Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of Sweden and delivering a Council opinion on the 2020 Convergence Programme of Sweden
Date: 2020-05-20
Institutions: European Commission, Secretariat-General
Subjects: Sweden, digitisation, economic policy, economic recovery, epidemic, health policy, infectious disease, investment, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 20.5.2020  COM(2020) 527 final  Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of Sweden and delivering a Council opinion on the 2020 Convergence Programme of Sweden  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2020 National Reform Programme of Sweden and delivering a Council opinion 
on the 2020 Convergence Programme of Sweden 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 9(2) thereof, 

Having  regard  to  Regulation  (EU)  No  1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16  November  2011  on  the  prevention  and  correction  of  macroeconomic 
imbalances2, and in particular Article 6(1) thereof,  

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

(2) 

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On  17  December  2019,  the  Commission  adopted  the  Annual  Sustainable  Growth 
Strategy,  marking  the  start  of  the  2020  European  Semester  for  economic  policy 
coordination. It took due account of the European Pillar of Social Rights, proclaimed 
by the European Parliament, the Council and the Commission on 17 November 2017. 
On  17  December  2019,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission also adopted the Alert Mechanism Report, in which it identified Sweden 
as one of the Member States for which an in-depth review would be carried out. 
The 2020 country report for Sweden3 was published on 26 February 2020. It assessed 
Sweden’s progress in addressing the country-specific recommendations adopted by the 
Council  on  9  July  20194,  the  follow-up  given  to  the  recommendations  adopted  in 
previous years and Sweden's progress towards its national Europe 2020 targets. It also 

OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 
SWD(2020) 526 final. 
OJ C 301, 5.9.2019, p. 117. 

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(3) 

(4) 

(5) 

included  an  in-depth  review  under  Article  5  of  Regulation  (EU)  No  1176/2011,  the 
results of which were also published on 26 February 2020. The Commission’s analysis 
led  it  to  conclude  that  Sweden  is  experiencing  macroeconomic  imbalances.  In 
particular,  overvalued  house  price  levels  coupled  with  a  continued  rise  in  household 
debt poses risks of a disorderly correction. This could have an adverse impact on the 
economy  and  potentially  also  for  the  banking  sector.  Any  negative  impact  on  the 
banking  sector  could  also  cause  negative  spill-overs  in  neighbouring  countries  given 
the systemic financial interlinkages. Some measures have been taken in recent years to 
address  these  imbalances.  However,  these  measures  have  had  limited  impact  so  far. 
Key  policy  gaps  remain,  particularly  in  relation  to  tax  incentives  for  debt-financed 
home  ownership,  the  functioning  of  the  housing  supply  and,  in  particular,  the  rental 
market. 

On 11 March 2020, the World Health Organization officially declared the COVID-19 
outbreak  a  global  pandemic.  It  is  a  severe  public  health  emergency  for  citizens, 
societies  and  economies.  It  is  putting  national  health  systems  under  severe  strain, 
disrupting  global  supply  chains,  causing  volatility  in  financial  markets,  triggering 
consumer  demand  shocks  and  having  negative  effects  across  various  sectors.  It  is 
threatening  people’s  jobs,  their  incomes  and  companies’  business.  It  has  delivered  a 
major  economic  shock  that  is  already  having  serious  repercussions  in  the  European 
Union. On 13 March 2020, the Commission adopted a Communication5 calling for a 
coordinated economic response to the crisis, involving all actors at national and Union 
level.  

Several  Member States have declared a state of  emergency or introduced emergency 
measures.  Any  emergency  measures  should  be  strictly  proportionate,  necessary, 
limited in time, and in line with European and international standards. They should be 
subject to democratic oversight and independent judicial review. 

