleration  in  growth  is  based  on  households  significantly  lowering  their  saving  rate.  The 
government  estimates  that  the  major  structural  reform  implemented  in  2012  —  the  reduced 
VAT  rate  for  restaurants  and  catering  services  —  will  increase  GDP  by  0.1 %  and  decrease 
the unemployment rate by 0.1 percentage points. 

On 30 May 2012, the Commission adopted the Convergence Report 2012 assessing whether 
Member States with a derogation meet the criteria for adopting the single currency. The report 
concluded  that  Sweden  does  not  fulfil  the  criteria  of  legal  compatibility  and  exchange-rate 
stability and therefore does not qualify for euro adoption. 

2.2. 

Challenges 

Despite generally favourable economic development, Sweden still faces a set of inter-linked 
policy  challenges  to  sustainable  macroeconomic  development.  The  main  policy  challenges 
have remained broadly unchanged since the 2011 assessment. 

Sweden  has  a  rather  high  level  of  private  debt,  which  is  accounted  for  mainly  by  the  non-
financial corporations sector (around 155 %  of GDP in 2010), but  also the household sector 
(around 82 % of GDP or 170 % of disposable income). While the corporate debt burden has 
decreased substantially since 2009, accumulation of household debt has continued to increase 
even  after  the  2008-2009  crisis.  This  has  gone  hand  in  hand  with  strong  growth  in  house 

6 

 
prices.  Over  the  last  year,  however,  the  upward  trend  in  house  prices  has  reversed  and 
household debt has stabilised as a percentage of GDP. Although these developments make the 
challenge  less  urgent,  it  remains  relevant.  The  high  level  of  household  indebtedness  makes 
households’  net  wealth  more  vulnerable  to  asset  price  fluctuations,  changes  in  interest  rates 
(accentuated by the widespread use of flexible mortgage rates) and the employment outlook. 

There are a number of policies currently in place that may contribute to the volatility of the 
Swedish housing market and mortgage debt accumulation. First, indebtedness of households 
is  encouraged  by  a  debt  bias  in  housing  taxation  generated  by  generous  tax  deductibility  of 
interest  payments  and  low  property  taxes.  Second,  there  has  also  been  a  trend  towards 
increasingly longer amortisation periods, with new mortgage loans typically including no, or 
very  limited,  amortisation.  Third,  stringent  rent  regulation  pushes  households,  instead  of 
waiting for a rental apartment, to buy a house or apartment which will quickly meet their need 
for  housing  services,  thus  adding  to  the  demand  for  houses  and  tenant-owner’s  apartments, 
which tend to be mortgage-financed. On the supply side, a local planning monopoly, lengthy 
zoning  processes  and  rules  on  sub-letting  of  tenant-owner’s  apartments,  together  with 
insufficient  competition  in  the  sectors  supplying  input  to  the  construction  sector,  affect  the 
flexibility  of  housing  supply,  thus  contributing  to  higher  house  prices.  Addressing  all  the 
above issues is necessary to reduce the risk of debt-driven housing bubbles and to improve the 
functioning of the housing market. 

As regards the labour market, the challenge of low labour market integration of young people 
and  immigrants  is  still  relevant.  The  unemployment  rate  of  young  people  remains  high2 
(22.9 %  in  2011),  despite  some  improvement  reflecting  a  general  recovery  in  the  labour 
market  during  2011.  The  situation  of  foreign  nationals  even  deteriorated  in  2011,  with  the 
unemployment rate of this group increasing by almost 1 percentage point (to 20 %) between 
2010 and 2011. Employment rates for 2010 were 38.5 % for young people and 47.6% for non-
EU  nationals.  Within  the  latter  group,  developments  have  been  particularly  worrying  for 
women. Tackling these adverse developments would be directly in line with the priorities set 
out  in  the  Annual  Growth  Survey  2012  and  is  essential  for  achieving  the  Europe  2020 
employment target. 

On  the  supply  side,  factors  behind  the  relatively  high  unemployment  rates  and  low 
employment  rates  for  young  people  and  immigrants  could  include  labour  taxes  and  social 
contributions, which remain comparatively high despite extensive government reforms since 
2005. On the demand side, the full integration of vulnerable groups in the labour market could 
be hindered by relatively high wage levels at the low end of the wage scale.3 The differences 
in employment protection between regular and temporary workers constitute another possible 
barrier4.  As  regards  immigrants,  there  is  some  evidence  that  their  integration  in  the  labour 
market is occasionally hindered by potential employers’ unequal treatment of foreign-born job 
applicants. Finally, early school leaving also plays an important role in the exclusion of young 

2 

3  

4  

The low employment rate for young people could be due to the fact that a large proportion of them are 
involved  in  tertiary  education.  At  the  same  time,  according  to  Eurostat,  students  (who  are  mostly 
looking for employment alongside their studies) represent about half of unemployed youth (the share is 
one third for full-time students according to Swedish national statistics). This pattern seems to be just as 
significant  for  the  Netherlands,  Finland  and  Denmark.  In  Sweden,  however,  the  level  of  youth 
unemployment  is  much  higher  than  in  those  countries  and  education  appears  to  absorb  young  people 
who would otherwise be unemployed. 
The employment rate for persons with an upper secondary or post-secondary education is much higher 
than  for  those with  an  education  below  the upper secondary  level,  whereas  the  average  pay  for  these 
groups  is  very  close.  As  suggested  in  the  2010  Wage  Formation  Report  by  the  National  Institute  of 
Economic  Research,  high  minimum  wages  may  tend  to  curtail  employment  for  groups  with  limited 
education or low productivity for other reasons. 
See the OECD Economic Survey for Sweden, 2011.   

7 

 
                                                 
people  and  immigrants  from  the  labour  market  (although  drop-out  rates  are  not  high  in 
relation to the EU as a whole. 

The AGS 2012 requested an integrated assessment of tax policies. In Sweden, the design and 
structure of the tax system could be improved by implementing tax shifts which could make it 
more effective, efficient and growth-enhancing. Rather lenient tax treatment of housing leads 
to  a  debt  bias,  which  has  contributed  towards  the  rising  stock  of  mortgage  debt  and  also, 
potentially,  high  house  prices.  A  bias  towards  debt  financing  could  also  be  observed  in 
corporate  taxation,  contributing  to  the  build-up  of  corporate  debt  until  2009.  Within 
consumption taxation, the efficiency of VAT could be further enhanced by limiting the use of 
reduced VAT rates. Reforms in VAT and housing taxation could provide room to reduce the 
tax  burden  on  labour,  which  remains  relatively  high  despite  considerable  progress  in  recent 
years  and  may  be  discouraging  domestic  economic  activity,  employment  growth  and 
investment. 

Sweden's  competitive  position  is  threatened  in  the  medium  term  by  falling  business 
investment in R&D and little commercialisation of innovative output. Since 2002 the outflow 
of  R&D  business  investments  has  exceeded  the  inflow.  Consequently,  R&D  intensity  fell 
from a peak of 4.13 % in 2001 to 3.42 % in 2010. Sweden’s strong R&D position, as seen in 
the Innovation Union Scoreboard, is vulnerable due to its strong dependence on a few large 
multinational  companies  which  are  increasingly  moving  towards  the  global  innovation 
system.  Despite  being  a  top  performer  in  most  indicators  of  R&D  performance,  Sweden  is 
below  EU  average  as  regards  commercialisation  of  innovative  products  and  services.  Also, 
Sweden is slightly lagging behind in  creation of fast-growing innovative enterprises capable 
of ensuring a sustainable and competitive economy for growth and jobs. 

Box  1:  Summary  of  the  results  of  the  in-depth  review  under  the  macroeconomic  imbalances 
procedure 

The in-depth review on Sweden identified potential imbalances in the areas of the housing market and 
private debt. 

Although house prices seem to have developed in line with fundamentals, the Swedish housing market 
represents  an  area  where  imbalances  may  emerge.  Some  policies  and  features,  such  as  supply 
bottlenecks and rental regulation in combination with changes to the tax system, may have created an 
upward  bias  in  house  prices.  Some  of  these  policies  and  institutional  features  imply  distortions  or 
represent imperfections that carry an economic efficiency cost and could have a destabilising effect. 
Their interaction with tax policies and institutional features in the Swedish mortgage market, such as 
generous interest deductibility on mortgages and little amortisation, could also potentially increase the 
cost of these. 

Despite some mitigating circumstances, the high level of private-sector debt, in particular household 
indebtedness,  deserves  attention.  While  corporate  debt  makes  up  the  largest  share  of  total  private-
sector  debt,  there  are  specific  factors  behind  it  (mainly  the  strong  role  of  multi-nationals  and  of 
intercompany  loans)  which  makes  it  less  of  a  concern.  In  the  case  of  household  debt,  however,  the 
high debt level implies a heightened risk to macroeconomic stability by making households’ balance 
sheets more sensitive to negative shocks, such as a fall in house prices, a prolonged period of low or 
negative economic growth or a real interest rate shock. In view of that risk, and the potential role of 
various  policies  in  stimulating  continued  debt  build-up,  such  as  generous  interest  rate  deductibility, 
close monitoring may be warranted. 

The policy response could include measures to foster prudent lending, reduce the debt-bias in housing 
taxation,  strengthen  mortgage  amortisation  requirements  and  promote  the  use  of  fixed  interest  rate 
mortgages. Possible measures to improve the flexibility of housing supply include simplification of the 
planning and zoning processes, fostering competition in the construction sector and further easing the 
regulation of the rental market. 

8 

 
3. 

ASSESSMENT OF THE POLICY AGENDA 

3.1. 

Fiscal policy and taxation 

Budgetary developments and debt dynamics 

The main goal of the government's budgetary strategy, as expressed in the 2012 Convergence 
Programme (henceforth ‛programme’), is to ensure long-term sustainability by respecting the 
rules  of  the  Swedish  fiscal  framework,  including  the  target  of  having  a  surplus  in  general 
government net lending of 1% of GDP over the cycle. The strategy also aims at fulfilling the 
requirements  of  the  stability  and  growth  pact,  notably  respecting  the  3%  deficit  limit  and 
establishing  a  medium-term  budgetary  objective  (MTO).  Until  2011,  the  government 
maintained  the  MTO  at  the  same  level  as  the  surplus  target,  i.e.  at  1%  of  GDP.  The 
programme announces that, as from 2012, the MTO will be a deficit of 1% of GDP. The new 
MTO adequately reflects the requirements of the Stability and Growth pact. The reduction is 
explained by a wish to ‛distinguish more clearly between the Swedish national framework and 
the demands made of Sweden as a member of the EU’ and the lower target should be seen as 
a minimum requirement for net lending following from the fact that Sweden is a member of 
the  EU.  The  programme  states  that  the  guiding  principle  for  the  government's  fiscal  policy 
strategy will continue to be the more demanding 1% surplus-over-the-cycle target. 

As in 2010, general government net lending showed a small surplus of 0.3% of GDP in 2011. 
This  compares  to  an  expected  surplus  of  0.6%  of  GDP  in  last  year's  programme,  with  the 
difference  stemming  from  somewhat  slower  revenue  growth  than  expected.  Based  on  a  no-
policy change assumption, the programme foresees a small deficit of 0.1% of GDP in 2012, 
turning  into  a  surplus  of  0.5%  of  GDP  in  2013,  as  the  economy  is  expected  to  recover 
strongly. In the Commission’s spring forecast, the general government balance is forecast to 
show a deficit of 0.3% of GDP in 2012 and a surplus of 0.1% of GDP in 2013, based on a 
more muted recovery. Compared with last year's programme, both the 2012 programme and 
the Commission’s spring forecast foresees a much lower government balance in 2012, based 
primarily  on  revenues  not  being  as  strong  as  expected,  but  also  on  expenditures  being 
somewhat higher. For 2013, the programme predicts that household consumption will grow at 
a  much  faster  pace  than  foreseen  by  the  Commission’s  spring  forecast,  based  on  the 
assumption that households will start reducing their saving rate. For 2014 and 2015, surpluses 
of 1.7% and 3.0% of GDP are foreseen, respectively, based on a favourable macroeconomic 
scenario, with strong employment growth as a result of earlier government labour-market and 
tax  reforms.  Should  the  effects  of  these  reforms  be  less  than  expected  or  materialise  at  a 
slower pace, there might be slower revenue growth, which would have a negative impact on 
the general government balance. Expenditure restraint is expected to be the main contributor 
to  the  improvement  in  the  fiscal  balance  over  the  programme  period.  Assuming  unchanged 
policies,  the  programme  forecasts  that  expenditures  will  fall  by  3.3  %  of  GDP  over  the 
programme period. 

