On 12 February 2008, the Council examined the updated convergence programme of Sweden, which covers the period 2007 to 2010. The Swedish economy has performed well in recent years. In 2007, the economy has entered into a more mature phase that is reflected by a solid domestic demand boosted by buoyant investment and private consumption growth. Against this background, Swedish public finances have also been strong with consistent and sizable general government surpluses.

The main goal of the medium-term budgetary strategy in the programme is to achieve a nominal budget surplus of 1 % of GDP on average over the business cycle, supported by multi-annual expenditure ceilings for the central government and a balanced budget requirement for local governments. This surplus target corresponds to Sweden's medium-term objective (MTO) for the budgetary position of a 1 % of GDP structural surplus (i.e. cyclically adjusted surplus net of one-off and temporary measures), which is foreseen to be respected with a good margin throughout the programme period.

In view of this risk assessment, the budgetary stance in the programme allows meeting the MTO by a good margin throughout the programme period, as envisaged in the programme. The somewhat weaker budgetary position in 2008 goes along with continued structural reforms aimed at encouraging labour force participation by reducing the tax wedge which thus increases the growth potential of the economy.

Overall conclusions
The overall conclusion is that the medium-term budgetary position is sound with high general government surpluses and Sweden is at low risk with regard to the sustainability of public finances. With GDP growth in 2008 possibly turning out lower than foreseen, the risk of pro-cyclical fiscal policy would be very limited. Moreover, the weakening of the structural budgetary position in 2008 goes along with continued structural reforms aimed at encouraging labour force participation and thus increasing growth potential and is not envisaged to spill over into subsequent years.