On  20  March  2020,  the  Commission  adopted  a  Communication  on  the  activation  of 
the general escape clause of the Stability and Growth Pact6. The clause, as set out in 
Articles 5(1), 6(3), 9(1) and 10(3) of Regulation  (EC) 1466/97 and Articles 3(5) and 
5(2) of Regulation (EC) 1467/97, facilitates the coordination of budgetary policies in 
times  of  severe  economic  downturn.  In  its  Communication,  the  Commission  shared 
with the Council its view that, given the expected severe economic downturn resulting 
from  the COVID-19 outbreak, the  current  conditions  permit  activation of the clause. 
On  23  March  2020,  the  Ministers  of  Finance  of  the  Member  States  agreed  with  the 
assessment of the Commission. The activation of the general escape clause allows for 
a temporary departure from the adjustment path  towards the medium-term budgetary 
objective,  provided  that  this  does  not  endanger  fiscal  sustainability  in  the  medium 
term. For the corrective arm, the Council may also decide, on a recommendation from 
the Commission,  to  adopt  a revised  fiscal  trajectory. The  general  escape  clause does 
not suspend the procedures of the Stability and Growth Pact. It allows Member States 
to depart from the budgetary requirements that would normally apply while enabling 
the  Commission  and  the  Council  to  undertake  the  necessary  policy  coordination 
measures within the framework of the Pact. 

(6) 

Continued  action  is  required  to  limit  and  control  the  spread  of  the  pandemic, 
strengthen  the  resilience  of  the  national  health  systems,  mitigate  the  socio-economic 
consequences through supportive measures for business and households and to ensure 

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COM(2020) 112 final. 
COM(2020) 123 final. 

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(7) 

(8) 

(9) 

adequate  health  and  safety  conditions  at  the  workplace  with  a  view  to  resuming 
economic  activity.  The  Union  should  fully  use  the  various  tools  at  its  disposal  to 
support  Member  States’  efforts  in  those  areas.  In  parallel,  Member  States  and  the 
Union should work together to prepare the measures necessary to get back to a normal 
functioning of our societies and economies and to sustainable growth, integrating inter 
alia  the  green  transition  and  the  digital  transformation,  and  drawing  all  lessons  from 
the crisis. 

The  COVID-19  crisis  has  highlighted  the  flexibility  that  the  single  market  offers  to 
adapt  to  extraordinary  situations.  However,  in  order  to  ensure  a  swift  and  smooth 
transition to the recovery phase and the free movement of goods, services and workers, 
exceptional  measures that prevent  the single market  from  functioning  normally must 
be removed as soon as they are no longer indispensable. The current crisis has shown 
the need for crisis preparedness plans in the health sector, which include in particular 
improved  purchasing  strategies,  diversified  supply  chains  and  strategic  reserves  of 
essential  supplies.  They  are  key  elements  for  developing  broader  crisis  preparedness 
plans. 
The  Union  legislator  has  already  amended  the  relevant  legislative  frameworks7  to 
allow  Member  States  to  mobilise  all  unused  resources  from  the  European  Structural 
and  Investment  Funds  so  they  can  address  the  exceptional  effects  of  the  COVID-19 
pandemic. Those amendments will provide additional flexibility, as well as simplified 
and streamlined procedures. To alleviate cash flow pressures, Member States can also 
benefit  from  a  100%  co-financing  rate  from  the  Union  budget  in  the  2020-2021 
accounting year. Sweden is encouraged to make full use of those possibilities to help 
the individuals and sectors most affected by the challenges. 

The  socio-economic  consequences  of  the  pandemic  are  likely  to  be  unevenly 
distributed  across  regions  due  to  different  specialisation  patterns  -  in  particular  in 
regions  markedly  relying  on  tourism  and  more  generally  on  face-to-face  business  to 
consumers.  This  entails  a  substantial  risk  of  widening  regional  and  territorial 
disparities within Sweden, aggravating the already observed trend of slowly widening 
disparities between capital cities and the rest of the country or between urban and rural 
areas.  Combined with  the risk of a temporary unravelling of the convergenceprocess 
between Member States, the current situation calls for targeted policy responses. 

(10)  On 27 April 2020, Sweden submitted its 2020 National Reform Programme and, on 28 
April  2020,  its  2020  Convergence  Programme.  In  order  to  take  account  of  their 
interlinkages, the two programmes have been assessed at the same time. 

(11)  Sweden is currently in the preventive arm of the Stability and Growth Pact.  