The  programme  foresees  a  structural  general  government  balance,  as  recalculated  by  the 
Commission5,  of  1.0%  and  1.6%  of  GDP  in  2012  and  2013,  respectively,  whereas  the 
Commission’s forecast foresees the structural balance growing from 0.0% of GDP in 2011 to 
0.3% and 0.4% of GDP in 2012 and 2013, respectively. As the MTO has been lowered to -1% 
of  GDP  as  from  2012,  it  means  that  it  is  likely  to  be  met  over  the  period  covered  by  the 
programme,  even  taking  into  account  the  likelihood  of  further  expansionary  discretionary 

5  

Cyclically  adjusted  balance  net  of  one-off  and  temporary  measures,  recalculated  by  the  Commission 
services  on  the  basis  of  the  information  provided  in  the  programme,  using  the  commonly  agreed 
methodology 

9 

 
                                                 
measures  being  taken  in  2013  or  2014.  These  could  derive  from  a  need  to  restore  the  real 
value of such expenditure items that are not indexed to inflation or income growth. 

According  to  the  information  provided  in  the  programme,  in  2012  the  growth  rate  of 
government  expenditure,  net  of  discretionary  revenue  measures,  will  exceed  a  rate  which  is 
lower  than  the  reference  medium-term  rate  of  potential  GDP  growth  (1.84%)  and  which 
ensures an annual structural adjustment towards the MTO by 0.5% of GDP (0.85%). In 2013 
and the later years, by contrast, it will not exceed the reference medium-term rate of potential 
GDP  growth  (1.84%).  Following  an  overall  assessment  of  the  Member  State’s  budgetary 
plans, with the structural balance as a reference, including an analysis of expenditure net of 
discretionary  revenue  measures,  the  plans  have  been  found  to  be  consistent  with  continued 
fulfilment of the MTO. 

  Box 2: Main budgetary measures 

  Revenue 

  2011 

•  Increase in basic income deduction for 

+65 year-olds (-0.2% of GDP) 

  2012 

Expenditure 

•  Lower  VAT  rate  for  restaurant  and 

•  Higher 

spending  on 

infrastructure 

catering services (-0.2% of GDP) 

(+0.1% of GDP) 

  Note:  The  budgetary  impact  in  the  table  is  the  impact  reported  in  the  programme,  i.e.  by  the  national 
authorities. A positive sign implies that revenue / expenditure increases as a consequence of this measure. 
The  degree  of  detail  reflects  the  type  of  information  made  available  in  the  stability  or  convergence 
programme and, where available, of a multiannual budget. 

The  debt  ratio  has  shown  a  declining  trend  since  the  mid-1990s.  The  recession  of  2008/09 
only temporarily interrupted this process and gross debt stood at 38.4% of GDP in 2011. Over 
the programme period, the programme foresees a further decline in the debt ratio to 27.5% of 
GDP  in  2015,  with  the  main  driver  being  large  primary  balances,  but  also  a  substantial 
contribution  from  real  GDP  growth.  This  decline  is  based  on  a  rather  favourable 
macroeconomic  scenario  and  includes  the  effects  from  some  limited  further  privatisation 
receipts. In 2011, Sweden had a positive net financial  position  of  18.4%  of  GDP.  Since  the 
debt-to-GDP ratio is below the reference rate, the debt reduction benchmark is not applicable. 

Long-term sustainability 

The  long-term  change  in  age-related  expenditure  is  above  the  EU  average.  The  initial 
budgetary  position  offsets  the  long-term  costs.  Under  a  no-policy  change  assumption,  debt 
would  fall  to  23%  of  GDP  by  2020.  Full  implementation  of  the  programme  plans  would 
reduce debt faster. Ensuring continued sufficient primary surpluses over the medium-term, as 
planned in the programme update, would further improve the sustainability of public finances. 

Fiscal framework 

The Swedish budgetary framework has been gradually taking shape since the second half of 
the 1990s in reaction to the significant worsening of public finances during the deep recession 
of  the  early  1990s.  The  current  fiscal  framework  has  successfully  contributed  to  putting 

10 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Swedish public finances on a much stronger footing at both the central and the local level. It 
has played a specific role in preventing strong tax receipts in good times from translating into 
pro-cyclical  spending  increases.  This  has  provided  the  necessary  margin  for  automatic 
stabilisers to play their role in recessions, even making room for discretionary fiscal stimulus. 

The  framework  is  based  on  three  main  rules.  First,  the  surplus  target,  encompassing  the 
finances of both central and local governments (counties and municipalities) and the pension 
system, stipulates that an overall surplus of 1 % of GDP should be achieved over the business 
cycle.  The  achievement  of  the  target  is  assessed  against  seven  different  indicators.  The 
multitude of indicators impairs the clarity of the assessment and could lead to an opportunistic 
interpretation.  Second,  the  three-year  nominal  expenditure  ceiling  for  central  government 
(excluding interest expenditure) and the pension system controls budget overruns and forces 
government departments to prioritise. Third, the balanced-budget rule for local governments 
forbids  municipalities  and  counties  to  approve  ex-ante  deficit  budgets  and  requires  them  to 
compensate for any ex-post deficits within three years. In addition to the budgetary rules, the 
Fiscal  Policy  Council  was  established  in  2007  with  the  task  of  providing  an  independent 
evaluation of the government’s fiscal policy and compliance with the fiscal rules. 

The  fiscal  framework  has  been  reinforced  in  recent  years  by  the  adoption  in  2010  of  a  law 
making it a legal obligation to define the surplus target and specify the expenditure ceiling for 
the coming three years. In an agreement reached in 2011 among all major political parties in 
Parliament, the Fiscal Council received an expanded mandate and some additional resources. 
This represents a strengthening of the Council, as previously it had not enjoyed broad support 
in Parliament. 

Tax system 

Sweden is a high-tax country with a tax-to-GDP ratio of 45.8 % in 2010, well above the EU 
average.  Overall,  the  tax  policy  mix  is  sound,  moving  slowly  from  labour  taxation  to  other 
sources  of  taxation  generally  regarded  as  less  harmful  to  growth.  Although  the  share  of 
‘growth-friendly  taxes’  is  substantial,  there  is  scope  for  further  growth-enhancing  tax  shifts 
(from labour to housing taxation) and for important efficiency improvements (housing, VAT, 
corporate taxation). Tax administration is among the most efficient in the EU, with high tax 
compliance rates and low tax collection costs. 

Taxation  of  housing  in  Sweden  is  characterised  by  a  debt  bias,  generated  by  low  recurrent 
property taxes (reduced significantly in 2008) and generous tax reliefs for mortgage interest 
payments. The deduction scheme and property taxes in their current form are also regressive, 
as the former benefits borrowers with high capital and labour income, against which interest 
expenses can be deducted and property taxes are kept flat above a certain threshold. In order 
to  make  the  tax  system  more  debt-neutral,  return  on  housing  investments  could  be  taxed  as 
other returns (via the imputed rent or higher property taxes) or the interest tax relief could be 
reduced  or  phased  out.  The  timing  of  these  reforms  would  need  to  be  decided  carefully,  in 
order not to put excessive downward pressure on house prices. 

Within  corporate  taxation,  there  is  a  relatively  large  gap  between  the  effective  marginal  tax 
rate on debt and on equity for new investment, suggesting a bias towards debt-financing for 
corporations. Correcting the debt bias in both housing and corporate taxation is important in 
view of the high level of household and corporate debt. 

The efficiency of VAT could be further enhanced through a shift towards a more harmonised 
VAT  structure6.  The  application  of  reduced  rates  complicates  the  system  and  distorts  the 

6 
The standard rate of 25 % is high, but reduced rates are applied e.g. to food, restaurant and catering 
services (12 %), a range of cultural goods and public transport (both 6 %), and some items are fully exempt. 

11 

 
                                                 
functioning of the market. Moreover, even if the various reduced rates have been motivated 
by specific policy concerns, a reduced VAT rate is normally not the most effective or efficient 
policy measure to achieve these aims. This is likely to be also the case with the reduced VAT 
rate for restaurant and catering services which was introduced in January 2012 with a view to 
boosting youth employment. Experience from other countries shows that these measures have 
been criticised as costly, with a limited impact on employment.7 

Fiscal space provided by the abovementioned reforms could be used to reduce labour taxation 
further, and this could enhance growth. The government has implemented several reforms in 
recent years to lower the tax burden on labour. In particular, the in-work tax credit, introduced 
in  four  stages  over  the  period  2007-2010,  reduced  the  marginal  and  average  tax  rates. 
However, the marginal tax rates for above-average wage earners and the average tax wedge 
remain high. Similarly, the implicit tax rate on labour (39 % in 2010) remains above the EU 
average  (non-weighted  32.9 %,  weighted  36 %),  despite  a  significant  decline  over  the  last 
decade. 

The government is not contemplating any major changes to the tax system in the near future. 
A  further  reduction  in  labour  taxes  through  a  fifth  stage  of  the  in-work  tax  credit  scheme 
remains one of the reform ambitions, but the government has announced that there might not 
be sufficient fiscal space to implement it before 2014-2015. Given the generally good fiscal 
position,  the  space  for  a  more  counter-cyclical  impact  might  deserve  more  attention.  The 
government  has  launched  an  inquiry  to  review  corporate  taxation  which  will  issue 
recommendations in 2013. 

3.2. 

Financial sector 

The Swedish financial sector is in relatively good shape. Swedish banks are well capitalised, 
with  capital  ratios  already  meeting  Basel  III  requirements8.  Their  exposure  to  countries  in 
receipt of EU or IMF financial assistance has declined to a very low level. Banks’ profitability 
measured as returns on equity has improved over the last year, and the share of loans losses 
has declined (0.04 % of total lending in mid-2011). From a company perspective, too, access 
to finance does not pose a serious challenge in Sweden9. However, as discussed in section 2.2, 
the Swedish financial sector remains vulnerable to developments in the housing market due to 
high  household  debt.  Also,  the  financial  sector  continues  to  face  risks  related  to  its  strong 
international exposure and a heavy reliance on external short-term funding. 

7  
8  

9  

See footnote 12. 
Moreover,  no  Swedish  institution  was  below  the  required  5 %  core  Tier  1  capital  following  the  July 
2011 EBA stress test nor required to comply with the higher minimum core Tier 1 capital ratio of 9 % of 
risk-weighted assets following the temporary recapitalisation plan adopted by the European Council in 
October 2011. 
The 2011 survey on SME access to finance shows that only 8 % of companies in Sweden report access 
to finance as being the most pressing problem (EU average: 15 %). 

12 

 
                                                 
Box 3: The Swedish housing market 

From the second half of the 1990s until the onset of the financial crisis, house prices in Sweden rose sharply. 
When the financial crisis hit, house prices started to fall, though their correction proved fairly muted and since 
2009, house prices resumed their strong up-ward movement reaching a new all-time high in 2010. During 2011, 
house  prices  in  Sweden  have  been  rather  stable,  with  some  downward  movement  accelerating  in  the  fourth 
quarter of 2011 

Real house prices 
Index 1995q1=100

300

250

200

150

100

50

0
1980

UK

SE

US

ES

DK

1985

1990

1995

2000

2005

2010

Source: Ecow in

There is no straightforward way of assessing whether house prices are now at a level in line with fundamentals. 
At least on some metrics, house prices now look richly valued (e.g. price-to-rent ratio, affordability ratios). The 
price-to-disposable-income-per-capita  ratio is  still  some  25%  above  its mid-1990s  level  and  close  to  its  recent 
peaks.  However,  these  valuations  are  based  on  historical  average  values.  Indicators  which  take  into  account 
possible structural changes as well as econometric estimates suggest that the steady increase in house prices over 
the  last  15  years  may  well  be  justified  by  fundamentals,  such  as  strong  disposable  income  growth  and  low 
interest rates coupled with limitations on the supply-side. 

