Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Sweden and delivering a Council opinion on the 2023 Convergence Programme of Sweden
Date: 2023-05-24
Institutions: European Commission, Secretariat-General
Subjects: Sweden, economic policy, economic recovery, economic reform, energy policy, fiscal policy, green economy, investment policy, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 24.5.2023  COM(2023) 627 final  Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Sweden and delivering a Council opinion on the 2023 Convergence Programme of Sweden {SWD(2023) 627 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2023 National Reform Programme of Sweden and delivering a Council opinion 
on the 2023 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) 

Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council3,  which 
established  the  Recovery  and  Resilience  Facility,  entered  into  force  on  19  February 
2021. The Recovery and Resilience Facility provides financial support to the Member 
States  for  the  implementation  of  reforms  and  investments,  entailing  a  fiscal  impulse 
financed  by  the  EU.  In  line  with  the  European  Semester  priorities,  it  contributes  to 
economic  and  social  recovery  and  to  the  implementation  of  sustainable  reforms  and 
investments,  in  particular  to  promote  the  green  and  digital  transition  and  make  the 
Member States’ economies more resilient. It also helps strengthen public finances and 
boost  growth  and  job  creation  in  the  medium  and  long  term,  improve  territorial 
cohesion  within  the  EU  and  support  the  continued  implementation  of  the  European 
Pillar of Social Rights. The maximum financial contribution per Member State under 
the Recovery and Resilience Facility was updated on 30 June 2022, in accordance with 
Article 11(2) of Regulation (EU) No 2021/241.  

1 
2 
3 

OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
establishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17). 

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(2) 

On  22  November  2022,  the  Commission  adopted  the  Annual  Sustainable  Growth 
Survey4,  marking  the  start  of  the  2023  European  Semester  for  economic  policy 
coordination. The European Council endorsed the priorities of the  survey  around the 
four  dimensions  of  competitive  sustainability  on  23  March  2023.  On  22  November 
2022,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the  Commission  also  adopted 
the  2023  Alert  Mechanism  Report,  in  which  it  identified  Sweden  as  one  of  the 
Member States that may be affected or may be at risk of being affected by imbalances, 
and for which an in-depth review would be needed. The Commission also adopted a 
recommendation  for  a  Council  recommendation  on  the  economic  policy  of  the  euro 
area, which the Council adopted on 16 May 2023, as well as the proposal for the 2023 
Joint  Employment  Report  analysing 
the  Employment 
the 
Guidelines  and  the  principles  of  the  European  Pillar  of  Social  Rights,  which  the 
Council adopted on 13 March 2023.    

implementation  of 

(3)  While  the EU economies are showing remarkable resilience, the  geopolitical  context 
continues  to  have  a  negative  impact.  As  the  EU  stands  firmly  with  Ukraine,  the  EU 
economic  and  social  policy  agenda  is  focused  on  reducing  the  negative  impact  of 
energy shocks on both vulnerable households and companies in the short term, and on 
keeping  up  efforts  to  deliver  on  the  green  and  digital  transition,  support  sustainable 
and  inclusive  growth,  safeguard  macroeconomic  stability,  and  increase  resilience  in 
the medium term. It also focuses heavily on increasing the EU’s competitiveness and 
productivity. 

(4) 

On  1  February  2023,  the  Commission  issued  the  Communication  A  Green  Deal 
Industrial Plan for the Net-Zero Age5 to boost the competitiveness of the EU's net-zero 
industry  and  support  the  fast  transition  to  climate  neutrality.  The  plan  complements 
ongoing efforts under the European Green Deal and REPowerEU. It aims to provide a 
more  supportive environment for scaling up  the  EU's manufacturing  capacity  for the 
net-zero  technologies  and  products  required  to  meet  the  EU’s  ambitious  climate 
targets,  as  well  as  ensuring  access  to  relevant  critical  raw  materials,  including  by 
diversifying sourcing, properly exploiting geological resources in Member States and 
maximising  the  recycling  of  raw  materials.  The  plan  is  based  on  four  pillars:  a 
predictable  and  simplified  regulatory  environment,  speeding  up  access  to  finance, 
enhancing  skills,  and  open  trade  for  resilient  supply  chains.  On  16  March  2023,  the 
Commission  also  issued  the  Communication  Long-term  competitiveness  of  the  EU: 
looking  beyond  20306,  structured  along  nine  mutually  reinforcing  drivers  with  the 
objective  to  work  towards  a  growth  enhancing  regulatory  framework.  It  sets  policy 
priorities  aimed  at  actively  ensuring  structural 
improvements,  well  focused 
investments and regulatory measures for the long-term competitiveness of the EU and 
its Member States. The recommendations below help address those priorities. 