(12) 

In  its  2020  Convergence  Programme,  the  government  plans  the  headline  balance  to 
deteriorate  from  a  surplus  of  0,4%  of  GDP  in  2019  to  a  deficit  of  3,8%  of  GDP  in 
2020. The deficit is projected to decline to 1,4% of GDP in 2021 and reach a surplus 

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Regulation (EU) 2020/460 of the European Parliament and of the Council of 30 March 2020 amending 
Regulations  (EU)  No  1301/2013,  (EU)  No  1303/2013  and  (EU)  No  508/2014  as  regards  specific  measures  to 
mobilise  investments  in  the  healthcare  systems  of  Member  States  and  in  other  sectors  of  their  economies  in 
response to the COVID-19 outbreak (Coronavirus Response Investment Initiative) (OJ L 99, 31.3.2020, p. 5) and 
Regulation  (EU)  2020/558  of  the  European  Parliament  and  of  the  Council  of  23  April  2020  amending 
Regulations  (EU)  No  1301/2013  and  (EU)  No  1303/2013 as  regards  specific  measures  to  provide  exceptional 
flexibility for the use of the European Structural and Investments Funds in response to the COVID-19 outbreak 
(OJ L 130, 24.4.2020, p. 1). 

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(13) 

of 1,5% by 2023. After  decreasing to  35% of GDP  in  2019, the general  government 
debt-to-GDP  ratio  is  expected  to  increase  to  40%  in  2020  according  to  the  2020 
Convergence Programme. The macroeconomic and fiscal outlook are affected by high 
uncertainty related to the COVID-19 pandemic. 

In response to the COVID-19 pandemic, and as part of a coordinated Union approach, 
Sweden has adopted budgetary measures to increase the capacity of its health system, 
contain  the  pandemic,  and  provide  relief  to  those  individuals  and  sectors  that  have 
been  particularly  affected.  According  to  the  2020  Convergence  Programme,  those 
budgetary measures amounted to 2,4% of GDP. The measures include: strengthening 
health  care  services  (0,1%  of  GDP),  emergency  aid  for  distressed  sectors  (1,6%  of 
GDP)  and  labour  market  and  social  policy  measures  (0,2%  of  GDP).  In  addition, 
Sweden has announced measures that, while not having a direct budgetary impact, will 
contribute  to  support  liquidity  to  businesses.  According  to  the  Convergence 
Programme, those measures include in particular tax deferrals of up to 6,9% of GDP, 
as well as different kinds of loan guarantees and expanded credit facilities amounting 
to roughly 4,7% of GDP. Overall, the measures taken by Sweden are in line with the 
guidelines  set  out  in  the  Commission  Communication  on  a  coordinated  economic 
response  to  the  COVID-19  outbreak.  The  full  implementation  of  those  measures, 
followed  by  a  refocusing  of  fiscal  policies  towards  achieving  prudent  medium-term 
fiscal  positions  when  economic  conditions  allow,  will  contribute  to  preserving  fiscal 
sustainability in the medium term.  

(14)  Based  on  the  Commission  2020  spring  forecast  under  unchanged  policies,  Sweden’s 
general government balance is forecast at -5,6% of GDP in 2020 and -2,2% in 2021. 
The general government debt ratio is projected to remain below 60% of GDP in 2020 
and 2021. 

(15)  On 20 May 2020, the Commission issued a report prepared in accordance with Article 
126(3)  of  the  Treaty  due  to  Sweden's  planned  breach  of  the  3%  of  GDP  deficit 
threshold in 2020. Overall, the analysis suggests that the deficit criterion as defined in 
the Treaty and in Regulation (EC) No 1467/1997 is not fulfilled.   

(16)  Sweden’s economy has slowed down in an unprecedented way following the outbreak 
of the COVID-19 pandemic. According to the Commission forecast, unemployment is 
expected to rise to 9,7% in 2020 and recover to 9,3% in 2021. Private consumption is 
expected to decline strongly, in particular in the most exposed consumption categories 
like  transport,  restaurants  and  accommodation.  Gross  fixed  capital  formation  is 
projected to see an even sharper drop than consumption, driven largely by uncertainty 
over the pace of the recovery. The  Swedish  authorities started taking measures early 
on  and  have  successively  scaled  up  policy  measures  as  the  pandemic  spread.  The 
measures covered healthcare  and addressed the economic fall-out.  Healthcare-related 
measures include economic support from the central government for all extra costs of 
the  COVID-19  outbreak  to  the  regions  and  local  authorities  responsible  for  the 
healthcare system. On the economic front, the government has taken a broad range of 
steps  to  relieve  the  costs  of  the  corporate  sector  (short-term  layoffs,  sick  pay  costs, 
waving employer’s social contributions, credit guarantees and rent reductions) as well 
as to ensure corporate liquidity (postponing tax payments, including VAT payments). 
Further, the Riksbank has decided to extend loans to companies via banks, to purchase 
government and municipal bonds, as well as covered mortgage bonds and bonds and 
commercial  papers  issued  by  Swedish  non-financial  corporations.  In  the  process  of 
designing and implementing these measures the resilience of the banking sector needs 
to be taken into account. The Riksbank has also concluded currency swap agreements, 