There  are  reasonable  explanations  why  Swedish  house  prices  have  avoided  the  steep  correction  seen  in  many 
other countries in recent years. The quick recovery from the 2008/09 recession, which was helped by significant 
monetary  and  fiscal  stimulus,  and  a  relatively  resilient  labour  market  explains  why  disposable  income  has 
continued  to  rise  at  a  respectable  pace  also  in  the  more  recent  period.  Some  specific  tax  measures  favoring 
housing  (such  as  significant  decrease  in  property  taxation  and  deduction  schemes  for  home  improvement 
services) have also added to demand for owner-occupied housing, as has rental regulation. The trend decline in 
mortgage  rates,  in  combination  with  reduced  amortization  requirements,  also  fuelled  demand  over  the  last 
decade. On the supply side, a number of factors have contributed to a rather muted supply expansion over the 
same period. The effects from the crisis of the early 1990s and the 1991 tax reform lead to a sharp contraction of 
the  construction  sector,  which  has  taken  a  long  time  to  recover  from.  Poor  competition  and  administrative 
uncertainty  in  relation  to  zoning  and  issuance  of  building  permits  may  also  have  held  back  supply  by  raising 
costs.  Thus,  contrary  to  Spain  and  Ireland  for  instance,  Sweden  did  not  experience  an  overexpansion  of  the 
construction  sector,  as  increased  demand  for  housing  mainly  manifested  itself  in  higher  prices  and  less  in 
increasing volumes. 

Although  house  prices  seem  to  have  developed  in  line  with  fundamentals,  the  Swedish  housing  market 
represents an area where an imbalanced development could emerge. Some policies and features, such as supply 
bottlenecks and rental regulation in combination with changes to the tax system,  may  have created an upward 
bias  in  house  prices.  Some  of  these  policies  and  institutional  features  (a  widespread  use  of  variable-rate 
mortgages and little amortisation)  imply distortions or represent imperfections that carry an economic efficiency 
cost  and  could  have  a  destabilising  effect.  Their  interaction  with  tax  policies,  such  as  generous  interest 
deductibility on mortgages and low property taxes, could also potentially increase the cost of these. 

13 

 
 
 
The  challenge  of  high  house  prices  and  household  indebtedness  were  highlighted  in  a 
recommendation given to Sweden in 2011. The government’s response to the specific risk of 
house prices has so far been rather limited. This has to be seen against the background of a 
housing  market  situation  which  has  stabilised  since  the  recommendation  was  issued.  The 
government  has  set  up  an  advisory  committee  to  analyse  developments  in  house  prices  and 
household  indebtedness  and  suggest,  by  August  2012,  possible  reforms.  While  the  focus  of 
this  inquiry  is  relevant,  there  is  no  guarantee  that  it  will  lead  to  any  actual  measures10.  In 
2011, the government also marginally eased regulation of the rental market. In its 2012 spring 
bill, the government proposes some measures to simplify the sub-letting of apartments and to 
stimulate  housing  construction.  Also,  it  refers  to  a  new  act  to  simplify  the  planning  and 
building permits processes. Although certainly welcome, these measures are not likely to be 
sufficient to address the issues involved. The intended lowering of the property fee for rental 
units  and  for  construction  of  new  housing,  as well  as  higher  tax  deductions  for  revenues  of 
home rentals, are likely to increase the availability of housing, but a more systematic solution 
would  have  been  preferred,  based  on  elimination  of  tax  distortions  and  rent  regulation. 
Continuous  efforts  are  needed  to  achieve  a  well-functioning  rental  market  and  to  tackle  the 
constraints on the housing supply. 

In  broader  terms,  the  government  has  been  addressing  the  challenge  of  household 
indebtedness  by  strengthening  the  resilience  of  the  financial  sector.  A  number  of  measures 
have been taken in this respect. Above all, the crisis-related more stringent rules for Swedish 
banks’ capital adequacy have been extended beyond the end of 2011. In November 2011, the 
authorities had already announced higher capital requirements for four systemically important 
banks, above the Basel III requirements and ahead of the Basel III implementation schedule. 
With  a  view  to  strengthening  supervision  capacity,  the  resources  of  the  Swedish  Financial 
Supervisory Authority have been reinforced. The Financial Crisis Committee was appointed 
in 2011 to review the rules for managing a financial crisis. In order to counter liquidity risks, 
plans were announced to meet the short-term liquidity requirement of Basel III ahead of the 
agreed timetable, with the euro and the US dollar being treated separately. Moreover, banks 
should  continue  to  reduce  the  differences  in  maturity  between  assets  and  liabilities,  and 
improve their public liquidity reporting. 

The  measures  taken  by  the  government  are  relevant,  but  focus  mainly  on  strengthening  the 
resilience of the financial sector. In this area, the efforts to increase capital requirements and 
advance liquidity requirements for banks are ambitious compared to other EU Member States. 
Nevertheless, measures to foster prudent lending and diminish the debt bias in the financing 
of housing investment have so far received less attention, apart from the introduction in the 
autumn  of  2010  of  a  cap  of  85 %  on  the  loan-to-value  ratio.  Furthermore,  despite  some 
promising  steps,  the  system  of  rent  regulation  and  the  major  constraints  on  housing 
construction remain in place. In this light, the recommendation on housing and the financial 
sector is considered to have been partially implemented. 

In line with the Annual Growth Survey objectives, the capital positions of the systemic banks 
have  been  strengthened  without  restricting  lending  to  the  economy.  Credit  growth  to  the 
private  sector  has  been  overall  stable  (between  5  and  6 %  during  2011),  with  credit  to 
households slowing down and credit to non-financial corporations accelerating. 

10  

The previous inquiry, which delivered its results in October 2010, focused on various aspects including 
housing supply, rent regulation and mobility in the housing market, but its conclusions were only very 
tentative and did not provide concrete recommendations for policy action in this field. 

14 

 
 
                                                 
3.3. 

Labour market, education and social policy 

The  performance  of  the  Swedish  labour  market  is  generally  very  good:  the  overall 
employment rate is very high (78.7 %, 2010); labour productivity is above the EU average; the 
wage-setting  system  is  rather  flexible  and  accommodates  cyclical  developments  well;  the 
dialogue between the social partners is consensus-oriented and efficient in preventing strikes; 
the system of unemployment benefits as well as the sickness and disability benefit schemes 
have become more supportive of labour integration and employment; and substantial progress 
has  been  made  in  reducing  labour  taxes.  Nevertheless,  well-targeted  policy  action  is 
warranted  in  several  areas,  in  particular  in  addressing  persistent  and  relatively  high 
unemployment rates as well as low employment rates for young people and non-EU nationals. 

The need to tackle the weak labour market participation of young people and immigrants was 
identified in a country-specific recommendation for Sweden in the 2011 assessment and was 
also  highlighted  as  a  general  priority  in  the  Annual  Growth  Strategy  2012.  The  Swedish 
Budget Bill for 2012, presented in September 2011, included numerous measures in response 
to the recommendation. The measures in favour of youth employment include: lowering the 
VAT rate for restaurants and catering services; implementing the apprenticeship programme 
as a permanent part of upper secondary school; introducing a reform aimed at increasing the 
number of students leaving upper secondary school with passes in all subjects; and ensuring a 
better  match  between  upper  secondary  school  and  the  labour  market.  With  a  view  to 
improving  the  labour  market  integration  of  immigrants,  the  measures  include:  further 
monitoring  of,  and  improvements  to,  the  reformed  reception  system  for  newly  arrived 
refugees;  evaluation  of  the  effectiveness  of  Swedish  language  training  for  immigrants; 
launching an inquiry aimed at proposing by October 2012 measures to speed up integration in 
the  labour  market  of  female  immigrants  and immigrants  arriving  in  Sweden  on  the  basis  of 
family reunification (60 % women), as well as subsidies for employers who hire unemployed 
immigrants. 

Most of these measures are relevant and can be expected to have a positive impact. However, 
since most reforms are not being implemented until 2012, it is too early to assess whether they 
have actually had any significant effects on the target groups. The relevance and effectiveness 
of the main measure targeted at youth employment — the VAT reduction for restaurants and 
catering services — could be called into question. As experience from other Member States 
indicates11, there is some doubt concerning the effect which this tax expenditure measure has 
on  job  creation  and  growth.  The  Swedish  VAT  reform  will  be  evaluated  by  several 
government  agencies,  with  final  reports  to  be  provided  in  January 2016.  A  short-term 
evaluation of the price impact will be presented already in July 2012. 

In addition to the measures included in the Budget Bill 2012, the NRP reports on initiatives 
which aim at improving the functioning of the Swedish labour market, including in the field 
of  employment  protection  and  wage  formation.  The  government  is  considering  options  to 
prevent  exploitation  of  fixed-term  employment.  In  addition,  a  public  inquiry  is  examining 
whether employer costs related to employment termination disputes can be reduced. –Another 
public  examination  has  been  instructed  to  investigate  and,  by  30  November  2012,  propose 
solutions  for  a  new  form  of  employment  with  an  educational  content  for  young  people  – 
apprentice  probation  employment.  In  addition,  the  government  offices  are  making 

11  

For  Finland,  see  Iida  Häkkinen  Skans  and  Tuomas  Kosonen,  Sänkt  moms  på  frisörverksamhet  och 
restauranger i Finland: Blev det verkligen lägre priser och högre sysselsättning?, Ekonomisk Debatt nr 
5  2011;  Konjunkturinstitutet,  Yttrande  på  promemorian  ‘Sänkt  restaurang-  och  cateringmoms’  (dnr 
Fi2011/1404).  For  France,  see  e.g.  the  report  from  the  "Conseil  des  Prélèvements  Obligatoires", 
http://www.ccomptes.fr/fr/CPO/documents/divers/Rapport_de_synthese_Entreprises_et_niches_fiscales
_et_sociales_071010.pdf  ,  page  200  and  following.  Estimates  of  the  effects  of  a  VAT  reduction  for 
restaurants in  Belgium suggest a similar conclusion.   

15 

 
                                                 
preparations for the introduction of a special form of employment for upper secondary school 
apprentices. All these initiatives represent promising steps towards more flexibility at the low 
end  of  the  wage  scale,  benefiting  young  and  low-skilled  people,  and  towards  reducing  the 
employment protection divide between permanent and temporary workers. However, they are 
still in an embryonic stage and the result will depend on the reaction of the social partners. 

To  summarise,  the  government  strategy  to  improve  labour  market  participation  of  young 
people  and  immigrants  has  so  far  mainly  focused  on  active  labour  market  policy  measures. 
Previous measures in this field have not generated significant and lasting positive effects. It is 
too  early  to  see  the  results  of  the  measures  implemented  in  2012.  In  order  to  handle  the 
challenges  in  a  more  comprehensive  way,  a  more  determined  effort  in  areas  such  as 
employment protection and high wages at the lower end of the wage skill might be required. 
Initiatives  announced  in  the  NRP  are  promising  steps  in  that  direction,  but  it  is  to  be  seen 
whether they will translate into palpable results. In the field of labour taxation, there is a clear 
risk  that  none  of  the  remaining  reform  ambitions  set  out  in  the  previous  NRP  will  be 
implemented over the programme period, in particular the fifth stage in the in-work tax credit 
scheme and a further increase in the threshold for the state income tax,. The government has 
indicated that sufficient fiscal space for these reforms might not be available until 2014-2015. 
In  the  light  of  these  observations,  the  recommendation  on  labour  market  integration  is 
considered to have been partially implemented. 

