The Swedish Fiscal Framework. The Challenge of Maintaining Fiscal Discipline amid Rising Spending Pressures

Oskar Grevesmühl and Martin Åström

No 87, European Economy - Economic Briefs from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: This Economic Brief explains how the Swedish national fiscal framework, since its gradual introduction starting in the mid-1990s, has contributed to restoring fiscal discipline and decreasing the government -debt-to-GDP ratio. The main components of that framework (including the so called surplus target, expenditure ceilings and a debt anchor) are presented and compared with that of its EU peers. This is followed by a closer look at the distribution of the achieved consolidation across revenues and expenditures, respectively, and across the various levels of government. Thereafter, the paper discusses the particular role of defining a so-called “reform space” in steering the budgetary process. Following the established practice of reviewing the level of the surplus target every eight years and as a result of the emergence of new spending needs, for example on defence, and the need to transpose new legislation at EU level into national legislation, there is a discussion on how to adapt the framework. The paper describes the main proposals in this discussion, including the lowering of the target for government net lending to 0% of GDP and the new approach to increasing defence spending without breaching the fiscal rules. The final section concludes by distilling a few tentative lessons from the Swedish experience.

Keywords: Fiscal policy coordination; fiscal rules; fiscal sustainability; indexation of public expenditure and revenues. (search for similar items in EconPapers)
JEL-codes: H2 H3 H6 H7 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2025-12
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Persistent link: https://EconPapers.repec.org/RePEc:euf:ecobri:087

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