(5) 

In 2023, the European Semester for economic policy coordination continues to evolve 
in  line  with  the  implementation  of  the  Recovery  and  Resilience  Facility.  Fully 
implementing  the  recovery  and  resilience  plans  remains  essential  for  delivering  the 
policy priorities under the European Semester, as the plans address all or a significant 
subset  of  the  relevant  country-specific  recommendations  issued  in  recent  years.  The 
2019, 2020 and 2022 country-specific recommendations remain equally relevant also 

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COM(2022) 780 final. 
COM(2023) 62 final.  
COM(2023) 168 final.  

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(6) 

(7) 

for  recovery  and  resilience  plans  revised,  updated  or  amended  in  accordance  with 
Articles 14, 18 and 21 of Regulation (EU) No 2021/241.  
The REPowerEU Regulation7, adopted on 27 February 2023, aims to rapidly phase out 
the  EU’s  dependence  on  Russian  fossil  fuel  imports.  This  will  contribute  towards 
energy security and the diversification of the EU’s energy supply, while increasing the 
uptake of renewables, energy storage capacities and energy efficiency. The Regulation 
enables  Member  States  to  add  a  new  REPowerEU  chapter  to  their  national  recovery 
and  resilience  plans  in  order  to  finance  key  reforms  and  investments  that  will  help 
achieve  the  REPowerEU  objectives.  These  reforms  and  investments  will  also  help 
boost the competitiveness of the EU's net-zero industry as outlined in the Green Deal 
Industrial  Plan  for  the  Net-Zero  Age  and  address  the  energy-related  country-specific 
recommendations issued to the Member States in 2022 and, where applicable, in 2023. 
The  REPowerEU  Regulation  introduces  a  new  category  of  non-repayable  financial 
support, made available to Member States to finance new energy-related reforms and 
investments under their recovery and resilience plans.  

On 8 March 2023, the Commission adopted a communication providing fiscal policy 
guidance for 2024. It aims to support the preparation of Member States’ stability and 
thereby  strengthen  policy  coordination8.  The 
convergence  programmes  and 
Commission recalled that the general escape clause of the Stability and Growth Pact 
will be deactivated at  the end of 2023.  It  called  for fiscal  policies in  2023-2024 that 
ensure  medium-term  debt  sustainability  as  well  as  raise  potential  growth  in  a 
sustainable manner. Member States were invited to set out in their 2023 stability and 
convergence programmes how their fiscal plans will ensure that the 3% of GDP deficit 
reference value is adhered to as well as plausible and continuous debt reduction, or for 
debt  to  be  kept  at  prudent  levels,  in  the  medium  term.  The  Commission  invited 
Member States to phase out national fiscal measures introduced to protect households 
and  firms  from  the  energy  price  shock,  starting  with  the  least  targeted  ones.  It 
indicated that, if support measures needed to be extended because of renewed energy 
pressures,  Member  States  should  target  such  measures  much  better  than  in  the  past 
towards  vulnerable  households  and  firms.  The  Commission  proposed  that  the  fiscal 
recommendations  would  be  quantified  and  differentiated  and  be  formulated  on  the 
basis of net primary expenditure, as proposed in its Communication on orientations for 
a  reform  of  the  EU  economic  governance  framework9.  It  recommended  that  all 
Member States should  continue to  protect  nationally  financed investment and ensure 
the  effective  use  of  the  Recovery  and  Resilience  Facility  and  other  EU  funds,  in 
particular  in  light  of  the  green  and  digital  transition  and  resilience  objectives.  The 
Commission  indicated  that  it  will  propose  to  the  Council  to  open  deficit-based 
excessive deficit procedures in spring 2024 on the basis of the outturn data for 2023, in 
line with existing legal provisions. 

(8) 

On  26  April  2023,  the  Commission  presented  legislative  proposals  to  implement  a 
comprehensive  reform of the EU's economic  governance rules.  The central  objective 
of the proposals is to strengthen public debt sustainability and promote sustainable and 

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Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council  of  27  February  2023 
amending Regulation (EU) 2021/241 as regards REPowerEU chapters in recovery and resilience plans 
and  amending  Regulations  (EU)  No  1303/2013,  (EU)  2021/1060  and  (EU)  2021/1755,  and  Directive 
2003/87/EC (OJ L 63, 28.2.2023, p. 1). 
COM(2023) 141 final. 
COM(2022) 583 final. 

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(9) 

inclusive growth in all Member States through reforms and investment. The proposals 
aim at providing Member States with more control over the design of their medium-
term plans, while putting in place a more stringent enforcement regime to ensure that 
Member  States  deliver  on  the  commitments  undertaken  in  their  medium-term  fiscal-
structural plans. The objective is to conclude the legislative work in 2023.  