As  regards  progress  towards  the  Europe  2020  targets,  it  can  be  expected  that  the 
apprenticeship  programme,  the  reform  of  upper  secondary  education  and  the  new  measures 
targeting immigrants will be the main measures which will have a positive impact on the 2020 
employment  target,  as  well  as  the  early  school  leaving  target  and  the  target  to  reduce  the 
number of people at risk of poverty. Earlier measures might have contributed already to the 
improvement  in  the  employment  rate  since  2009.  However,  such  a  conclusion  would  be 
premature given the difficulty of disentangling the effect of a cyclical upturn in employment 
from the effect of the government measures. 

The  use  of  the  European  Social  Fund  in  Sweden  support  numerous  projects  that  help  fight 
unemployment and social exclusion, especially for the most vulnerable groups among young 
people  and  immigrants.  On  a  critical  view,  it  is  noted  that  the  Swedish  government  in  its 
budget for 2012 decreased the limit for outstanding ESF commitments at the end of the year 
by 20% compared to 2011, which leads to a less effective use of the ESF for this purpose in 
the years 2012-2014. This is in contradiction with one of the objectives set out in the Annual 
Growth  Survey  2012,  mobilising  and  making  better  use  of  the  available  EU  funds  to 
implement the recommendations on the labour market, and goes against the spirit of the recent 
Commission's Youth Opportunities Initiative. 

The  Swedish  social  model  is  characterised  by  a  well-developed  universal  social  protection 
system and an active labour market policy. Expenditure on social protection as a percentage 
of  GDP  has  constantly  been  among  the  highest  in  the  EU  (in  2009  SE:  32.1 %,  EU-27: 
29.5 %).  The  social  protection  system  has  remained  solid  throughout  the  economic  crisis, 
reflecting  stable  public  finances.  Sweden  has  not  been  forced  to  introduce  any  austerity 
measures  in  the  social  protection  system.  As  a  result,  the  combined  at-risk-of  poverty  and 
social  exclusion  rate  has  been  stable  over  the  last  few  years  (2007:  14.5 %,  2010:  15 %). 
Sweden is one of the Member States with the lowest income inequalities (ranking second in 
2010, against the EU average of 23.3 %)12. 

12  

The  risk  of  poverty  is  considerably  higher  for  those  born  outside  the  EU  (32.4 %  in  2010),  non-EU 
citizens (51.3 % in 2010), the unemployed (48.9 % in 2010), elderly women (21.6 % in 2010) and single 
people with dependent children (37.5 %, 2010). 

16 

 
                                                 
Despite a slight improvement in the overall at-risk-of-poverty and social-exclusion indicator 
in  2010,  the  situation  has  not  improved  for  some  vulnerable  groups.  The  negative  trends 
concern  the  elderly  (especially  women),  in-work  poverty  for  women,  child  poverty  and  the 
impact  of  social  expenditure  in  reducing  child  poverty  (see  statistical  annexes).  The  issue 
looks  even  more  worrying  from  a  longer-term  and  EU-wide  perspective.  While  the  risk  of 
poverty and social exclusion decreased in the EU over the period 2007-2010 for people above 
65  by  4.7  pps  (by  3.4  pps  for  women),  it  increased  in  Sweden  by  5.5  pps  (by  8.7  pps  for 
women). 

The  Swedish  government’s  overall  policy  objective  is  strongly  focused  on  reducing  social 
exclusion  through  labour  market  integration.  Increased  labour  market  inclusion  for  groups 
with a weak foothold on the labour market, such as immigrants and young people, will lead to 
a significant reduction in social exclusion for those vulnerable groups. This is also the main 
purpose  of  a  key  measure  taken  recently  to  combat  social  exclusion  —  the  reform  of  the 
reception  system  for  asylum  seekers  and  their  families  introduced  in  December  2010.  The 
reform aims to improve the labour market inclusion of immigrants by shifting responsibility 
for activation measures from the municipalities to the Swedish Public Employment Service. 
The  objective  is  to  harmonise  the  quality  of  introduction  measures,  strengthen  personal 
incentives for taking up jobs and provide adequate individualised guidance. 

However, there are vulnerable groups, such as elderly women with low pension earnings and 
single households with children, for whom labour market inclusion is not always an effective 
or  realistic  method  of  reducing  the  risk  of  poverty.  As  a  result,  the  overall  policy  focus  on 
labour market inclusion as a way of reducing the risk of poverty should be complemented by 
other policies as well. 

As regards education, early school leaving fell below the 10 % target in 2010 and continues to 
decrease. Sweden has thus already reached the national target set for 2020. The main measure 
in the fight against early school leaving has been the implementation of the upper secondary 
reform  beginning  in  the  2011-2012  school  year,  further  differentiating  the  vocational  track 
and  mainstreaming  the  apprenticeship  system  to  make  upper  secondary  vocational  training 
more relevant to labour market needs. As regards tertiary education attainment, Sweden had 
already exceeded its 2020 target (40-45 %) in 2010, with 45.8 % of graduates in the 30-34 age 
group. 

Nevertheless,  the  declining  quality  of  school  education,  as  illustrated  in  international  test 
results  (OECD  PISA  in  2009),  and  the  continuing  lack  of  attractiveness  of  the  teaching 
profession remain major points of concern. The government adopted a range of measures to 
tackle  this:  a  new  Education  Act  strengthening  rights  to  learning  support;  new  curricula  to 
better  prepare  upper  secondary  school  students  for  the  labour  market;  a  programme  for 
strengthening education in mathematics, natural sciences and technology; a reform of initial 
teacher education under the so-called ‛Boost for teachers‛' initiative; and additional resources 
for the continuing professional development of teachers. The high average age of university 
entrants, significant drop-out rates from higher education (46 % in 2008)13 and the rather late 
graduation of university students lead to a relatively belated entry of graduates into the labour 
market.  This  accounts  for  among  the  highest  cumulative  expenditure  per  student  over  the 
average duration of tertiary studies. The reforms initiated recently and described in the NRP 
such  as  the  quality-based  resource  allocation  starting  in  2013  should  strengthen  the  role  of 
higher  education  institutions  in  the  knowledge  triangle.  Overall,  Sweden  has  introduced  a 
large  number  of  relevant  and  ambitious  reforms,  particularly  in  school  education.  There  is, 

13 

OECD, Education at a Glance 2010. This includes students entering single courses who may never have 
intended to study all the courses required for a degree, an estimated 40 % in Sweden. 

17 

 
                                                 
however,  a  need  for  better  coordination  of  these  measures,  particularly  with  regard  to  early 
school leaving and to reducing the incidence of dropping out from tertiary education. 

3.4. 

Structural measures supporting growth and competitiveness 

Sweden  ranks  among  the  most  competitive  economies  in  the  world,  taking  into  account 
factors such as labour productivity, knowledge and skills levels, infrastructure, eco-efficiency, 
innovation capacity and the business environment. Sweden is above the EU average in these 
areas  and  did  not  receive  any  country-specific  recommendations  in  the  field  of  structural 
reforms in 2011. 

Research and innovation 

Sweden has the second highest level of R&D expenditure as a share of GDP and is considered 
to be an innovation leader according to the Innovation Union Scoreboard. However, several 
shortcomings  have  been  identified  that  hinder  further  progress  in  the  area  of  research  and 
innovation. First of all, the commercialisation of innovative products is rather weak with the 
indicator of ’Sales of new to market and new to firm innovation’ below the EU average and 
showing  a  negative  trend.14  Also,  Sweden  appears  to  be  lagging  behind  in  creating  fast-
growing innovative enterprises. It creates new firms in innovative sectors, but these firms are 
not  growing  to  the  same  extent  as  in  other  European  countries.  The  patenting  activity  of 
young  firms  in  Sweden  (less  than  5  years)  is  clearly  lower  than  that  of  young  firms  in  the 
United States or other Nordic countries.15 

The  Swedish  innovation  environment  seems  to  be  loosing  the  ability  to  retain  and  attract 
business  R&D  investments  and  innovation  chains.  Business  R&D  intensity  has  declined 
significantly over the last years16, largely reflecting reallocation of business R&D investment 
by large companies outside Sweden17. As a result, progress towards the national R&D target 
of 4 % of GDP has  ceased, with R&D intensity declining from a peak of 4.13 % in 2001 to 
3.42 % in 2010. Within the business sector, R&D investment is very much concentrated in a 
few  large  companies18,  which  renders  the  apparently  favourable  position  of  Sweden 
vulnerable (also in view of the fact that many big R&D investors in Sweden are now foreign-
owned).  At  the  same  time,  R&D  investments  in  Small  and  Medium-sized  Enterprises  has 
fallen almost 30% between 2005 and 2009. 

Sweden  is  a  relatively  small  country  in  population  terms  and  the  Swedish  research  and 
innovation system depends on its being integrated into the expanding European research and 
innovation  system  to  access  knowledge  in  strategic  areas  for  the  country  and  to  achieve  a 
critical mass. In this respect, the public sector could make more progress. Currently, only the 
most  research-intensive  universities  in  Sweden  cooperate  extensively  with  international 
partners,  which  means  they  miss  out  on  the  more intensive cooperation taking place among 
top universities in other European countries. 

14  
15  
16  

17  

18  

Innovation Union Scoreboard 2011. 
Innovation Union Competitiveness report 2011. 
R&D financed by business enterprises as a % of GDP fell from 2.96% in 2001 to 2.12% in 2009, the 
largest  decrease  among  all  EU  Member  States.  In  fact,  most  world  competitors  to  Sweden  increased 
their business R&D investment intensity over the same period. 
Inward  business  R&D  expenditure  to  Sweden  decreased  by  11%  between  2003  and  2007,  while 
outward R&D investment from Sweden increased by 49% over that period. Declining overall business 
R&D expenditure between 2007 and 2010 suggest that this trend continued  in the subsequent period. 
When  foreign  affiliates  in  Sweden  are  also  taken  into  account,  around  65-70 %  of  private  R&D  is 
performed  by  large  companies  while  98 %  of  all  Swedish  companies  are  SMEs.  In  recent  years, 
employment  growth  has  no  longer  been  based  in  multinational  firms  in  Sweden  but  in  small  and 
medium-sized enterprises.   

18 

 
                                                 
Over the last five years, several initiatives have been launched to enhance the effectiveness of 
the  Swedish  research  and  innovation  system,  with  a  focus  on  innovation  in  SMEs  through 
reinforced cooperation with universities and better access to seed funding and venture capital. 
Interesting proposals have also been made more recently for both demand-side measures (i.e. 
introducing  a  new  procurement  law,  fostering  innovation-friendly  procurement)  and  supply-
side  measures  (in  particular  to  fund  testing,  demonstration  infrastructure  and  incubators  of 
new  research-based  products)19.  A  reform  of  the  early-stage  financing  system,  in  order  to 
streamline it and gain synergy effects, is outlined in the NRP. These initiatives are relevant, 
but additional value could be produced if these supply-side and demand-side measures were 
linked more closely to each other. 

The new Innovation Bill, planned for adoption at the end of 2012, provides an opportunity to 
address  the  weaknesses  in  the  Swedish  research  and  innovation  system  in  a  comprehensive 
way. An effort is needed to restore the attractiveness of the business environment for private 
R&I  investments  by  introducing  schemes  to  encourage  young  innovative  firms  to  develop 
new technologies and innovative solutions and by developing stronger incentives for science-
industry  cooperation  targeting  in  particular  large  firms  established  in  Sweden.  Through  a 
more  strategic  use  of  EU  Structural  Funds  for  R&D&I,  it  should  be  possible  to  further 
develop  smart  specialisation  and  international  linkages  as  well  as  strengthen  co-ordination 
between  national  and  regional  initiatives20.  Key  initiatives  could  include  investments  in 
innovative  SMEs  along  the  entire  innovation  value  chain  and  the  swift  commercial 
exploitation of research and innovation results. The state could also play a stronger brokerage 
role,  fostering  research  and  innovation  partnerships  between  the  business  sector  and 
universities and research institutions. 