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with other central banks, to ensure the availability of major currencies for the financial 
increasing 
sector.  Social  and 
unemployment  and  sickness  benefits,  lowering  requirements  for  accessing  the 
unemployment scheme and through active labour market and education policies (green 
jobs, new start jobs extended, summer courses, more students in higher education). 

labour  market  policy  has  been  expanded  by 

(17)  Sweden’s  short-term  policy  response  to  COVID-19  outbreak  relies  on  securing 
appropriate resources and capacity buffers and adapting the roles and responsibilities 
of  health  workers.  In  the  medium  term,  this  should  also  lead  to  timely  and 
geographically balanced healthcare, the appropriate deployment of the health workers 
in the various settings (for example in out-patient and in-patient care), and help avoid 
structural  shortages  of  medical  staff.  Making  use  of  Sweden’s  strong  Research  & 
Innovation  sector  for  science-driven  actions  can  contribute  to  progress  on  vaccines 
development,  treatments  and  diagnostics  and  on  translating  research  findings  into 
public health policy. 

(18)  Supporting the availability of skills, and digital skills in particular, can sustain higher 
productivity  growth  through  research  and  innovation  in  high-tech  sectors,  and  help 
achieve  Sweden’s  ambitious  climate  and  energy  objectives  contained  in  its  National 
Energy and Climate Plan. Investments are also needed to reduce educational outcomes 
gaps  between  learners  with  a  migrant  and  native  background.  The  high  quality  of 
labour was a major contributor to labour productivity growth but had all but stopped 
contributing before the COVID-19 crisis. Labour market integration of groups whose 
potential  was  not  fully  used  before  the  crisis,  such  as  non-EU  migrants  and  people 
with disabilities, will also be necessary. Skills shortages are particularly pronounced in 
education,  health  care,  social  work,  information  and  communication  technology, 
industry and construction.  

(19)  To  foster  the  economic  recovery,  it  will  be  important  to  front-load  mature  public 
investment  projects  and  promote  private  investment,  including  through  relevant 
reforms.  In  the  digital  and  microelectronics  sectors,  more  than  50%  of  employers 
report skills shortages affecting growth. Sustaining the high share of public spending 
in research is a necessary condition to improve the productivity performance. Capital 
deepening and higher investments in high-tech and innovative sectors are also needed 
to restore labour productivity growth. The diffusion of new digital technologies among 
small and medium-sized enterprises will help boost productivity. The crisis has shown 
how important the digital infrastructure is and that fast and stable connectivity needs 
to  be  available  in  all  places  where  people  live  or  work.  The  expansion  of  mobile 
broadband in the 700 MHz band will play an important role, as does the possibility of 
financial  support  for  the  development  of  fixed  broadband.  The  upcoming  auction  of 
the 5G will provide additional impulse to the digitalisation of the Swedish economy. 
The  objective  of  achieving  a  climate  neutral  society  in  2045  will  also  require 
investments in research and innovation enabling the development and implementation 
of novel, competitive solutions for decarbonisation and coordinated social and policy 
actions.  Transport  is  the  prime  target  for  reducing  Sweden’s  greenhouse  gas 
emissions.  A  comprehensive  and  relatively  fast  transformation  of  the  fleet  to  low 
emissions vehicles is on the political agenda. Planned investment in rail infrastructure  
is  important  to  facilitate a modal split  and to  deliver on Sweden’s  ambitious climate 
objective.  The  electrification  of  transport  and  industry  will  require  significant 
investments  in  power  production  and  distribution.  The  programming  of  the  Just 
Transition Fund for the period 2021-2027 could help Sweden to address some of the 
challenges  posed  by  the  transition  to  a  climate  neutral  economy,  in  particular  in  the 

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territories  covered  by  Annex  D  to  the  country  report8.  This  would  allow  Sweden  to 
make the best use of that fund.  