On  28  May  2021,  Sweden  submitted  its  national  recovery  and  resilience  plan  to  the 
Commission, in accordance with Article 18(1) of Regulation (EU) 2021/241. Pursuant 
to  Article  19  of  Regulation  (EU)  No  2021/241,  the  Commission  assessed  the 
relevance, effectiveness, efficiency and coherence of the recovery and resilience plan, 
in  accordance  with  the  assessment  guidelines  of  Annex  V  to  that  Regulation.  On  4 
May 2022, the Council adopted its Decision on the approval of the assessment of the 
recovery and resilience plan for Sweden10. The release of instalments is conditional on 
a decision by the Commission,  taken in  accordance with  Article 24(5) of  Regulation 
(EU)  2021/241,  that  Sweden  has  satisfactorily  fulfilled  the  relevant  milestones  and 
targets  set  out  in  the  Council  Implementing  Decision.  Satisfactory  fulfilment 
presupposes  that  the  achievement  of  preceding  milestones  and  targets  has  not  been 
reversed. 

(10)  On 28 April 2023, Sweden submitted its 2023 National Reform Programme and, on 28 
April 2023, its 2023 Convergence Programme, in line with Article 8(1) of Regulation 
(EC)  No  1466/97.  To  take  account  of  their  interlinkages,  the  two  programmes  have 
been  assessed  together.  In  accordance  with  Article  27  of  Regulation  (EU)  2021/241, 
the  2023  National  Reform  Programme  also  reflects  Sweden’s  biannual  reporting  on 
the progress made in achieving its recovery and resilience plan.  

in 

addressing 

(11)  The Commission published the 2023 country report for Sweden11 on 24 May 2023. It 
assessed  Sweden’s  progress 
country-specific 
recommendations  adopted by  the Council  between 2019  and  2022 and  took stock of 
Sweden’s implementation of the recovery and resilience plan. Based on this analysis, 
the  country  report  identified  gaps  with  respect  to  those  challenges  that  are  not 
addressed  or  only  partially  addressed  by  the  recovery  and  resilience  plan,  as  well  as 
new and emerging challenges. It also assessed Sweden’s progress on implementing the 
European  Pillar  of  Social  Rights  and  on  achieving  the  EU  headline  targets  on 
employment, skills and poverty reduction, as well as progress in  achieving the UN’s 
Sustainable Development Goals.  

relevant 

the 

(12)  The  Commission  carried  out  an  in-depth  review  under  Article  5  of  Regulation  (EU) 
No  1176/2011  for  Sweden  and  published  its  results  on  24  May  202312.  The 
Commission  concluded  that  Sweden  is  experiencing  macroeconomic  imbalances.  In 
particular, vulnerabilities relating to its real estate market and high private debt persist. 
Real estate prices are high, and have been rising until recently. House price increases 
have  gone  hand  in  hand  with  rising  private  debt.  In  2022,  against  a  backdrop  of 
marked  tightening  in  monetary  and  financing  conditions,  real  estate  prices  started  to 
decline  visibly  in  what  seems  to  be  the  start  of  an  unwinding  of  the  accumulated 
vulnerabilities.  Prices  remain  significantly  overvalued  and  are  expected  to  decline 
further. The turnover in the real estate sector has recently declined markedly, and, as a 

10 

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12 

Council Implementing Decision of 4 May 2022 on the approval of the assessment of the recovery and 
resilience plan for Sweden (ST 7772/22; ST 7772/22 ADD 1). 
SWD(2023) 627 final. 
SWD(2023) 644 final. 

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result,  demand  for  newly  built  dwellings  has  also  fallen.  The  adverse  developments 
have,  so  far,  been  limited  to  the  construction  and  real  estate  sectors,  which  are  now 
declining  sharply  after  years  of  high  growth.  As  a  whole,  the  Swedish  economy  is 
expected  to  contract  in  2023,  with  the  changes  in  monetary  conditions  affecting  the 
balance sheets of households and commercial real estate companies and their room to 
consume and invest.  The impact  of increased interest  rates on mortgage payments  is 
substantial,  due  to  the  prevalence  of  variable  interest  rates  and  very  long  duration 
mortgages. The impact of changing conditions on the financial sector has been limited; 
the  sector  is  strong  and  records  high  profit  margins  and  risk-weighted  capital  ratios, 
likely serving as a bulwark against a propagation of the real estate sector problems to 
the wider economy through the financial sector, although it is highly exposed to real 
estate.  Policy  progress  has  been  limited.  In  particular,  the  tax  system  continues 
favouring homeownership through low recurrent property taxation and promotes debt-
financed housing acquisition through significant tax deductibility of mortgage interest 
payments. In addition, the inefficient rental market has seen limited reform.  

