New Swedish govt steps up spending

(MENAFN- Arab News) STOCKHOLM: Sweden's new left-wing government presented Thursday its 2015 budget with the Nordic country's largest deficit in nearly two decades as it seeks to boost employment through increased infrastructure and education spending.

Amid calls for stepped-up spending by European nations which can afford to do so Sweden will now let its deficit rise to 2.2 percent of economic output the highest level since 1996.

Sweden has also seen falling prices that has sparked concern of a dangerous deflationary spiral setting in that could lead to a recession but so far is still expected to grow 2.1 percent this year.

The budget forecasts 3.0 percent growth next year.

Sweden is one of the few nations that has room to take on more debt under European rules and despite the increased deficit its debt ratio is still expected to dip to 40.2 percent next year.

She said it would be impossible to balance the budget before 2017.

Expectations had built up around the announcement of defense spending figures after the Swedish military's shortcomings were exposed during a fruitless hunt for a suspected foreign submarine off the Stockholm coast since last Friday.