Swedish government proposes EUR 2.2bn stimulus package

(STOCKHOLM) - Sweden's government proposed measures on Friday worth 22.9 billion kronor (2.2 billion euros, 2.7 billion dollars) over three years to ease slowdown from the global financial crisis, especially in the labour market and construction industry.

"Sweden is clearly feeling the consequences of the serious international crisis which we can see in the financial system but also in a global fall in demand," Prime Minister Fredrik Reinfeldt told reporters as he and three other ministers presented the new measures.

For 2009, Reinfeldt said the government wanted to pump 8.3 billion kronor more into mainly job creation and to support the country's vital but ailing construction sector, in addition to measures worth 32 billion kronor already planned in next year's budget.

For 2010, 8.8 billion kronor would go to similar efforts, while 5.8 billion would be spent a year later, the government said in a statement.

"Sweden is a country that depend on exports. It is a reality that when demand falls, very many of our export markets demand fewer Swedish-produced goods," Reinfeldt said, explaining the need for the new cash injection.

The new measures included lowering taxes on all construction, renovations and maintenance carried out from next Monday, in a move Enterprise and Energy Minister Maud Olofsson said should increase demand for construction services and machinery and help put 7,000 more people to work.

The Scandinavian country of about nine million people slipped into recession in the third quarter as household consumption shrank for the first time since 2001 and its industry production dwindled.

Thousands of jobs have been lost as Sweden in recent weeks has begun feeling the sting of the global financial turmoil, with its car industry, which accounts for 15 percent of exports and employs 140,000 people, taking an especially hard blow.

This week, struggling US car giants Ford and General Motors said they were considering selling off their beleaguered Swedish units, Volvo Cars and Saab Automobile, which are among Sweden's largest employers.

Olofsson, who has vehemently insisted that Stockholm has no plans to become, even temporarily, an owner of Volvo and Saab, said Friday it was too early to say what measures the government would take to help the automobile sector.

"We want to get a better picture of what GM and Ford are planning (and) we want to get a better picture of what European investment banks are prepared to do," she told reporters.

"We will come back to this as soon as we have a better overview," she said.

Reinfeldt meanwhile brushed aside opposition calls for more extensive measures to bring down unemployment, which in October stood at 5.7 percent of the workforce, according to the national statistics bureau, insisting on the necessity of conducting a "responsible" economic policy.

"The best message this government can send is to both use stimulus measures but also say to the Swedish people that we have ensured they won't lead to tax increases or to cuts in the Swedish welfare system" in the long run, he said.

The new stimulus package was presented just a day after Sweden's national bank slashed its key interest rate by a full 1.75 percentage points to 2.0 percent amid a dire outlook for the economy, which observers expect will contract next year.

In late October, the Swedish parliament passed a 1.5 trillion kronor package to help the country's financial sector if it comes under more pressure from the worldwide credit crunch.

So far, Swedish banks however appear to be faring relatively well and the package has yet to be implemented.