(13)  Based  on  data  validated  by  Eurostat,13  Sweden’s  general  government  balance 
improved  from  a  balanced  budgetary  position  in  2021  to  a  surplus  of  0.7%  in  2022, 
while general government debt fell from 36.5% of GDP at the end of 2021 to 33.0% at 
the end of 2022. 

(14)  The  general  government  balance  has  been  impacted  by  the  fiscal  policy  measures 
adopted to mitigate the economic and social impact of the increase in energy prices. In 
2022,  such  revenue-decreasing  measures  included  reducing  the  energy  tax  on  diesel 
and petrol; while such expenditure-increasing measures included offsetting the cost of 
electricity  to  households.  The  Commission  estimates  the  net  budgetary  cost  of  these 
measures  at  0.2%  of  GDP  in  202214.  The  general  government  balance  has  also  been 
impacted  by  the  budgetary  cost  of  temporary  protection  to  displaced  persons  from 
Ukraine, which is estimated at 0.2% of GDP in 2022. At the same time, the estimated 
cost of COVID-19 temporary emergency measures dropped to 1.1% of GDP in 2022, 
from 2.0% in 2021. 

(15)  On  18  June  2021,  the  Council  recommended  that  in  2022  Sweden15  maintain  a 
supportive  fiscal  stance,  including  from  the  impulse  provided  by  the  Recovery  and 
Resilience Facility, and preserve nationally financed investment. 

(16)  According 

to 

the  Commission  estimates, 

in  2022  was 
contractionary, at +0.4% of GDP, which was appropriate in a context of high inflation. 
As recommended by the Council, Sweden continued to support the recovery including 
with  investments  financed  by  the  Recovery  and  Resilience  Facility.  Expenditure 
financed by Recovery and Resilience Facility grants and other EU funds amounted to 
0.2  %  of  GDP  in  2022  (0.2%  of  GDP  in  2021).  Nationally  financed  investment 

the  fiscal  stance16 

13 
14 

15 

16 

Eurostat-Euro Indicators, 47/2023, 21.4.2023. 
The gross budgetary cost of energy support measures was close to 0.5% of GDP in 2022, but significant 
offsetting revenue was received from the Transmission System Operator, Svenska Kraftnät.  
Council  Recommendation  of  18  June  2021  delivering  a  Council  opinion  on  the  2021  Convergence 
Programme of Sweden, OJ C 304, 29.07.2021, p. 131. 
The  fiscal  stance  is  measured  as  the  change  in  primary  expenditure  (net  of  discretionary  revenue 
measures), excluding Covid-19 crisis-related temporary emergency measures but including expenditure 
financed  by  non-repayable  support  (grants)  from  the  Recovery  and  Resilience  Facility  and  other  EU 
funds,  relative  to  medium-term  potential  growth. For  more  details  see  Box 1  in  the  Fiscal  Statistical 
Tables. 

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provided an expansionary contribution of 0.1 percentage points to the fiscal stance17. 
Sweden  therefore  preserved  nationally  financed  investment,  as  recommended  by  the 
Council.  At  the  same  time,  the  growth  in  nationally  financed  primary  current 
expenditure (net of new revenue measures) provided a contractionary contribution of 
0.8  percentage  points  to  the  fiscal  stance.  Sweden  therefore  sufficiently  kept  under 
control the growth in nationally financed current expenditure. 

(17)  The  macroeconomic  scenario  underpinning 

the 
Convergence Programme is cautious in 2023 and realistic thereafter. The government 
projects real GDP to decrease by 1.0% in 2023 and to grow again by 1.2% in 2024. By 
comparison, the Commission 2023 spring forecast projects real GDP to fall by 0.5% in 
2023  and  grow  by  1.1%  in  2024,  mainly  due  to  more  recent  data  and  investment 
outside construction being somewhat less dynamic in the Commission forecast. 

the  budgetary  projections 

in 

(18) 

In  its  2023  Convergence  Programme,  the  government  expects  that  the  2022  general 
government  surplus  will  deteriorate  to  a  deficit  ratio  of  0.4%  of  GDP  in  2023.  The 
deterioration  in  2023  mainly  reflects  the  weaker  economy  and  deteriorating  local 
government  sector  finances.  According  to  the  Programme,  the  general  government 
debt-to-GDP ratio is expected to decrease from 33.0% at the end of 2022 to 31.0% at 
the end of 2023. The Commission 2023 spring forecast projects a government deficit 
of 0.9% of GDP for 2023. This is higher than the deficit projected in the Convergence 
Programme,  mainly  due  to  the  fact  that  the  Commission  expects  higher  public 
spending, resulting from e.g. higher intermediate consumption and social transfers in 
kind,  as  well  as  higher  interest  expenditure.  The  Commission  2023  spring  forecast 
projects a similar general government debt-to-GDP ratio, of 31.4%, at the end of 2023. 

