Björklund critical

Last Friday’s agreement between the government and the Moderates, the Centre Party and the Christian Democrats to raise the defence budget to SKr 10.2 billion for the 2016-2020 period is an important signal to the world, according to Defence Minister Peter Hultqvist.

This is a boost of SKr 2 billion annually but, under the terms of the deal, SKr 1.7 billion will go towards the increased cost of employer contributions, and SKr 1.3 billion will be transferred from the budget for international operations.

In addition to this, politicians have also decided that a battle group of around 200 soldiers and a tank unit will be based on the island of Gotland permanently as of 2018. Furthermore, additional funds will be allocated to Sweden’s hunt for foreign submarines in its waters.

Outlining the terms on Friday, Peter Hultqvist did not rule out the possibility of tax increases to finance the deal.

Liberal leader Jan Björklund has since attacked the terms of the agreement, saying it is a huge disappointment. “Our defence capability is inadequate and that is bad for Sweden,” he said.

The party leader also accused his centre-right alliance colleagues of abandoning their call for an inquiry into NATO membership; instead it was agreed that an inquiry would consider Swedish security policy in relation to the Nordic countries, the USA, the UN, the EU and NATO.

“It will come to nothing; it will be nothing more than a general analysis, which has already been made,” he said, adding that no matter how many billions Sweden spent on its defences, NATO membership would involve greater security.

The fact that a divide has now emerged among the alliance parties is “regrettable but unavoidable,” said Björklund.

“It is unfortunate for the alliance that we are going separate ways, but even more unfortunate for Sweden that our defences are not strong enough,” he remarked.

Industry stalwarts slam budget

Unemployment is higher today than it was before the financial crisis, which is costing Sweden dearly, measured in kronor and in increased segregation. Although the government wants to create more jobs, its budget may well lead to fewer jobs, states Dagens Industri (DI) this morning, following the presentation of the spring budget on Wednesday.

Industrialist Rune Andersson, who owns Mellby Gård AB, is deeply concerned over the tax hikes on labour and enterprise, suggesting the government is making a return to the 1970s, when politicians believed “the state was better at creating growth than companies”.

Both Andersson and Carola Lemne, the director general of the Confederation of Swedish Enterprise, slam the plans to raise payroll taxes for the under 25s, saying it is a huge mistake. As DI remarks, no one can say at present just what impact the tax rise will have on the 10,000 to 15,000 jobs created as a result of lower payroll taxes, but one thing is certain: “higher costs will not lead to more young people getting jobs”.

Meanwhile, Marcus Strömberg, CEO of education company AcadeMedia, welcomes the news that the government intends to create 12,800 new course places in adult education over the next two years, but is sceptical to the idea of “trainee jobs”, saying it would have been better “to focus on measures that lead to real jobs”.

Germany taken to court due to Vattenfall

Moorberg power plant
Moorberg power plant

Swedish Vattenfall’s new coal power plant in Hamburg/Moorberg has already cost the utility SKr 10 billion in write-downs, and could well cost even more. The European Commission has decided to take Germany to court over its failure to apply the requirements of the Habitats Directive in relation to the authorisation of the power plant. The project risks having a negative impact on a number of protected fish species, which pass near the power plant when migrating from the North Sea to sites on the Elbe, upstream of Hamburg (ed.). If the Commission wins its case, Vattenfall may be forced to invest further to reduce the plant’s impact on the fish in the Elbe.

Tax hike criticised

On Monday the government announced a new package of measures designed to boost Swedish exports and the innovation climate. SKr 226 million will be earmarked towards the initiative this year and SKr 315 million annually thereafter up to the end of the government’s term of office.

However, Dan Olofsson, owner of Danir AB, does not give much for the drive, pointing out that the government intends to raise taxes by SKr 20 billion in 2016, but will invest just 1 per cent of the revenue generated on export promotion. He also slams the argument put forward by the government that higher taxes on businesses and on labour will create more jobs.

“They transfer billions from enterprise to the state and believe the state is some kind of expert in creating jobs and in economic dynamics, which I do not believe. Globally, competition is stiff and we should look after our businesses. Heaping costs onto companies is fundamentally wrong,” he says.

The Confederation of Swedish Enterprise is also critical, saying the funds allocated for the initiative, which may or may not have an impact, are nothing compared to the taxes that will shortly be levied on companies.

Nordic countries in military cooperation

Swedish Defence Minister Peter Hultqvist and his Danish, Finnish and Norwegian colleagues, along with Iceland’s foreign minister, have signed a debate piece in Oslo-based newspaper Aftenposten, outlining an intention to broaden defence cooperation.

The cooperation should be seen as “a direct response to aggressive Russian behaviour” in the Nordic countries’ neighbouring areas, writes the newspaper.

According to Norwegian defence analyst Janne Haaland Matlary, the strategy, which includes joint military exercises, goes as far as it can without explicitly creating a NATO community with non-NATO members Finland and Sweden.

“Finland and Sweden have also decided to hold their exercises to NATO standard, which implies a step towards NATO. Today there are no political grounds for them to join NATO, public opinion is not sufficiently scared, and referenda will be necessary. But what is happening now still looks like a preparation for membership,” she told Aftenposten.

