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ALMEDALEN 2022

Swedish finance minister: voters may have to accept falling real wages

Sweden's finance minister had told The Local that this year's election will largely be about rising costs, but that his party is not planning to intervene to prop up real incomes and so worsen inflation.

Swedish finance minister: voters may have to accept falling real wages
Swedish Finance Minister Mikael Damberg at the Swedbank seminar on Swedens economic situation. Photo: Richard Orange

Speaking at a seminar on Sweden’s economic situation hosted by Swedbank, Mikael Damberg agreed that the coming campaign would be a so-called plånboksval, or “pocketbook election”, where rising costs and falling spending power are the dominant issue, but he said he thought this would benefit rather than harm the Social Democrats. 

“Economic issues will be very important,” he told The Local, “and I think people will think about who will be best in charge of the public finances, and who has been in government and handled tough situations, and I think that Magdalena Andersson, as the Prime Minister with seven years as Minister of Finance, is the right woman to lead Sweden in these difficult times.”

His worry, he said, was that Sweden’s political parties would respond to inflation levels of close to eight percent by promising voters subsidies and cash transfers to make up for rising prices, which if implemented would then risk fuelling an inflationary spiral. 

“It might be |a problem] if the parties draw the wrong conclusion, and think that they can spend a lot of money right now. Because if they spend too much money, too broadly, not focusing on vulnerable groups, then inflation will go up, and interest rates will go even higher. And that would actually worsen the situation in the wallet for ordinary people.” 

Instead, Damberg said that people living in Sweden would ideally simply tighten their belts and tolerate a period of falling real incomes. 

“For 25 years in Sweden, we have had real wage increases for ordinary workers, and that’s kind of unique on an international perspective. So this year, there will be a drop in real wages because of inflation,” he said.

He said that he hoped that in next year’s negotiations between unions and employers over new collective bargaining agreements, unions were as responsible as they have been historically, and avoided calling for inflationary pay hikes. 

“It’s tough. The war has made us all less rich, and some groups will be affected very much. But I think, there’s no point in getting wage increases if it pushes inflation higher. The trick here is to get wage increase that are for real, and not just on paper.” 

In the seminar, he said that there was a danger that the huge emergency spending packages Sweden, like other countries, had put in place to soften the impact of the Covid-19 pandemic would set a precedent, leading voters and politicians to think it was possible for governments to spend their way out of the coming economic difficulties in a similar way. 

His intention, he said, if he was reappointed finance minister after the election, would be to keep the tax rate roughly level with where it is now, neither raising nor lowering taxes, in the hope that Sweden’s state finances go into a small surplus next year. 

He said it had been right this year to pass measures to increase the incomes of the poorest families and the poorest pensioners, and that his party would still seek to give aid targeted those least able to cope with rising prices. 

“Politics has a role,” he said. “But you need to be careful not to create too big a role, because if you think that politics can do everything, then we will start fuelling inflation. It’s a lot harder now than it was in the pandemic.” 

Shortly before the seminar, Ulf Kristersson, leader of the opposition Moderate Party, made a speech in which he accused the government of bringing in 46 new taxes over the last four years, and together in a “left-wing cartel” with other parties of planning a series of tax hikes, including a property tax, a tax on savings, a wealth tax, a tax on the highest incomes, and a reduced tax break on cleaners and other households services.

“I think they’re a bit desperate, because they’re not doing that well in the polls,” Damberg said. “So one way [of improving the situation] is to try to frighten voters. But I think our record speaks for itself, and I think Magdalena Andersson has got a lot of credibility when it comes to handling Swedish economy.” 

“She has not introduced a property tax, and she has not in the last period in government increased the tax burden on ordinary people. If you look at the tax burden in Sweden over the last period, it’s gone down, not up.”

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2022 SWEDISH ELECTION

Centre Party ‘ready to join Social Democrat-led government’

Sweden's Centre Party would consider minister roles in a Social Democrat-led government, the party's leader, Annie Lööf, said on Monday, firmly positioning her party in the left bloc.

Centre Party 'ready to join Social Democrat-led government'

In an interview with newspaper Dagens Nyheter (DN), Lööf said that Social Democrat leader Magdalena Andersson was her clear choice as prime ministerial candidate in the election. 

“I believe Magdalena Andersson has the leadership needed,” she said, citing the current prime minister’s “noticeably better openness for cooperation,” than her rival, Moderate Party leader Ulf Kristersson. 

Lööf underlined the fact that her support was conditional on “policy anchored in the centre”, and that her party would not support a government that included the Left Party, and would not engage in “organised budget cooperation” with the Left Party. 

When DN asked if this also meant the Centre would be open to governmental positions, Lööf said that the party “would like to be in government with the Social Democrats,” but that this was “presuming policy leans towards the centre”.

Lööf’s decision to set out her position was welcomed by Andersson, who said that “Sweden and Swedish politics needs fewer locked positions and not more”. 

But it was met with criticism from both inside her party, from the opposition, and from the Left Party. 

“We are putting ourselves forward in this election as an independent liberal party and should support which alternative can carry out the most Centre Party politics,” the party’s youth wing wrote on Twitter. “A centre-right liberal party should always hold the door open for several government alternatives.” 

Nooshi Dadgostar, leader of the Left Party, said the decision was “strange”. 

“She seems to be asking for our support to sit in a government without being willing to cooperate with us,” she said. “In that way, it’s strange. the Social Democrats and the Centre Party do not have a majority on their own.” 

In the interview, Lööf was highly critical of the direction the Moderate Party, with whom the Centre Party ruled for eight years, had taken. 

 

“Unfortunately, we see that the Moderates, Christian Democrats and the Liberal Party have all drifted to the right and deepened their cooperation with the Sweden Democrats,” she said. “This is extremely unfortunate. It is the first time since the arrival of democracy that the right-wing parties are working together with a xenophobic party and standing for election together.” 

However, even though she said Kristersson would have to cut his party’s ties to the Sweden Democrat for her to support him as a prime ministerial candidate, she said she did not rule out working together with her previous allies on the other side of the political divide.

“We are open to continued collaboration over bloc boundaries,” she said. “But that’s conditional on the future prime minister being receptive to where the political majority is located.”

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