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December 2014 : Could Sweden show the way for other European countries?

Stockholm remains an essential stopover for ministers from other European states who are curious to find out how successive Swedish governments have managed to reduce the deficit, keep welfare spending in check, modernize their industrial infrastructure and combine exports, productivity and wage increases.  Sweden is nudging the top of a number of rankings. It enjoys high per capita income, low rates of inequality and poverty, significant public confidence in its institutions, high GDP growth since the 2009 financial crisis , and steadily falling national debt (35.5% of GDP in 2014). It is also one of the few EU member states to keep to its public finance commitments.

Sweden has got many of the fundamentals right: an enviable budgetary situation, an extremely competitive economy and satisfactory job market performance, with 76% employment rate. These have reduced its exposure to the troubles of the Eurozone, and are partly the result of flexible monetary policy and structural reform. The far-reaching structural reforms carried out over the last two decades have strengthened the capacity of the Swedish economy to cope with turbulent global markets.

From one model to another

The country has changed its economic model. The original “Swedish model”, which set the benchmark in the 1960s for striking a “fair” balance between Anglo-Saxon capitalism and the socialist economies, was inspired by a theoretical economic model devised in 1951 by the trade-unionists Rehn and Meidner. It was a form of social democracy based on acceptance of a market economy, a generous welfare state, low wage inequality and a strong social consensus. The main reasons for the discrepancies between the model and the reality in Sweden during the 1970s and 1980s were rampant inflation (around 10% per year) and hasty deregulation of the credit market. These two factors combined to plunge the country into a serious financial crisis, followed by economic recession, in the early 1990s.


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