Environment, energy and transport 

Sweden has developed a good mix of measures to promote energy efficiency, including fiscal, 
financial, legislative, information and voluntary instruments. These measures are supported at 
various governance levels (national, regional and local) and tackle all sectors of the economy. 
Additional energy-saving potential could be identified by examining the interaction between 
the systematic use of combined heat and power on the one hand and building insulation on the 
other. 

Sweden  has  committed  to  reduce  its  greenhouse  gas  emissions  by  17%  (compared  to  2005 
and only for emissions not covered by the EU Emission Trading System) by 2020. According 
to  2011  projections  taking  into  account  existing  measures,  Sweden  is  expected  to  be  very 
close to reaching  its national  target. Nevertheless, given the already low level  of emissions, 
abatement costs are likely to rise in the future, putting emphasis on the cost-effectiveness of 
Sweden’s climate change policies. A number of measures have been adopted recently to cut 
emissions  from  the  transport  sector  (e.g.  hike  in  fuel  taxes,  new  vehicle  tax  rules),  which 
together with the agriculture sector are the main producers of GHG emissions in the country. 

As  regards  renewable  energy,  Sweden  is  well  on  track  to  reach  its  commitments  under  the 
Europe  2020  strategy  (49 %  share  of  renewable  energy  in  final  energy  consumption,  10 % 
share  in  the  transport  sector  by  2020).  As  Sweden  is  already  advanced  in  the  field  of 
renewables,  energy  efficiency  and  carbon  emissions,  costs  of  accommodating  even  higher 

19 
20  

Vinnova policy VP 2011:04; Vinnova Information VI 2011:09; Erawatch country report 2010. 
EU structural funds can play an important role here as they provide 40-50 % of public regional support 
for  research  and  innovation  with  a  particular  focus  on  SMEs.  Large  regional  disparities  in  R&D 
expenditure should also be taken into account (R&D expenditure at NUTS 2 level ranging from 0.9 % 
of  GDP  to  4.7 %  of  GDP  in  2009,  thus  revealing  large  variations  in  proximity  to  the  national  R&D 
target).   

19 

 
                                                 
standards are likely to rise in the future. The EU structural funds could increasingly be used to 
help Sweden achieve its targets in these areas. 

Despite  the  increases  in  energy  and  CO2  taxes  in  2011,  the  taxation  system  still  has  the 
potential  to  shift  towards  a  greener  taxation  scheme.  In  particular,  it  would  be  beneficial  to 
address the large number of exemptions and differentiated tax rates with a view to increasing 
the cost-effectiveness and the overall efficiency of environmental taxation21. The intention  to 
carry  out  a  comprehensive  survey  on  potentially  environmentally  harmful  subsidies,  
announced in the NRP, is welcome and should be pursued to deliver clear proposals on how 
these subsidies should be eliminated. 

In  the  waste  sector,  Sweden  has  succeeded  in  achieving  a low  landfill  rate  (1 %). However, 
given the high incineration rate (49 %), there is less focus on prevention and diverting waste 
from  incineration  to  recycling.  This  is  the  result  of  a  deliberate  policy  to  generate 
energy/heating  and  has  led  to  the  establishment  of  high  cost  infrastructure,  which  the 
authorities feel a need to use. Shifting the focus from incineration to recycling would not only 
significantly  reduce  direct  and  indirect  GHG  emissions,  but  would  also  generate  benefits  in 
terms of job creation22. 

Energy infrastructure is well developed, although improving the connection between surplus 
generation areas in the north of the country and deficit consumption areas in the south, as well 
as  cross-border connections, would  be worthwhile with a view to  improving the stability of 
the electricity supply. Notwithstanding the small size of the gas market, total dependence on a 
single  interconnection  and  a  heavy  reliance  on  foreign  storage  facilities  increase  Sweden’s 
vulnerability to distortions in gas supply. 

The  overall  situation  of  the  transport  infrastructure  network  is  quite  satisfactory.  An 
increasing share of GDP is being invested in transport infrastructure. Nevertheless, in addition 
to bottlenecks in the main cities, one main area of concern is the low level of investment in 
the maintenance  and upgrading of the  Swedish rail  system,  which  has  clearly  not  kept  pace 
with  the  increase  in  traffic  over  recent  years.  Capacity  is  constrained  partly  because  the 
network is mostly single track and carries traffic types with different quality needs. In 2011 
Sweden  announced  that  work  on  railway  operation  and  maintenance  would  be  stepped  up. 
These  challenges  should  also  be  addressed  in  the  upcoming  proposal  for  infrastructure 
decisions announced in the Swedish NRP. 

Internal market and competition 

Sweden  is  one  of  the  Member  States  that  transposed  the  Services  Directive  within  the 
transposition deadline, involving a considerable number of amendments to national laws. In 
particular,  Sweden  has  amended  its  law  on  foreign  branches  and  has  removed  the  obstacles 
created by numerous formalities and a cross-cutting establishment requirement. The Swedish 
point of single contact is well installed, but the clarity of the information could be improved 
(such  as  the  search  function),  and  it  could  be  made  easier  for  foreign  users  to  complete  the 
procedure (including developing ways of accepting foreign-issued e-identification). 

Sweden is also a top performer in implementing the digital agenda. It ranked first out of 142 
countries in the Global Information Technology Report 2012 by the World Economic Forum. 
E-commerce is widely used both in national on-line shopping (65.7 % of Sweden's population 
compared  to  40.4 %  in  the  EU  in  2010)  and  in  cross-border  on-line  shopping  (12.7 % 

21  

22 

The  impact  of  the  carbon  tax  on  GHG  emissions  from  the  industrial  sector  has  been  lowered  by 
exemptions for petroleum, mineral products and metal industries.     
Limiting energy recovery to non-recyclable waste could create more than 2.000 jobs and increase the 
annual  turnover  of  the  waste  sector  by  over  EUR  240  million  in  Sweden.  European  Commission, 
Implementing EU waste legislation for green growth, 2012. 

20 

 
                                                 
compared  to  8.8 %).  For  SMEs,  Sweden  is  the  best  performer  with  respect  to  on-line 
purchasing (52.6 % compared to 26.4 %) and scores well above the average for on-line selling 
(23.5 % compared to 12.8 %). 

In  the  field  of  competition,  Sweden  is  one  of  the  Member  States  that  has  made  the  most 
progress  over  the  past  decade.  Nevertheless,  there  is  still  scope  for  further  improvement  in 
several areas. The wide range of commercial activities run by municipalities in some sectors 
can  result  in  unfair  competition  between  publicly  owned  companies  and  private  actors, 
especially  in  public  procurement.  Although  the  Swedish  Competition  Authority  was  given 
ample powers to act against commercial activities run by public authorities (municipalities), 
so far these powers have not been used. Also, there is a need to reinforce internal scrutiny and 
compliance mechanisms as regards state aid. 

3.5.  Modernisation of public administration 

Swedish  public  administration  is  generally  regarded  as  efficient,  providing  comprehensive 
services of a high quality to both citizens and enterprises. This strong performance is based on 
a  high  degree  of  openness  and  transparency  in  public  administration,  strong  respect  for  the 
rule  of  law  and  consensual  decision-making.  Sweden  consistently  ranks  among  the  world’s 
least  corrupt  nations  (it  ranked  4th  in  the  2011  corruption  index  published  by  Transparency 
International). Sweden is also one of the leading countries in e-government: the provision of 
services  to  individuals  and  businesses  has  reached  100 %23;  the  take-up  of  e-government 
services is also high (90 % for businesses and 68 % for citizens, which is the second highest in 
the  EU);  and  the  use  of  e-procurement  is  well  advanced  (56 %  of  municipalities,  50 %  of 
county councils and 28 % of state authorities were using e-procurement at the end of 2010). 

At  the  same  time,  the  Swedish  authorities  are  aware  that  there  is  room  for  improvement  in 
terms of cost-effectiveness, streamlining and simplification. Setting up a company is case in 
point as it remains burdensome, time-consuming and costly in Sweden. In fact, in terms of the 
number  of  days  needed  to  set  up  a  new  company  Sweden  performs  worse  than  most  other 
member states. 

Sweden is currently developing a new strategy with a view to stepping up and extending e-
government, with targets to be reached by 2015 and a long-term vision for 2020. Moreover, 
the  2010  Bill  on  public  administration  for  democracy,  participation  and  growth  proposes 
comprehensive  use  by  government  agencies  of  e-procurement  by  2013,  simplified  contacts 
with public administration and possible  outsourcing of certain public administration support 
functions  in  order  to  improve  efficiency  and  reduce  administrative  costs.  In  the  Bill,  the 
government also proposes scaling back provision by public entities of goods and services on 
markets in order to keep market distortions to a minimum and grant private sector providers a 
level playing field. 

Although  the  administrative  burden  is  not  very  high  in  Sweden  compared  to  other  EU 
countries24,  the  Swedish  government  is  taking  measures  to  make  further  reductions  in  the 
resources which Swedish businesses, in particular SMEs, need to allocate in order to comply 
with  the  rules  and  requirements.  In  2006,  the  government  set  a  target  to  reduce  the 
administrative burden for businesses by 25 % by 2010 (subsequently postponed to 2012). As 
the  reduction  achieved  so  far  is  just  over  7 %,  the  Swedish  government  has  stepped  up  its 
efforts  considerably  this  year  by  taking  a  large  number  of  measures:  a  simplification 
programme  for  2011-2014;  a  newly  created  ‘forum  for  better  regulation’  consisting  of 
representatives  from  the  business  community,  local  authorities,  county  councils,  and 

23 Based on a basket of eight basic services for enterprises and twelve basic services for citizens. 
24 European Commission, Member States Competitiveness Performance and Policies 2011. 

21 

 
                                                 
government  agencies  and  bodies;  a  new  training  programme  for  improving  interaction 
between  local  authorities  and  enterprises;  and  several  analyses  to  support  and  guide  future 
policy  measures.  The  mandate  of  the  Swedish  Better  Regulation  Council  has  been  widened 
and extended until 2014. Furthermore, the Swedish government has decided to postpone the 
annual  assessment  of  administrative  costs  until  2013  and  in  the  meantime  is  looking  for 
alternative, less burdensome ways of measuring administrative costs. In the area of taxation, 
several  measures  have  been  taken  to  simplify  tax  procedures  for  businesses  and  individuals 
(e.g. taxation of foreign experts). 

The measures to reduce the administrative burden are relevant and in line with the priorities of 
the 2012 AGS, although it is less certain whether they will ensure that the target is achieved in 
2012. 

22 

 
4. 

OVERVIEW TABLE 

2011 commitments 

Summary assessment 

Country-specific recommendations (CSRs) 

CSR 1: Keep fiscal policy on a path that ensures that 
the medium-term objective continues to be met. 

Sweden  has  implemented  the  recommendation  only 
partially. 

CSR  2:  Take  preventive  action  to  deal  with  the 
macroeconomic  risks  associated  with  rising  house 
prices  and  household  indebtedness.  A  broad  set  of 
measures could be considered, such as reviews of the 
mortgage  system,  including  the  capital  requirements 
of  banks,  rent  regulation,  property  taxation  and 
construction permits 

CSR  3:  Monitor  and  improve  the  labour  market 
participation  of  young  people  and  other  vulnerable 
groups. 

The  stance  adopted  in  the  Budget  Bill  for  2012  is 
considered  balanced,  reconciling  fiscal  prudence 
with a need to counter the economic slowdown. The 
medium-term  objective    was  not  achieved  in  2011, 
but is likely to be met in 2012-2013. This is mainly 
due to the fact that the government has lowered the 
MTO from +1% of GDP to -1% of GDP as of 2012. 
The Commission estimates the structural balance to 
have reached reach 0% of GDP in 2011 and to reach 
0.3%  and  0.4%  of  GDP  in  2012  and  2013, 
respectively. 

