In the May 2023 edition of the MPR

Rule of Law
Under its EU Presidency, Sweden is proactively addressing the challenge of EU enlargement, with a specific focus on rule of law criteria. Ensuring new member states adhere to democratic values before granting EU admission is a priority, especially considering the struggles of some Central and Eastern European countries, and the remaining states of former Yugoslavia. Alongside other EU institutions, Swedish leadership works to strengthen member states’ judicial systems and uses financial conditionality to incentivise compliance with rule of law standards.

Recognising the political urgency of integrating Balkan countries into the EU, yet aware of the risks of hasty enlargement, Sweden advocates a measured approach. The Swedish EU Presidency has scheduled dialogue meetings on democratic values and rule of law, demonstrating their commitment to deliberate, positive, and qualitative steps forward in EU enlargement, rather than rushing the process.

SD’s Newfound Assertiveness

The Sweden Democrats (SD) are carving out a prominent role in Swedish politics, with a growing assertiveness on key issues such as immigration and EU membership. Recently, they threatened to destabilise the coalition government over a European Union migration deal and have amped up their eurosceptic stance, even as they aim to thwart the government’s European cooperation initiatives. Their increasing influence raises concerns for those enthusiastic about integration and for diplomatic partners across Europe. Even though SD dropped their demand for Sweden’s EU exit in 2019, they are now shifting their course. One year ahead of the European Parliament election, they are positioning themselves to negotiate more exemptions from EU directives.

On domestic issues, the Sweden Democrats have become more vocal in their criticism of government policies, including those on wind power and biofuels. They have also raised eyebrows by challenging mainstream Swedish opinion, criticising initiatives such as the Royal Dramatic Theatre’s offering of drag queen-led tours for children. This boldness stems partly from their growing clout within the current government coalition. Party leader Jimmie Åkesson has even expressed his ambition to become Prime Minister by 2026. While a push for Sweden’s exit from the EU is unlikely to be a successful strategy for the party, SD is exerting pressure on its government partners over European integration issues, which could eventually lead to a referendum on EU membership. This dynamic poses challenges for the current government, which often finds itself ceding to SD’s demands while remaining under their scrutiny. SD’s assertiveness is expected to continue in the foreseeable future.

The 2023 Spring Budget Bill: Defined by its Omissions?

The Swedish Government’s Spring Amending Budget and Economic Policy guidelines for 2022/23 intend to shield vulnerable households from escalating prices and counteract high inflation through increased competition. The budget incorporates measures aimed at elevating employment rates, stimulating productivity growth, and providing aid to socially disadvantaged groups. Given Sweden’s precarious economic situation, the government is maintaining a restrained fiscal policy, with a total budget of SEK 4 billion – a significant decrease from previous years. Among other things, the budget includes augmented funding for military aid to Ukraine, a revenue cap for electricity producers, and bolstered support for the police and correctional forces. The Riksdag is set to make decisions on the bills in June.

However, the spring budget has drawn criticism from experts, with some arguing it lacks adequate support for the most vulnerable and fails to address climate change. Nordea’s Chief Economist described the budget as “very cautious”, while acknowledging the government’s task of managing inflation. SEB’s Chief Economist suggested that the fiscal policy toolbox is depleted, leaving households to rely on personal savings. Non-governmental organisations raised concerns about frozen aid funds and faulted the government’s investment in climate compensation in other countries. Criticisms also pointed to notable omissions, including a lack of initiatives to combat climate change and support innovation, and potential power struggles related to the Tidö Agreement and the growing influence of the Sweden Democrats. Overall, there’s a prevailing sentiment that more could have been done to aid the most vulnerable during these challenging times.

In the April 2023 edition of the MPR

Sweden’s EU Presidency at Half-Time 

Sweden has made use of its time in the Presidency to augment the EU agenda on things that it feels particularly strongly about. Chief amongst these is the competitiveness agenda, but also, we believe the focus on breathing life into what rule of law should mean in practice.

The four priorities of the Swedish EU Presidency 2023 and their settings 

Priority #1 – Security and unity: Much of the work under this heading springs from the Russian renewed invasion of Ukraine in February 2022 and the subsequent war there. The Western and EU military support to Ukraine has increased step by step during the armed conflict in Ukraine and this has been a top priority for the Swedish Government under its EU Presidency programme.

Priority #2 – Economic affairs including competitiveness: Simultaneously with maximum support for Ukraine, the economic work of the EU continues under the Swedish Presidency with a special and welcome focus on competitiveness.

Priority #3 – Green and energy transitions: One step forward on the green agenda has been during the Swedish stewardship of the issue of maritime fuel emissions and another the progress now reached on the Europe-wide build up of e-car charging stations, which is important not least for Europe’s heavy transport sector, which today emits large amounts of harmful emissions. 

Priority #4 – Democratic values and the rule of law – our foundation: The Swedish Presidency is said to be actively seeking to nurture “a common culture of law in the EU” and is driving the introduction of new EU instruments of conditionality vis-a-vis errant member states. 

Sweden and the Euro: Still a ‘no’?

The recent memorandum “Exchange Rates and the Balance of Payments: A Lost Relationship?” by Riksbank, Sweden’s central bank, discusses the enduring weakness of the Swedish krona despite a significant current account surplus. The krona’s weakness pre-2008 was attributed to an increase in Swedish savings, leading to diminished consumption and downward pressure on prices. The consequent low inflation led to lower interest rates, making foreign securities more appealing than Swedish ones, thereby weakening the krona. Post-financial crisis, the central bank cites financial flows, lower interest rate policy, and carry trades as reasons for the krona’s continued frailty. The possibility of the weak krona being a product of fiscal policy, managed by the government and Riksdag, is also considered. The small size of the krona in the global market, making it illiquid and vulnerable to global instability and inflation issues, is a contributing factor to its weakness.

The traditionally weak Swedish krona, aimed to stimulate exports and inflation, is a long-standing monetary policy in Sweden dating back over 350 years. However, this strategy may be unsustainable given the rapidly changing global context. Sweden’s potential membership in the European Monetary Union implies surrendering control over its own monetary policy. Still, it’s worth noting that Riksbank’s autonomy is already somewhat limited due to the influence of the European Central Bank. This situation presents a complex balancing act for Sweden between maintaining its traditional economic strategy and adapting to shifting global economic structures.

Climate Policy Council Report: Emissions Going Up, Confidence Going Down

The Climate Policy Council’s report serves as a significant critique of the Swedish Government’s current trajectory, indicating that Sweden is not living up to its reputation as a leader in climate action. This comes at a critical juncture in climate policy, domestically and internationally, and underscores the Swedish Government’s failure to reduce emissions. The report’s publication coincides with the IPCC’s urgent call for global governments to take radical action against climate change. This situation casts a shadow on Sweden’s international image and its ability to hold other countries accountable under the Paris Agreement.

The Council’s report also bolsters allegations made in the Aurora case against the government’s lack of adequate action on climate change. The Council, part of Sweden’s tripartite climate policy framework, is tasked with evaluating progress and advising on action planning. The increasing criticism indicates that the government is aware of its shortcomings in reducing emissions. Should Swedish or international courts rule that legal obligations regarding human rights include protection from global climate change, Sweden could be compelled to change its policies. The Aurora case, invoking human rights law, posits that Sweden has an absolute responsibility to reduce emissions, including those within Swedish firms’ supply chains. Even if Sweden fails to meet or alters the targets set by the Riksdag under the Climate Act, a human rights-based ruling could maintain the state’s obligations. The key question now is whether such rulings will come too late, or if the government will preemptively modify its policies.