(19)  The  government  balance  in  2023  is  expected  to  continue  to  be  impacted  by  the 
measures adopted to mitigate the economic and social impact of the increase in energy 
prices.  They  consist  of  measures extended from 2022 (in particular, the  reduction of 
the energy tax on petrol  and diesel) and new measures, such as the  compensation of 
electricity costs for households, firms and organisations. The cost of these measures is 
mostly  offset  by  revenues  from  transmission  fees  as  well  as,  to  a  lesser  extent,  the 
taxes on windfall profits of energy suppliers. Taking these revenues into account, the 
net budgetary cost of the support measures is projected in the Commission 2023 spring 
forecast  at  0.1%  of  GDP  in  202318.  Most  of  the  measures  in  2023  do  not  appear 
targeted to the most vulnerable households or firms, and do not fully preserve the price 
signal  to  reduce  energy  demand  and  increase  energy  efficiency.  As  a  result,  the 
amount  of  targeted  support  measures,  to  be  taken  into  account  in  the  assessment  of 
compliance  with  the  fiscal  recommendation  for  2023,  is  actually  estimated  in  the 
Commission  2023  spring  forecast  at  0.0%  of  GDP  in  2023  (in  line  with  2022).  The 
budgetary cost of temporary protection to displaced persons from Ukraine is projected 
to remain broadly stable in 2023. Finally, the 2023 government balance is expected to 
benefit from the phasing out of COVID-19 temporary emergency measures of 1.1% of 
GDP. 

17 

18 

Other nationally financed capital expenditure provided an expansionary contribution of 0.2 percentage 
points of GDP. 
The  figure represents the level of annual budgetary cost of those  measures, including current revenue 
and expenditure as well as – where relevant – capital expenditure measures. 

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(20)  On  12  July  2022,  the  Council  recommended19  that  Sweden  take  action  to  ensure  in 
2023 that the growth of nationally financed primary current expenditure is in line with 
an  overall  neutral  policy  stance20,  taking  into  account  continued  temporary  and 
targeted support to households and firms most vulnerable to energy price hikes and to 
people fleeing Ukraine. Sweden should stand ready to  adjust current  spending to  the 
evolving  situation.  Sweden  was  also  recommended  to  expand  public  investment  for 
the  green  and  digital  transitions,  and  for  energy  security  taking  into  account  the 
REPowerEU  initiative,  including  by  making  use  of  the  Recovery  and  Resilience 
Facility and other Union funds. 

(21) 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
broadly  neutral  (-0.1%  of  GDP),  in  a  context  of  high  inflation.  This  follows  a 
contractionary  fiscal  stance  in  2022  (+0.4  %  of  GDP).  The  growth  in  nationally 
financed primary current expenditure (net of discretionary revenue measures) in 2023 
is  projected  to  provide  a  broadly  neutral  contribution  of  -0.2%  of  GDP  to  the  fiscal 
stance.  In  sum,  the  projected  growth  of  nationally  financed  primary  current 
expenditure is in line with the recommendation of the Council. Expenditure financed 
by Recovery and Resilience Facility grants and other EU funds is projected to amount 
to 0.3% of GDP in 2023, while nationally financed investment is projected to provide 
a broadly neutral contribution to the fiscal stance of 0.1 percentage points21. Therefore, 
Sweden  plans  to  finance  additional  investment  through  the  Recovery  and  Resilience 
Facility  and  other  EU  funds,  and  it  is  not  projected  to  preserve  nationally  financed 
investment. It plans to finance public investment for the green and digital transitions, 
and for energy security,  such as investments  in  the climate transition  of the industry 
and  expansion  of  broadband,  which  are  funded  by  the  Recovery  and  Resilience 
Facility and other EU funds. 

(22)  According to the Convergence Programme the general government deficit is expected 
to  increase  to  0.6%  of  GDP  in  2024.  The  increase  in  2024  mainly  reflects  the 
economic  downturn.  The  programme  expects  the  general  government  debt-to-GDP 
ratio to remain stable at 31.0% at the end of 2024. Based on policy measures known at 
the  cut-off  date  of  the  forecast,  the  Commission  2023  spring  forecast  projects  a 
government  deficit  of  0.5%  of  GDP  in  2024.  This  is  broadly  in  line  with  the  deficit 
projected in the programme. The Commission 2023 spring forecast projects a similar 
general government debt-to-GDP ratio, of 30.7% at the end of 2024.  

(23)  The Convergence Programme envisages the phasing out of most of the energy support 
measures  in  202422.  The  Commission  estimates  the  net  cost  of  energy  support 
measures at 0.1% of GDP in 2024, in line with 2023. These estimates hinge upon the 
assumption  of  no  renewed  energy  price  increases.  The  energy  support  measures  that 
are currently planned to remain in place in 2024 do not appear targeted to vulnerable 
households or firms.  They do not  preserve the price signal  to  reduce energy demand 
and increase energy efficiency. 