Sweden  has  implemented  the  recommendation  only 
partially. 

Although  the  stabilisation  of  the  housing  and 
mortgage  markets  makes  the  implementation  of  the 
recommendation  less  urgent,  it  remains  valid  in  the 
long  term.  The  measures  taken  by  the  government 
are going in the right direction, but focus mainly on 
strengthening  the  resilience  of  the  financial  sector, 
where  the  level  of  ambition  is  high.  Measures  to 
foster prudent lending and diminish the debt bias in 
the  financing  of  housing  investment,    have  so  far 
received  less  attention.  The  government  has  taken 
some  initial  steps  to  ease  the  rent  regulation  and  is 
considering measures to tackle the constraints in the 
housing supply. 

Sweden  has  implemented  the  recommendation  only 
partially. 

The  government  has  adopted  a  large  number  of 
measures  which  can  be  expected  to  have  a  positive 
impact. However, since most of the reforms are not 
being  implemented  until  2012,  it  is  too  early  to 
assess  whether 
they  have  actually  had  any 
significant  effects  on  the  target  groups.  A  political 
debate  has  been  launched  on  ways  to  increase  the 
flexibility at the lower end of the wage scale and to 
ease 
in  employment  protection 
legislation  for  temporary  and  permanent  workers. 
Nevertheless,  a  more  determined  effort  in  these 
areas  would be warranted to address the challenge. . 

the  difference 

Europe 2020 (national targets and progress) 

Employment rate target set in the 2011 NRP: 

Employment rate (%) 

Well over 80 % 

2010: 78.7 %, 2011: 80% 

The  EU-wide  target  has  been  met.  Achievement  of 
the  more  ambitious  national  target,  already  attained 
in  2007-2008,  has  been  hindered  by  a  significant 
increase in unemployment following the 2008-2009 
crisis.  Since  then,  significant  progress  has  been 

23 

 
 
 
R&D target set in the 2011 NRP: 

Gross domestic expenditure on R&D (in % of GDP) 

Approximately 4 % GDP 

2009: 3.61 %, 2010: 3.42 % 

made towards the achievement of the target. 

the 

No progress has been made towards the achievement 
in  public  R&D 
of 
expenditure as a share of GDP was outweighed by a 
decrease in business R&D expenditure. 

target.  The 

increase 

Greenhouse gas emission target set in the 2011 NRP: 

Greenhouse gas emissions: 

a) -17 % compared with the 2005 level or 

a) base year 2005: 2010: -10.2 % 

b) -40 % compared with the 1990 level 

b) base year 1990: 2009: -17 % 

Renewable energy target set in the 2011 NRP: 

49 % 

Energy  efficiency  —  reduction  in  primary  energy 
consumption by 2020 (in Mtoe): 

12.8 Mtoe 

Early school leaving target (in %): 

10 % 

Progress has been made towards achievement of the 
target.  Sweden  is  on  track  to  meet  the  target  by 
2020. 

Share  of  renewable  energy  in  gross  final  energy 
consumption: 

2009: 47.3 % (Eurostat), 2010: 47.8 % (national RES 
report) 

Progress has been made towards achievement of the 
target.  Sweden  is  on  track  to  meet  the  target  by 
2020.  The 
target  for  2011/2012  was 
achieved already in 2009. 

interim 

n.a. 

The  method  for  assessing  national  progress  in 
energy efficiency is currently being discussed by the 
institutions  in  the  context  of  the  proposed  Energy 
Efficiency  Directive.  Alternative  indicators  (e.g. 
energy  intensity)  suggest  that  progress  has  been 
made towards achieving the target. 

from 

leavers 

Early 
training 
(percentage  of  the  population  aged  18-24  with  at 
most  lower  secondary  education  and  not  in  further 
education or training): 

education 

and 

Tertiary education target (in %): 

Tertiary educational attainment 

40-45 % 

2009: 43.9 %, 2010: 45.8 % 

2009: 10.7 %, 2010: 9.7 % 

The target has been achieved. 

Target  on  the  reduction  of  population  at  risk  of 
poverty or social exclusion in number of persons: 

Reducing  the number of people  aged 20-64  who  are 
not in the labour force (except full-time students), the 
long-term  unemployed  or  those  on  long-term  sick 
leave to well under 14 %. 

The target has been achieved. It was even exceeded 
in 2010. 

According  to  the  NRP,  the  share  of  the  population 
defined in the target is estimated to be about 13 % of 
the  age  group  in  2011  which  is  a  reduction  by  one 
percentage point compared with 2010. 

Progress  was  made  towards  meeting  the  target 
between  2010  and  2011,  according  to  preliminary 
figures. 

24 

 
 
 
5. 

ANNEX 

Table I. Macroeconomic indicators 

Core indicators
GDP growth rate
Output gap 1
HICP (annual % change)
Domestic demand (annual % change) 2
Unemployment rate (% of labour force) 3
Gross fixed capital formation (% of GDP)
Gross national saving (% of GDP)
General government (%  of GDP)
Net lending (+) or net borrowing (-)
Gross debt
Net financial assets 
Total revenue 
Total expenditure
  of which: Interest
Corporations (%  of GDP)
Net lending (+) or net borrowing (-)

1995-
1999

2000-
2004

2005-
2008

2009

2010

2011

2012

2013

3.4
-1.5
1.4
2.6
8.6
16.4
21.3

-2.1
70.3
-22.2
59.0
61.1
4.9

3.0
0.3
1.9
2.0
6.3
17.4
23.3

0.7
52.6
-0.8
55.6
54.9
2.5

2.5
2.0
1.8
2.9
6.8
19.1
27.3

2.6
43.7
16.0
54.8
52.2
1.7

-5.0
-5.6
1.9
-4.6
8.3
18.0
23.3

-0.7
42.6
22.4
54.0
54.7
1.0

6.1
-1.4
1.9
6.2
8.4
18.1
25.4

0.3
39.4
24.0
52.4
52.2
0.8

3.9
0.4
1.4
3.4
7.5
18.3
26.7

0.3
38.4
21.1
51.4
51.1
1.0

0.3
-1.0
1.1
0.6
7.7
18.5
25.1

-0.3
35.6
n.a
51.8
52.1
1.1

2.1
-0.6
1.5
1.8
7.7
18.6
25.3

0.1
34.2
n.a
51.8
51.8
1.1

4.4

2.9

3.7

2.8

3.7

3.3

1.9

1.6

n.a
n.a
12.8
21.1

-141.7
5.5
13.0
22.2

-147.1
14.4
13.0
22.5

-159.7
13.9
10.0
19.5

-109.3
12.9
12.0
23.1

-167.7
13.5
12.0
22.3

-110.9
0.7
12.3
20.6

1.4
84.9
39.9
3.2
25.5
3.3

1.8
91.3
40.8
2.5
23.8
4.4

3.5
101.2
40.7
3.5
20.8
6.8

4.9
110.1
42.0
4.0
23.1
8.0

2.9
115.0
40.4
3.7
21.7
6.2

1.4
102.7
39.8
2.8
22.2
4.8

Net financial assets, non-financial corporations
Net financial assets, financial corporations
Gross capital formation
Gross operating surplus
Households and NPISH (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Gross wages and salaries
Net property income
Current transfers received
Gross saving
Rest of the world (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Net exports of goods and services
Net primary income from the rest of the world
Net capital transactions 
Tradable sector
Non-tradable sector
  of which: Building and construction sector
Real effective exchange rate (index, 2000=100)
Terms of trade in goods and services (index, 2000=100)
Market performance of exports (index, 2000=100)
Notes:
1 The output gap constitutes the gap between actual and potential gross domestic product at 2000 market prices.
2 The indicator for domestic demand includes stocks.
3  Unemployed persons are all persons who were not employed, had actively sought work and were ready to begin working immediately or within two 
weeks. The labour force is the total number of people employed and unemployed. The unemployment rate covers the

3.8
34.6
6.8
-1.8
-0.5
42.7
44.7
3.8
102.4
104.4
97.9

7.1
12.3
6.2
2.3
-0.1
40.2
47.6
5.2
96.0
94.4
103.8

6.6
17.1
6.3
2.0
-0.1
40.2
47.1
4.8
92.7
95.1
101.2

5.7
n.a
5.6
1.8
-0.1
n.a
n.a
n.a
96.9
93.8
102.8

7.9
18.4
7.5
1.9
-0.2
41.4
46.2
4.4
96.2
94.5
100.8

5.6
20.5
7.0
-0.1
0.0
42.0
45.7
4.0
97.8
97.7
99.7

6.7
15.1
6.5
1.9
-0.1
38.8
48.5
4.5
87.4
95.3
99.5

4.2
n.a
41.4
3.0
21.1
7.3

n.a
n.a
12.9
20.8

4.3
n.a
41.5
3.1
20.9
7.5

5.8
n.a
5.8
1.8
-0.1
n.a
n.a
n.a
97.0
93.6
104.0

Source :
Commission spring 2012 forecast

25 

 
 
Table II. Comparison of macroeconomic developments and forecasts 

Real GDP (% change)
Private consumption (% change)
Gross fixed capital formation (% change)
Exports of goods and services (% change)
Imports of goods and services (% change)
Contributions to real GDP growth:
- Final domestic demand
- Change in inventories
- Net exports
Output gap1
Employment (% change)
Unemployment rate (%)
Labour productivity (% change)
HICP inflation (%)
GDP deflator (% change)
Comp. of employees (per head, % change)
Net lending/borrowing vis-à-vis the rest of the 
world (% of GDP)

2011
COM CP
3.9
2.1
5.8
6.8
6.1

3.9
2.1
5.8
6.8
6.1

2012
COM CP
0.4
1.5
1.4
0.3
0.4

0.3
1.1
1.1
1.3
2.2

2013
COM CP
3.3
3.6
5.3
6.3
6.1

2.1
1.8
3.3
5.4
5.2

2.6
0.7
0.7
0.4
2.2
7.5
1.7
1.4
1.0
0.8
7.1

2.6
0.7
0.7
0.9
2.1
7.5
2.2
1.4
1.0
1.1
8.4

1.0
-0.4
-0.3
-1.0
0.1
7.7
0.1
1.1
1.0
2.9
5.7

1.1
-0.7
0.0
-1.9
-0.1
7.8
0.4
0.9
0.9
2.8
6.3

1.7
0.0
0.4
-0.6
0.4
7.7
1.7
1.5
1.3
3.1
5.8

2.8
0.0
0.5
-1.8
0.3
7.7
3.0
1.1
1.2
3.3
6.4

2014
CP
3.7
3.7
8.1
7.2
7.5

3.4
0.0
0.4
-1.2
1.4
6.9
2.4
1.2
1.4
3.6
6.3

2015
CP
3.6
3.4
7.9
6.9
7.2

3.2
0.0
0.3
-0.7
1.7
5.7
1.9
1.4
1.5
3.5
6.2

Note:
1In percent of potential GDP, with potential GDP growth according to the programme as recalculated by the Commission.

Source :

Commission spring 2012 forecast (COM); Convergence programme (CP).