Besides joint exercises, the strategy includes joint industrial cooperation in the defence sector, the joint exchange of intelligence and the joint processing of cyber attacks. It also includes an intention to broaden cooperation with the Baltic countries.

The first visible sign of the enhanced alliance will be the Arctic Challenge exercise to be held at the end of May, which will involve both Sweden and Norway. A number of US F-16s, based in the UK, are also expected to take part in the exercise.

Government proposes troops to Iraq

“The terrorist organisation ISIL, also known as IS, has spread death, destruction and fear. We have all been able to follow how its rampage in Iraq and Syria has led to people being murdered and forced into exile and how communities have been devastated. We have seen premeditated atrocities against dissidents and extensive abuse. And we are forced to conclude that ISIL is also trying to extend its terrorist activities to other parts of the world, including Europe,” write Foreign Minister Margot Wallström and Defence Minister Peter Hultqvist in Dagens Nyheter this morning.

Sweden is a member of the international coalition to counter ISIL and has to date given extensive humanitarian aid to those who are forced to flee their homes in Iraq and Syria. Parallel to this, Sweden support the political process that will eventually eliminate the breeding grounds for terrorist organisations such as ISIL.

Iraq has requested assistance to stop ISIL, which is why the Social Democratic-led government will now propose to the Riksdag that Sweden send 35 troops to northern Iraq to train and advise the Iraqi security forces. The troops will join the international coalition against ISIL.

The government will also propose that a force of 120 troops should be made available to bolster defences and evacuate people, if the security situation should deteriorate, Wallström and Hultqvist announce.

Government boosts spending on maintenance

At a press conference on Tuesday Prime Minister Stefan Löfven outlined the government’s plans to pump funds into rail maintenance. SKr 620 million is to be set aside this year, and SKr 1.24 billion annually for three years after that.

Rail maintenance has been neglected in recent years, and Stefan Löfven was keen to point out yesterday that the boost in funding would help improve Sweden’s competitiveness.

The initiative will form part of the supplementary spring budget, which will be presented next week.

Prior to last September’s general election, the Social Democrats promised to re-nationalise rail maintenance. At yesterday’s press conference, however, the PM said he was awaiting the findings of a report due to be presented on 15 April, and that only then would the government decide what to do.

The Green Party has made no secret of the fact that it is keen to see maintenance re-nationalised, but according to Infrastructure Minister Anna Johansson (S), the government could equally decide to keep the rails private.

“…Our primary promise was that the trains would run on time,” she says.

Meanwhile, just hours after the government presented its plans, a train pulled down cables south of Stockholm, leading to major delays for south-bound trains.

Division over defence spending

 

Defence Minister Peter Hultqvist
Defence Minister Peter Hultqvist

Defence Minister Peter Hultqvist (S) hopes cross-party agreement can be reached on defence appropriations for 2016-2020 by Thursday evening. The government has proposed raising the defence budget by a total of SKr 6.2 billion, which is less than the Moderates have proposed and just a third of the SKr 18 billion the Liberal Party has proposed.

“The Liberal Party believes this is what is required if our capabilities are not to be reduced further. There is a structural deficit that the Armed Forces have had to face since 2009,” said Liberal defence spokesman Allan Widman during a break in the negotiations on Monday evening.

The Armed Forces have said they require an annual boost of SKr 4 billion to meet the goals drawn up by the Defence Commission (Försvarsberedningen) – quite a bit more than the government has proposed. Furthermore, the Armed Forces would require an extra capital injection of SKr 15 billion in order to procure an additional submarine and expanding its Air Force, from 60 to 70 Gripen fighter jets.

Late yesterday Finance Minister Magdalena Andersson (S) said the government’s proposal was “balanced”. Afterwards, Moderate MP Hans Wallmark said: “The Finance Minister has been extremely frosty. Others in the government do not make it any easier for the Defence Minister”.

“Greece must be saved”

Anders Borg urges Greek bailout
Anders Borg urges Greek bailout

Talking to public service broadcaster SVT this morning, Anders Borg, the former finance minister, gave his views on the economic situation in Sweden and in Europe.

When asked about Greece, he made clear that the country needed to be saved so that it remained in the eurozone.

“My advice is that Europe should bail out Greece, even if the country has made a lot of mistakes,” he said.

He predicted that a new drachma would lose 40 per cent of its value relative to the euro if Greece were to withdraw from the monetary union (ed.), that banks would be forced to close for several weeks, restrictions would be imposed on withdrawals and anger would drive people out onto the streets to protest.

“It’s a small, fragile democracy. You cannot drive them into a tumultuous economic situation,” he said.

During the interview, Anders Borg said he expected European inflation and interest rates would remain low for a long time, and that this was a consequence of the ECB’s actions in combination with globalisation and an economic shift that affected consumer prices.

He also admitted that the Swedish government should have done more to stimulate the economy in 2012, when the Greek crisis struck. “We should have introduced some form of tax relief or invested more in the infrastructure,” he said.

Finland eyes Gripen

Sweden and Finland recently announced closer military cooperation, including the joint use of airbases, and on Wednesday the Swedish government granted Finland access to classified information regarding the Gripen NG fighter jet.

The backdrop is that Finland is to replace its fleet of F-18 Hornet fighter aircraft at an estimated cost of 6 billion euro.