19 

20 

21 
22 

Council  Recommendation  of  12  July  2022  on  the  National  Reform  Programme  of  Sweden  and 
delivering a Council opinion on the 2022 Convergence Programme of Sweden, OJ C 334, 1.0.2022, p. 
221. 
Based  on  the  Commission  spring  2023  forecast,  the  medium-term  (10-year  average)  potential  output 
growth of Sweden, which is used to measure the fiscal stance, is estimated at 7.7 % in nominal terms. 
Other nationally financed capital expenditure is projected to provide a neutral contribution. 
The reduction of energy tax on diesel and petrol is planned to remain in place from 2023 to 2025. 

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(24) 

 In  the  programme,  Sweden  plans  to  meet  the  medium-term  budgetary  objective  –  a 
structural  budget  balance  of  -1.0%  of  GDP  –  in  2023  and  2024,  and  to  maintain  it 
throughout the rest of the programme period. Based on the Commission 2023 spring 
forecast, the structural balance is forecast to be in surplus of 0.1% of GDP in 2023 and 
0.7% of GDP in 2024, above the medium-term budgetary objective. 

(25)  Assuming unchanged policies, the Commission 2023 spring forecasts projects the net 

nationally financed primary expenditure to grow in 2024 at 1.1% in 2024. 

(26)  According  to  the  programme,  government  investment  is  expected  to  increase  from 
4.7% of GDP in  2023 to 5.2% of GDP in  2024. The higher investment  reflects  both 
higher  nationally  financed  investment  and  investment  financed  by  the  EU,  namely 
through  the  Recovery  and  Resilience  Facility.  The  programme  refers  to  reforms  and 
investments, such as the changed age limits in the pension system, that are expected to 
contribute  to  fiscal  sustainability  and  to  sustainable  and  inclusive  growth.  The 
Convergence Programme outlines a medium-term fiscal path until 2026. According to 
the  programme,  the  general  government  deficit  is  expected  to  turn  into  a  surplus  of 
0.2%  of  GDP  in  2025  and  of  1.4%  by  2026.  The  general  government  balance  is 
therefore  planned  to  meet  the  relevant  Treaty  reference  value  over  the  programme 
horizon.  According  to  the  programme,  the  general  government  debt-to-GDP  ratio  is 
expected to decrease from 31.0% at the end of 2024 to 27.7% by the end of 2026. 

(27)  High private debt and, despite some recent corrections, still overvalued property prices 
constitute  macroeconomic  imbalances  that  continue  to  be  at  risk  of  disorderly 
unwinding. Housing remains difficult to afford for newcomers to the housing market, 
while the rental market offers few alternatives and is still in need of reform, to reduce 
waiting  lists  and  promote  the  construction  of  rental  accommodation.  Limited  policy 
action  has  been  taken  by  Sweden  to  counter  the  imbalances,  focusing  on 
macroprudential  policies  and  supply  measures  aimed  at  easing  building  permit 
procedures and subsidising the construction of rental apartments.  

(28)  The  overall  tax  burden  on  property  remains  relatively  low  because  of  generous  tax 
deductions  on  mortgage  interest  payments  and  low  recurrent  property  taxes.  The 
impact of policy changes on after-tax mortgage payments is difficult to assess, due to a 
lack  of  individual  household  data  on  assets  and  liabilities.  Availability  of  such  data 
could  lead  to  efficiency  gains  in  the  design  of  policy,  possibly  lowering  the  entry 
barrier to the housing market and spreading housing burdens more equally among the 
population. On the rental market, regulated below-market rents benefit a limited group 
of households. There is no link between the regulated rent and the household’s needs 
or  income.  As  a  consequence,  there  are  long  waiting  lists,  particularly  for  the  more 
sought-after rental dwellings, and the vacancy rate for apartments is very low from an 
international  perspective.  Efficiency  gains  would  be  made  if  rents  followed  market 
prices  more  closely,  complemented  with  rental  support  based  on  income  and  net 
wealth.  