26 

 
 
Table III. Composition of the budgetary adjustment 

(% of GDP)

2011

2012

2013

2014

2015

Change: 
2011-2015

Revenue
of which:
- Taxes on production and imports
- Current taxes on income, wealth, etc.
- Social contributions
- Other (residual)
Expenditure
of which:
- Primary expenditure

of which:

Compensation of employees
Intermediate consumption
Social payments
Subsidies
Gross fixed capital formation
Other (residual)
- Interest expenditure
General government balance (GGB)
Primary balance
One-off and other temporary measures
GGB excl. one-offs
Output gap2
Cyclically adjusted balance2
Structural balance3
Change in structural balance
Structural primary balance3
Change in structural primary balance
Expenditure benchmark
Public expenditure growth4 (real)
Reference rate5,6
Lower reference rate5,7
Deviation in % of GDP 
   from applicable reference rate
Two-year average deviation in % of GDP 
   from applicable reference rate

COM
51.4

COM
51.8

18.4
18.7
7.6
6.7
51.1

18.6
18.7
7.7
6.8
52.1

CP
51.7

18.7
18.9
7.6
6.5
51.7

COM
51.8

18.6
18.8
7.7
6.7
51.8

CP
51.2

18.6
18.8
7.5
6.3
50.7

CP
50.8

18.4
18.9
7.5
6.0
49.1

CP
50.8

18.3
19.1
7.5
5.9
47.8

50.1

51.1

50.7

50.7

49.7

48.1

47.0

14.0
9.2
17.7
1.5
3.4
4.3
1.0
0.3
1.3
0.0
0.3

0.4

0.0

0.0

1.1

14.3
9.1
18.2
1.5
3.5
4.5
1.1
-0.3
0.8
0.0
-0.3

-1.0

0.3

0.3
0.2

1.4
0.3

2.25

1.84

0.85
0.20

14.1
9.2
18.2
1.5
3.4
4.3
1.0
-0.1
0.9
0.0
-0.1

-1.9

1.0

1.0
0.9

2.0
0.9

2.02

1.84

0.85
0.09

14.3
8.7
18.2
1.5
3.5
4.5
1.1
0.1
1.2
0.0
0.1

-0.6

0.4

0.4
0.1

1.5
0.1

1.51

1.84

0.85
-0.16

13.8
9.0
18.0
1.4
3.3
4.2
1.0
0.5
1.5
0.0
0.5

-1.8

1.6

1.6
0.6

2.6
0.6

1.51

1.84

0.85
-0.16

13.5
8.7
17.4
1.3
3.1
4.1
1.0
1.7
2.6
0.0
1.7

-1.2

2.4

2.4
0.8

3.4
0.8

13.3
8.4
16.9
1.3
3.1
3.9
0.8
3.0
3.8
0.0
3.0

-0.7

3.4

3.4
1.0

4.2
0.8

0.35

1.84

0.85
-0.71

0.84

1.84

0.85
-0.46

n.a.

n.a.

0.02

-0.03

-0.44

-0.59

CP
-0.6

-0.1
0.4
-0.1
-0.8
-3.3

-3.1

-0.7
-0.8
-0.8
-0.2
-0.3
-0.4
-0.2
2.7
2.5
0.0
2.7

-1.2

3.4

3.4

3.2

-

-

-
-

-

Notes:
1On a no-policy-change basis.
2Output gap (in % of potential GDP) and cyclically-adjusted balance according to the programme as recalculated by the Commission on the 
basis of the information in the programme.
3Structural (primary) balance = cyclically-adjusted (primary) balance excluding one-off and other temporary measures.
4M odified expenditure aggregate used for the expenditure benchmark, growth rates net of non-discretionary changes in unemployment benefit 
and of discretionary measures.
5The reference rates applicable to 2014 onwards will be available from mid-2012. For illustrative purposes, the current reference rates have 
also been applied to the years 2014 onwards.
6The (standard) reference rate applies starting in the year following the one in which the country reaches its M TO.
7The lower reference rate applies as long as the country is adjusting towards its M TO, including the year in which it reaches the M TO.

Source :
Convergence programme (CP); Commission spring 2012 forecast (COM); Commission calculations.

27 

 
 
Table IV. Debt dynamics 

Average 
2006-10

41.3
-2.2

-2.9
-0.3

1.4
-0.7
-0.9
1.0

2011

38.4
-1.1

-1.3
-0.8

1.0
-1.5
-0.4
1.1

(% of GDP)

Gross debt ratio1
Change in the ratio
Contributions 2 :

1. Primary balance
2. ‘S now-ball’ effect

Of which:
Interest expenditure
Growth effect
Inflation effect

3. S tock-flow adjustment

Of which:
Cash/accruals diff.
Accum. financial assets

Privatisation

Val. & residual effects

2012

2013

COM

35.6
-2.7

-0.8
0.6

1.1
-0.1
-0.4
-2.5

CP

37.7
-0.7

-0.9
0.5

1.0
-0.2
-0.3
-0.3

-0.4

-0.2
0.4

COM

34.2
-1.5

-1.2
-0.1

1.1
-0.7
-0.4
-0.2

CP

35.4
-2.3

-1.5
-0.6

1.0
-1.2
-0.4
-0.2

-0.4

-0.2
0.4

(% of GDP)

average 
2006-10

2011

Gap to the debt benchmark5,6
S tructural adjustment7
To be compared to:
Required adjustment8

-

-

-

-

-

-

2012

2013

COM/CP3
-

CP4
-

COM/CP3
-

CP4
-

-

-

-

-

-

-

-

-

2014
CP

31.8
-3.6

-2.6
-0.8

0.9
-1.2
-0.5
-0.2

-0.4

-0.1
0.3

2014
CP4
-

-

-

2015
CP

27.5
-4.3

-3.8
-0.8

0.8
-1.1
-0.5
0.3

-0.4

0.4
0.3

2015
CP4
-

-

-

Notes:
1End of period.
2The snow-ball effect captures the impact of interest expenditure on accumulated debt, as well as the impact of real GDP growth and 
inflation on the debt ratio (through the denominator). The stock-flow adjustment includes differences in cash and accrual accounting, the 
accumulation of financial assets and valuation and other residual effects
3 Assessment of the consolidation path set in the CP assuming growth follows the COM  forecasts
4 Assessment of the consolidation path set in the CP assuming growth follows the CP projections
5 Not relevant during the excessive deficit procedures that were ongoing in November 2011 and in the three years following the correction 
of the excessive deficit.
6 If positive, the projected gross debt ratio does not comply with the debt reduction benchmark.

7Applicable only during the transition period of three years from the correction of the excessive deficit for excessive deficit procedures 
that were ongoing in November 2011.

8 Remaining annual structural adjustment assuming that the COM  (CP) budgetary projections are achieved.

Source :
Convergence programme (CP); Commission spring 2012 forecast (COM); Commission calculations.

28 

 
 
Table V. Long-term sustainability indicators 

SE

EU27

no-policy 
change 
scenario 

CPs scenario

no-policy 
change 
scenario 

SCPs scenario

S2
of which:

Initial budgetary position (IBP)
Long-term change in the primary balance (LTC)
 of which:

pensions
care (health care and long-term)
other

S1 (required adjustment)*

Debt,  % of GDP (2011)
Age-related expenditure, % of GDP (2011)

1.8

-1.1
2.9

0.3
2.4
0.2
-2.9

0.6

-3.9
4.4

0.4
3.7
0.3
-7.2

2.9

0.7
2.3

1.1
1.5
-0.3
2.2

0.7

-1.6
2.4

1.2
1.5
-0.3
-0.1

38.4
27.6

82.8
25.8

Source:  Commission, 2012 stability and convergence programmes. 
Note:  The ‘no-policy change’ scenario depicts the sustainability gap under the assumption that the 
 budgetary position evolves according to the spring 2011 forecast until 2013. The ‘convergence programme’ 
scenario depicts the sustainability gap under the assumption that the budgetary plans in the programme
are fully implemented.    
*  The required adjustment of the primary balance until 2020 to reach a public debt of 60% of GDP by 2030.

Figure I. Medium-term debt projections 

(% of GDP)
60

50

40

30

20

10

0

0
0
0
2

2
0
0
2

4
0
0
2

6
0
0
2

8
0
0
2

0
1
0
2

2
1
0
2

4
1
0
2

6
1
0
2

8
1
0
2

0
2
0
2

COM no-policy change scenario
COM + Shock ( -1p.p. in the short-term/long-term interest rate on maturing and new debt from 2014)
COM + Shock (+1p.p. in the short-term/long-term interest rate on maturing and new debt from 2014)
COM consolidation scenario (0.5% per year on SB) in order to achieve MTO
COM consolidation scenario (1% per year on SB) in order to achieve MTO
SP scenario

29 

 
 
Table VI. Taxation indicators 

Total tax revenues (incl. actual compulsory social contributions, % of GDP)
Breakdown by economic function (% of GDP)1
     Consumption
              of which:
              - VAT
             - excise duties on tobacco and alcohol
             - energy
             - other (residual)
     Labour employed
     Labour non-employed
     Capital and business income
     Stocks of capital/wealth
     p.m.  Environmental taxes2
VAT efficiency3
     Actual VAT revenues as % of theoretical revenues at standard rate

2001

49.4

12.5

8.7
0.8
2.4
0.6
26.9
3.9
4.3
1.8
2.8

2005

48.9

2007

47.3

2008

46.4

2009

46.7

2010

45.8

12.7

9.0
0.7
2.4
0.6
24.8
4.2
5.5
1.7
2.9

12.4

9.0
0.7
2.2
0.6
23.4
3.8
6.2
1.4
2.6

12.7

9.3
0.7
2.2
0.6
24.0
3.7
4.7
1.3
2.7

13.3

9.7
0.7
2.3
0.6
23.5
3.9
4.6
1.4
2.8

13.3

9.8
0.7
2.2
0.6
22.4
3.5
5.3
1.4
2.8

52.5

54.9

57.2

58.3

57.5

59.4

Note: 
1 Tax revenues are broken down by economic function, i.e. according to whether taxes are raised on consumption, labour or capital. See European Commission (2012), Taxation trends in the 

European Union, for a more detailed explanation.

2 This category comprises taxes on energy, transport and pollution and resources included in taxes on consumption and capital.

3 The VAT efficiency is measured via the VAT revenue ratio. The VAT revenue ratio is defined as the ratio between the actual VAT revenue collected and the revenue that would theoretically be 

raised if VAT was applied at the standard rate to all final consumption. A low ratio can indicate a reduction of the tax base due to large exemptions or the application of reduced rates to a wide range 

of goods and services ('policy gap') or a failure to collect all tax due to e.g. fraud ('collection gap'). See European Commission (2011), Tax reforms in EU Member States, European Economy 5/2011, 

for a more detailed explanation.

Source: Commission

Table VII. Financial market indicators 

2007

2008

2009

2010

2011

308.2
57.8
…

272.3
61.9
10.6

321.4
60.7
6.8

253.0
61.0
10.0

1.0
10.3
14.3
-5.9
-4.0
223.4
4.9
6.9
116.5

0.6
9.8
19.7
9.5
6.4
228.3
0.1
5.3
122.0

Total assets of the banking sector (% of GDP)
Share of assets of the five largest banks (% of total assets)
Foreign ownership of banking system (% of total assets)
Financial soundness indicators:
              - non-performing loans (% of total loans) 
              - capital adequacy ratio (%) 1) 
              - return on equity (%) 1), 3)
Bank loans to the private sector (year-on-year % change)
Lending for house purchase (year-on-year % change)
Loan to deposit ratio
CB liquidity as % of liabilities
Banks' exposure to countries receiving official financial assistance  (% of GDP)4)
Private debt (% of GDP)
Gross external debt (% of GDP) 5)
            - Public
            - Private
Long term interest rates spread versus Bund (basis points)*
Credit default swap spreads for sovereign securities (5-year)*
Notes: 
1) Four large banking groups.  Latest December 2009.
2) The capital adequacy ratio is defined as total capital divided by risk weighted assets.   
3) Net income to equity ratio. Four large banking groups.  Latest March 2011.
4) Covered countries are IE, EL, PT, RO, LV and HU.
5) Latest data 2011Q3.
* Measured in basis points.
Source :
Bank for International Settlements and Eurostat (exposure to macro-financially vulnerable countries), IMF (financial soundness indicators), 
Commission (long-term interest rates), World Bank (gross external debt), ECB (all other indicators).

