Sweden calls for stricter EU stability pact

17th May 2010, Comments 0 comments

Swedish Finance Minister Anders Borg on Monday called for extra rigour in the EU's strict rules for public spending, saying the current guidelines did not safeguard against future financial debacles.

"We should put in place a more ambitious objective under a more ambitious timeline," Borg told a press conference in Stockholm Monday.

"If we arrive at the next financial crisis with a debt of 90 to 95 percent of GDP and a deficit of 3.0 percent, we will quickly end up in a situation similar to Greece's," he said, according to the TT news agency.

The European Union's 1997 Stability and Growth Pact requires the bloc's members to maintain fiscal discipline, notably by holding annual public deficits to under 3.0 percent of output and to work toward securing surpluses in times of robust growth.

Borg also called on Spain and Portugal to disclose their deficit reduction plans at a meeting of eurozone finance ministers in Brussels on Monday evening.

"It is now of the utmost importance that Spain and Portugal show which measures they are taking within their respective tightening packages to reduce their large deficits," Borg said in a statement.

"It is only by cleaning up public finances that long-term stability can be ensured," he added.

A staunch supporter of budgetary discipline, Sweden last year posted the strongest public finances in the European Union, with a deficit amounting to just 0.5 percent of gross domestic product (GDP) -- well below the three percent limit.

This year, the Scandinavian country's deficit is expected to inch up to around 2.0 percent, before slipping back to 1.6 percent next year, according to the European Commission.

When Sweden held the rotating EU presidency in the second half of 2009, the country repeatedly stressed the need to create an "exit strategy" for the union's large deficits that ballooned as governments implemented stimulus packages to counter the effects of the global financial crisis.

At their Brussels meeting, the eurozone finance ministers were to try to thrash out ways of restoring confidence in the falling euro currency amid the ongoing Greek debt drama.

Greece has received a three-year 110 billion euro rescue package from its eurozone counterparts, which along with the International Monetary Fund have also agreed a package worth 750 billion euros designed to prevent the Greek crisis from spreading to other weak eurozone economies.

Sweden, which is not part of the eurozone, will not take part in Monday's meeting, but Borg will represent the Scandinavian country at a meeting in Brussels Tuesday of all EU finance ministers.

© 2010 AFP

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