(29) 

In accordance with Article 19(3), point (b) and Annex V, criterion 2.2 of Regulation 
(EU) 2021/241, the recovery and resilience plan includes an extensive set of mutually 
reinforcing  reforms  and  investments  to  be  implemented  by  2026.  While  Sweden’s 
recovery  and  resilience  plan  was  only  adopted  in  2022,  its  implementation  is  now 
underway. Despite a slow start, the implementation is generally on track, and, at this 
stage,  risks  of  non-absorption  appear  limited  given  the  relatively  small  financial 
allocation of the recovery and resilience plan. The Operational Arrangement between 
the Commission and Sweden has been concluded in May 2023. Sweden is expected to 

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submit its first payment request combining two instalments in the second half of 2023. 
Preparations of a REPowerEU chapter and an addendum due to the slight decrease of 
non-repayable  support  are  ongoing.  The  swift  inclusion  of  the  new  REPowerEU 
chapter  in  the  recovery  and  resilience  plan  will  allow  additional  reforms  and 
investments to be financed in support of Sweden’s strategic objectives in the field of 
energy and the green transition. The systematic and effective involvement of local and 
regional authorities, social partners and other relevant stakeholders remains important 
for the successful implementation of the recovery and resilience plan, as well as other 
economic and employment policies going beyond the plan, to ensure broad ownership 
of the overall policy agenda.  

(30)  The Commission approved all of Sweden’s cohesion policy programming documents 
in 2022. Proceeding with the swift implementation of the cohesion policy programmes 
in  complementarity  and  synergy  with  the  recovery  and  resilience  plan,  including  the 
REPowerEU  chapter,  is  key  to  achieving  the  green  and  digital  transition,  increasing 
economic and social resilience, as well as achieving balanced territorial development 
in Sweden. 

(31)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan,  Sweden  faces  a  number  of  additional  challenges  related  to  (i)  unequal 
opportunities in education for pupils from disadvantaged socio-economic and migrant 
backgrounds;  (ii)  the  need  to  better  integrate  disadvantaged  groups  into  the  labour 
market; and (iii) the need to reduce reliance on fossil fuels. 

(32)  Even  though  Sweden  generally  performs  well  on  educational  outcomes,  inequalities 
persist  in  the  Swedish  education  system.  Pupils  with  disadvantaged  socio-economic 
and migrant backgrounds have limited educational opportunities, including developing 
the skills needed to find employment. Inequalities in education are increasing and are 
often linked to the lack of opportunities for pupils with migrant backgrounds to choose 
the  school  they  want.  Differences  in  grading  practices  across  schools  risk  further 
undermining  educational  outcomes.  The  shortage  of  qualified  teachers  remains 
problematic  and  is  most  pressing  for  special  needs  teachers,  subject  teachers  in 
compulsory  schools  and  vocational  teachers  in  secondary  schools.  There  is  scope  to 
improve the set-up and governance of the education system, including the enrolment 
process and grading system, as well as teachers’ career progression.  

(33)  Sweden  continues  to  face  challenges  in  integrating  people  with  disadvantaged  and 
migrant  backgrounds  into  the  labour  market,  as  well  as  with  reducing  the  remaining 
skills  gaps.  The  education  levels  of  non-EU-born  people  have  decreased  in  recent 
years, which further increases the gap between the EU-born and the non-EU born. The 
share  of  early  leavers  from  education  and  training  has  been  increasing,  especially 
among  non-EU-born  students.  Strengthening  participation  in  learning  activities  is 
needed to help people from disadvantaged groups develop skills relevant for the labour 
market and increase their chances of finding a job. 

(34)  More  effort  is  needed  for  Sweden  to  achieve  its  national  target  of  net  zero  carbon 
emissions by 2045. Although Sweden continues to be among the Member States with 
the highest  share of renewables in  its  final  energy  consumption, power  grid capacity 
and  transmission  constraints  may  impose  restrictions  on  the  further  deployment  of 
renewable  energy  sources  in  the  future.  In  2022,  these  constraints  contributed  to 
surging  energy  prices  for  industry  and  households  and  limited  the  expansion  of 
economic  activity  in  remote  geographical  locations.  Increasing  the  capacity  of  the 
electricity  grid  is  pivotal,  given  that  Sweden’s  final  electricity  consumption  is 

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expected to double to 300 TWh by 2045, due to the increased electrification needs of 
industry and transport. However, the construction and reinforcement of the electricity 
grid is subject to delays caused by lengthy permitting processes. In addition, Sweden 
has  some  of  the  lengthiest  administrative  procedures  in  the  EU  for  deploying 
renewable  energy  sources,  in  particular  onshore  wind  projects.  The  government  has 
launched  an  investigation  into  simplifying  environmental  permit  assessments  within 
the  remit  of  the  Swedish  Environmental  Code.  At  the  same  time,  concrete  policy 
action is lacking to accelerate administrative procedures for electricity grid expansion 
and the deployment of renewable energy sources, by limiting the number of authorities 
involved in these procedures and by running procedures in parallel. Reducing energy 
consumption  by  increasing  energy  efficiency  is  also  essential  to  reducing  carbon 
emissions  and  energy  costs  for  households  and  businesses.  In  terms  of  energy 
efficiency, Sweden is at risk of not achieving its national target of using energy 50% 
more efficiently in 2030 (as compared to 2005) if the energy consumption trajectory 
between 2005 and 2020 continues. With a primary energy consumption of 43.8 Mtoe 
in  2021,  Sweden  remains  among  the  Member  States  with  the  highest  energy 
consumption per capita. Sweden’s consumption of natural gas has dropped by 37% in 
the  period  August  2022  -  March  2023,  compared  with  the  average  gas  consumption 
over  the  same  period  in  the  preceding  5  years,  beyond  the  15%  reduction  target. 
Sweden could keep pursuing efforts to temporarily reduce gas demand until 31 March 
202423. 