2.0
12.7
5.1
8.9
18.1
222.1
4.0
6.0
144.3

...
...
10.5
21.9
47.5
217.6
0.0
4.5
146.4

17.8
70.4
15.0
37.8

16.0
78.2
2.8
71.8

12.9
62.5
-9.6
53.1

…
…
-4.9
…

295.3
…
…

...
...
11.9
6.1
6.0
215.6
0.0
3.5
…

15.6
66.1
-0.3
42.4

30 

 
 
 
 
Table VIII.   Labour market and social indicators 

Labour market indicators
Employment rate 
(% of population aged 20-64)
Employment growth 
(% change from previous year)
Employment rate of women 
(% of female population aged 20-64)
Employment rate of men 
(% of male population aged 20-64)
Employment rate of older workers 
(% of population aged 55-64)
Part-time employment 
(% of total employment)
Part-time employment of women  
(% of women employment)
Part-time employment of men  
(% of men employment)
Fixed term employment 
(% of employees with a fixed term contract)
Unemployment rate1 (% of labour force)
Long-term unemployment2  (% of labour force)
Youth unemployment rate 
(% of youth labour force aged 15-24)

2006

2007

2008

2009

2010

2011

78.8

80.1

80.4

78.3

78.7

80.0

1.9

2.5

1.2

-2.0

1.0

2.1

75.8

77.1

77.2

75.7

75.7

77.2

81.7

83.1

83.5

80.9

81.7

82.8

69.6

70.0

70.1

70.0

70.5

72.3

24.8

24.8

27.2

27.7

27.1

26.6

39.2

39.0

42.1

41.9

41.0

40.2

11.8

11.9

13.7

14.6

14.4

14.2

17.3

17.5

16.1

15.3

15.8

16.4

7.1

1.0

6.1

0.9

6.2

0.8

8.3

1.1

8.4

1.5

7.5

1.4

21.5

19.2

20.2

25.0

25.2

22.9

Youth NEET3 rate (% of population aged 15-24)

9.3

7.5

7.8

9.6

7.8

:

:

:

1.7

0.1

1.6

-0.2

-0.9

-1.8

Early leavers from education and training (% of 
pop. 18-24 with at most lower sec. educ. and not in 
further education or training)
Tertiary educational attainment (% of population 
30-34 having successfully completed tertiary 
education)
Labour productivity per person employed (annual 
% change )
Hours worked per person employed  (annual % 
change)
Labour productivity per hour worked (annual % 
change; constant prices)
Compensation per employee (annual % change; 
constant prices)
Nominal unit labour cost growth (annual % 
change)

2.6

-0.4

2.9

0.1

-0.5

Real unit labour cost growth (annual % change)

-2.4

Notes:

13.0

12.2

12.2

10.7

9.7

39.2

39.9

40.8

42.4

42.3

1.0

0.8

0.2

2.4

4.2

1.4

-1.5

0.3

-1.8

-1.6

3.1

-0.1

-2.7

-0.5

-2.2

-0.4

4.4

2.3

5.0

2.1

2.8

1.9

-1.9

-2.9

1 According to ILO definition, age group 15-74)
2 Share of persons in the labour force who have been unemployed for at least 12 months.
3 NEET are persons that are neither in employment nor in any education or training.

Sources: 
Commission (EU Labour Force Survey and European National Accounts) 

31 

 
 
Expenditure on social protection 
benefits (% of GDP)
Sickness/Health care
Invalidity
Old age and survivors
Family/Children
Unemployment
Housing and Social exclusion n.e.c.
Total
of which:  Means tested benefits
Social inclusion indicators
Risk-of-poverty or exclusion1 (% of total 
population)
Risk-of-poverty or exclusion of children (% of 
people aged 0-17)
Risk-of-poverty or exclusion of elderly (% of 
people aged 65+)
At-risk-of-poverty rate2 (% of total population)
Value of relative poverty threshold (single 
household per year) - in PPS
Severe material deprivation3  (% of total 
population)
Share of people living in low work intensity 
households 4 (% of people aged 0-59 not 
student)
In-work at-risk-of poverty rate (% of persons 
employed)

Notes:

2005

2006

2007

2008

2009

7.92
4.58
11.54
2.88
1.85
0.53
31.1
0.88

2006

7.79
4.53
11.14
2.98
1.63
0.51
30.4
0.84

2007

7.51
4.42
11.06
2.93
1.08
0.47
29.2
0.78

2008

7.55
4.30
11.56
3.02
0.87
0.46
29.5
0.78

2009

8.01
4.55
12.69
3.22
1.30
0.48
32.1
0.86

2010

16.3

13.9

14.9

15.9

15.0

18.5

14.9

14.6

15.1

14.5

11.9

12.3

10.4

10.5

15.5

12.2

18.0

13.3

15.9

12.9

9068

9545

10680

11258

10897

2.1

2.2

1.4

1.6

1.3

6.6

7.4

5.9

6.5

5.4

6.8

6.2

6.9

5.9

6.5

1 People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) 
and/or suffering from severe material deprivation (SM D) and/or living in households with zero or very low 
work intensity (LWI).

2 At-risk-of poverty rate: share of people with an equivalised disposable income below 60% of the national 
equivalised median income. 

3 Share of people who experience at least 4 out of 9 deprivations: people cannot afford to i) pay their rent or 
utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish, or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have 
a washing machine, viii) have a colour TV, or ix) have a telephone.

4 People living in households with very low work intensity: share of people aged 0-59 living in households 
where the adults work less than 20% of their total work-time potential during the previous 12 months.

Sources: 
For expenditure on social protection benefits ESSPROS; for social inclusion EU-SILC.

32 

 
Table IX. Product market performance and policy indicators 

Performance indicators

Labour productivity1 total economy (annual growth in 
%)
Labour productivity1 in manufacturing (annual 
growth in %)
Labour productivity1 in electricity, gas, water (annual 
growth in %)
Labour productivity1 in the construction sector 
(annual growth in %)
Patent intensity in manufacturing2 (patents of the 
EPO divided by gross value added of the sector)

Policy indicators

Enforcing contracts3 (days)
Time to start a business3 (days)
R&D expenditure (% of GDP)
Tertiary educational attainment 
(% of 30-34 years old population)
Total public expenditure on education 
(% of GDP)

2002-
2006

3.2

9.4

-4.2

0.2

4.2

2002-
2006
n.a.

n.a.
3.7

34.1

2007

2008

2009

2010

2011

1.0

1.2

8.3

-1.5

-3.2

4.5

2.2

-5.4

-9.0

16.9

n.a.

-6.7

-5.3

n.a.

n.a.

-1.5

-12.3

-4.4

3.5

n.a.

4.3

3.8

n.a.

n.a.

n.a.

2007

2008

2009

2010

2011

508

15
3.4

41.0

508

15
3.7

42.0

508

15
3.6

43.9

508

15
3.4

45.8

508

15
n.a.

n.a.

n.a.

7.1

6.7

6.7

n.a.

n.a.

Product market regulation4, Overall
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Retail
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Network Industries5
(Index; 0=not regulated; 6=most regulated)

2005

2006

2008

2009

2010

2011

n.a.

n.a.

n.a.

n.a.

1.3

0.5

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

1.8

1.8

1.7*

n.a.

n.a.

n.a.

Notes:
1Labour productivity is defined as gross value added (in constant prices) divided by the number of persons employed.
2 Patent data refer to applications to the European Patent Office (EPO). They are counted according to the year in which they were 
filed at the EPO. They are broken down according to the inventor's place of residence, using fractional counting if multiple 
inventors or IPC classes are provided to avoid double counting. 
3 The methodologies, including the assumptions, for this indicator are presented in detail on the website 
http://www.doingbusiness.org/methodology. 
4 The methodologies for the product market regulation indicators are presented in detail on the website 
http://www.oecd.org/document/1/0,3746,en_2649_34323_2367297_1_1_1_1,00.html. The latest available product market 
regulation indicators refer to 2003 and 2008, except for Network Industries.
5 Aggregate ETCR.
*figure for 2007.

Source :

Commission, World Bank - Doing Business  (for enforcing contracts and time to start a business) and OECD (for the product 
market regulation indicators). 

33 

 
 
Table X. Indicators on green growth 

Green Growth performance

Macroeconomic
Energy intensity 
Carbon intensity 
Resource intensity (reciprocal of resource productivity)
Waste intensity 
Energy balance of trade 
Energy weight in HICP
Difference between change energy price and inflation 
Environmental taxes over labour taxes
Environmental taxes over total taxes

Sectoral 

Industry energy intensity 
Share of energy-intensive industries in the economy
Electricity prices for medium-sized industrial users 
Public R&D for energy 
Public R&D for the environment
Recycling rate of municipal waste
Share of GHG emissions covered by ETS
Transport energy intensity
Transport carbon intensity
Change in the ratio of passenger transport and GDP

Security of energy supply
Energy import dependency
Diversification of oil import sources 
Diversification of energy mix
Share of renewable energy in energy mix

2001-
2005

0.18
0.24
0.64
n.a.
-1.4%
12
5.72
9.5%
5.8%

0.23
11.8
0.05
n.a.
n.a.
86.4%
n.a.
0.44
1.10
-1.4%

38.6%
n.a.
0.29
26.3%

kgoe / €
kg / €
kg / €
kg / €
% GDP
%
%
ratio
ratio

kgoe / € 
% GDP
€ / kWh
% GDP
% GDP
ratio
%
kgoe / €
kg / €
%

%
HHI
HHI
%

2006

2007

2008

2009

2010

0.16
0.21
0.60
0.30
-1.8%
13
8.6
9.6%
5.6%

0.20
11.5
0.06
0.03%
0.01%
96.1%
29.6%
0.42
1.03
-3.9%

37.8%
0.27
0.28
28.5%

0.15
0.20
0.64
0.27
-1.7%
12
-2.2
9.6%
5.5%

0.19
11.4
0.06
0.03%
0.01%
94.9%
28.9%
0.41
0.99
0.3%

36.3%
0.26
0.29
30.4%

0.15
0.19
0.64
0.26
-2.0%
11
6.5
9.7%
5.8%

0.19
11.6
0.07
0.03%
0.01%
96.1%
31.6%
0.41
0.96
-0.2%

37.9%
0.25
0.29
31.3%

0.15
0.19
0.59
n.a.
-1.3%
11
-0.4
10.3%
6.0%

0.23
10.7
0.07
0.04%
0.02%
97.6%
29.1%
0.46
1.10
n.a.

37.4%
0.26
0.28
34.4%

0.16
n.a.
n.a.
n.a.
-1.7%
11
2
n.a.
n.a.

n.a.
n.a.
0.08
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.

n.a.
n.a.
n.a.
n.a.

Country-specific notes: 
The year 2011 is not included in the table due to lack of data.
General explanation of the table items:
Source: Eurostat unless indicated otherwise; ECFIN explanations given below
All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2000 prices)
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)
          Carbon intensity: Greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)
          Resource intensity: Domestic Material Consumption (in kg) divided by GDP (in EUR)
          Waste intensity: waste (in kg) divided by GDP (in EUR)
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP  
Energy weight in HICP: the share of the "energy" items in the consumption basket used in the construction of the HICP
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual %-change)
Environmental taxes over labour or total taxes: from DG TAXUD's database "Taxation trends in the European Union"
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in EUR) 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP
Recycling rate of municipal waste: ratio of municipal waste recycled over total municipal waste
Public R&D for energy or for the environment: government spending on R&D (GBAORD) for these categories as % of GDP
Share of GHG emissions covered by ETS: based on greenhouse gas emissions as reported by Member States to EEA (excl LULUCF)
Transport energy intensity: final energy consumption of transport (in kgoe) divided by gross value added of industry (in EUR) 
Transport carbon intensity:  greenhouse gas emissions in transport divided by gross value added of the transport sector
Passenger transport growth : measured in %-change in passenger kilometres
Energy import dependency: net energy imports divided by gross inland energy consumption incl. of international bunkers
Diversification of oil import sources: Herfindahl index (HHI), calculated as the sum of the squared market shares of countries of origin 

Diversification of the energy mix: Herfindahl Index over natural gas, total petrol products, nuclear heat, renewable energies and solid fuels

Share of renewable energy in energy mix: percentage-share in  gross inland energy consumption, expressed in tonne oil equivalents

34