(20)  Persistent  allegations  of  suspected  money  laundering  have  affected  the  reputation  of 
Swedish  banks,  and  preventing  money  laundering  remains  a  priority  for  Sweden. 
Effective supervision requires increased resources and appropriate procedures to apply 
the  risk-based  approach.  Sweden  has  recognised  that  more  resources  are  needed  to 
exercise suitable supervision and investigations, and has strengthened the capacity of 
its  Financial  Supervisory  Authority.  However,  the  Authority’s  capacity  is  still  low 
compared to the size of the Swedish financial sector. Challenges remain and the risk-
based approach still needs to be fully implemented. 

to  address  medium- 

(21)  While the present recommendations focus on tackling the socio-economic impacts of 
the  pandemic  and  facilitating  the  economic  recovery,  the  2019  country-specific 
recommendations adopted by the Council on 9 July 2019 also covered reforms that are 
essential 
structural  challenges.  Those 
recommendations remain pertinent and will continue to be monitored throughout next 
year’s  European  Semester  annual  cycle.  That  also  applies  to  recommendations 
regarding investment-related economic policies. The latter recommendations should be 
taken  into  account  for  the  strategic  programming  of  cohesion  policy  funding  post-
2020, including for mitigating measures and exit strategies with regard to the current 
crisis. 

long-term 

to 

(22)  The  European  Semester  provides  the  framework  for  continuous  economic  and 
employment  policy  coordination  in  the  Union,  which  can  contribute  to  a  sustainable 
economy.  Member  States  have  taken  stock  of  progress  regarding United  Nations’ 
Sustainable  Development  Goals  (SDGs)  implementation  in  their  2020  National 
Reform  Programmes.  By  ensuring  the  full  implementation  of  the  recommendations 
below, Sweden will contribute to the progress towards the SDGs and to the common 
effort of ensuring competitive sustainability in the Union. 

(23) 

(24) 

(25) 

In  the  context  of  the  2020  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Sweden’s  economic  policy  and  published  it  in  the  2020 
country  report.  It  has  also  assessed  the  2020  Convergence  Programme  and  the  2020 
National  Reform  Programme  and  the  follow-up  given  to  the  recommendations 
addressed  to  Sweden  in  previous  years.  It  has  taken  into  account  not  only  their 
relevance  for  sustainable  fiscal  and  socioeconomic  policy  in  Sweden,  but  also  their 
compliance with Union rules and guidance, given the need to strengthen the Union’s 
overall  economic  governance  by  providing  Union-level  input  into  future  national 
decisions.  

In  the  light  of  that  assessment,  the  Council  has  examined  the  2020  Convergence 
Programme and its opinion9 is reflected in particular in recommendation (1) below.  

In the light of the Commission’s in-depth review and this assessment, the Council has 
examined  the  2020  National  Reform  Programme  and  the  2020  Convergence 
Programme.  The  present  recommendations  take  into  account  the  need  to  tackle  the 
pandemic  and  facilitate  the  economic  recovery  as  a  first  necessary  step  to  permit  an 
adjustment  of  imbalances.  After  refocusing  recommendations  on  the  objective  of 
tackling  the  socio-economic  impacts  of  the  pandemic  and  facilitating  the  economic 
recovery, none of the present recommendations directly addresses the macroeconomic 

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SWD(2020) 526 final. 
Under Article 9(2) of Council Regulation (EC) No 1466/97. 

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imbalances  identified  by  the  Commission  under  Article  6  of  Regulation  (EU)  No 
1176/2011, 

HEREBY RECOMMENDS that Sweden take action in 2020 and 2021 to: 

1. 

2. 

3. 

In  line  with  the  general  escape  clause,  take  all  necessary  measures  to  effectively 
address the pandemic, sustain the economy and support the ensuing recovery. When 
economic  conditions  allow,  pursue  fiscal  policies  aimed  at  achieving  prudent 
medium-term  fiscal  positions  and  ensuring  debt  sustainability,  while  enhancing 
investment.  Ensure  the  resilience  of  the  health  system,  including  through  adequate 
supplies of critical medical products, infrastructure and workforce.  

Foster innovation and support education and skills development.  Front-load mature 
public  investment  projects  and  promote  private  investment  to  foster  the  economic 
recovery. Focus investment on the green and digital transition, in particular on clean 
and  efficient  production  and  use  of  energy,  high-tech  and  innovative  sectors,  5G 
networks and sustainable transport. 

Improve  the  effectiveness  of  anti-money  laundering  supervision  and  effectively 
enforce the anti-money laundering framework. 

Done at Brussels, 

For the Council 
The President 

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