(35)  Labour  and  skills  shortages  in  sectors  and  occupations  key  for  the  green  transition, 
including  manufacturing,  deployment  and  maintenance  of  net-zero  technologies,  are 
creating  bottlenecks  in  the  transition  to  a  net-zero  economy.  High  quality  education 
and  training  systems  that  respond  to  changing  labour  market  needs  and  targeted 
upskilling and reskilling measures are key to reducing skills shortages and promoting 
labour inclusion and reallocation.  To unlock untapped labour supply,  these measures 
need  to  be  accessible,  in  particular  for  individuals  and  in  sectors  and  regions  most 
affected by the green transition. Labour shortages have increased in Sweden in recent 
years and in 2022 they were reported for 16 occupations that require specific skills or 
knowledge for the green transition.  

(36) 

(37) 

In  light  of  the  Commission’s  assessment,  the  Council  has  examined  the  2023 
Convergence Programme and its opinion24 is reflected in recommendation (1) below.  

In  light  of  the  Commission’s  in-depth  review  and  this  assessment,  the  Council  has 
examined  the  2023  National  Reform  Programme  and  the  2023  Convergence 
Programme. Its recommendations under Article 6 of Regulation (EU) No 1176/2011 is 
reflected  in  recommendation  (1)  below.  Policies  referred  to  in  recommendation  (1) 
help address vulnerabilities linked to high private debt and high house prices. 

HEREBY RECOMMENDS that Sweden take action in 2023 and 2024 to:  

1. 

Wind  down  the  energy  support  measures  in  force  by  the  end  of  2023.  Should 
renewed  energy  price  increases  necessitate  support  measures,  ensure  that  these  are 
targeted  at  protecting  vulnerable  households  and  firms,  fiscally  affordable,  and 
preserve incentives for energy savings. 

23 
24 

Council Regulation (EU) 2022/1369 and Council Regulation (EU) 2023/706  
Under Articles 5(2) and 9(2) of Council Regulation (EC) No 1466/97. 

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While  maintaining  a  sound  fiscal  position  in  2024,  preserve  nationally  financed 
public  investment  and  ensure  the  effective  absorption  of  RRF  grants  and  other  EU 
funds, in particular to foster the green and digital transitions.  

For the period beyond 2024, continue to pursue investment and reforms conducive to 
higher sustainable growth and preserve a prudent medium-term fiscal position. 

Reduce  risks  related  to  high  household  debt  and  housing  market  imbalances  by 
reducing  the  tax  deductibility  of  mortgage  interest  payments  and/or  increasing 
recurrent  property  taxes,  while  establishing  adequate  tools  for  better  policy 
assessment and targeting. Stimulate investment in residential construction to ease the 
most urgent shortages, in particular by removing structural obstacles to construction 
and by ensuring the supply of buildable land. Improve the efficiency of the housing 
market, including by introducing reforms to the rental market. 

Proceed  with  the  steady  implementation  of  its  recovery  and  resilience  plan  and 
swiftly  finalise  the  REPowerEU  chapter  with  a  view  to  rapidly  starting  its 
implementation.  Proceed  with  the  speedy  implementation  of  cohesion  policy 
programmes, in close complementarity and synergy with the recovery and resilience 
plan.  

Improve  educational  outcomes  for  pupils  with  disadvantaged  socio-economic  and 
migrant backgrounds by ensuring equal access opportunities in the schooling system 
and  addressing 
the  skills  of 
disadvantaged  groups,  particularly  people  with  migrant  backgrounds,  by  adapting 
resources and methods to their needs, with a view to helping them integrate into the 
labour market. 

the  shortages  of  qualified 

teachers.  Develop 

Reduce  reliance  on  fossil  fuels  by  accelerating  the  deployment  of  renewables, 
including  by  expanding  and  upgrading  energy  transmission  networks,  introducing 
reforms  to  simplify  and  speed  up  administrative  and  permitting  procedures, 
improving  energy  efficiency  and  stepping  up  policy  efforts  aimed  at  the  provision 
and acquisition of the skills needed for the green transition. 

2. 

3. 

4. 

Done at Brussels, 

For the Council 
The President 

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