Sweden’s cost of living crisis scares voters ahead of the election
Article content
STOCKHOLM — With its robust welfare regulations and green energy mix, rich Sweden should have better conditions than most countries in Europe to withstand the energy-driven living crisis affecting the continent.
But consumer anxieties over skyrocketing utility bills, rising interest rates and stalling economic growth mean the campaign for the Sept. 11 general election has turned into something of a bidding war between the center-left and right blocs over who can do more to ease the short-term pain. This can entail long-term costs for the economy.
Advertisement 2
Article content
Article content
– There is a risk that it will become a replacement economy rather than a focus on long-term structural reforms, says Sven-Olov Daunfeldt, Chief Economist at Svenskt Näringsliv.
Swedes are among Europe’s most affluent. The welfare system – although much less generous than it used to be – means that poverty rates are well below the European average. But in recent decades, the gap between rich and poor has widened, leaving many vulnerable to inflation, which currently stands at around 8%.
Eva Lindman Marko, a 59-year-old educational psychologist, said she received a monthly electricity bill of more than 19,000 Swedish kronor ($1,765) in January — two or three times what she pays in a normal winter.
The prices may be even higher in the coming season – not least because of problems at the Ringhals nuclear power plant.
Advertisement 3
Article content
Sweden’s electricity comes mainly from hydropower, nuclear power and wind power, with only a small fraction from gas. But with prices set on international markets, it has not escaped the continent-wide effects of the war in Ukraine on energy prices.
“A rise of over 100% feels brutal in itself. But the cost can be three or four times that,” Lindman Marko said, adding that this winter she plans to lower the thermostat at home, wear thermal clothing and go to the sauna at a local pool to warm up.
“Obviously, the more worried you are about, say, electricity prices, the more it’s going to affect how you vote,” she said.
Gasoline and food prices have also skyrocketed. The cost of butter has increased by around 25%, meat by 24% and cheese by around 22% this year, according to consumer price comparison site Matpriskollen.
Advertisement 4
Article content
Stockholm’s Stadsmission, a non-profit organization, stated that it had seen its membership in its Matmissionen subsidized grocery stores almost double in the first half of the year.
– It’s a broad group – maybe you’re retired, maybe you’re unemployed or maybe you haven’t lived in Sweden for a long time, says Johan Rindevall, who manages Matmissionen’s stores.
“40 percent of our new members this year have been families with children.”
Matmissionen sells food donated by large chains to members with a monthly income below SEK 11,200 at approximately 30% of the prices in stores.
PROMISES, PROMISES
The two major political blocs are rushing out promises to help consumers fight the effects of inflation.
Prime Minister Magdalena Andersson’s Social Democratic government has pledged up to 90 billion Swedish kronor ($8.36 billion) in subsidies to ease the pain of rising electricity bills for households and businesses, on top of billions in subsidies paid out last winter.
Advertisement 5
Article content
The Moderates, the leading centre-right opposition party, have promised lower income taxes and lower fuel prices, which they say would mean an extra SEK 24,000 for working families each year.
They intend to pay for measures by cutting foreign aid and benefits such as unemployment and health insurance.
As a long-term solution to the energy crisis, the centre-right is planning loan guarantees of up to SEK 400 billion to support the construction of new nuclear power plants. Like Germany, Sweden has closed reactors in recent years.
The Left Party, loosely part of the centre-left bloc, wants to stop electricity exports.
Opinion polls do not provide a clear answer as to which political promises have caught the voters’ eyes, but the ruling Social Democrats have at least avoided the blame for the gloomy economic outlook.
Advertisement 6
Article content
The two main blocs run neck and neck even though the Social Democrats are easily the largest party.
HARD CHOICES
Whoever wins may find it difficult to live up to all their promises.
NIER, a government think tank, expects that the next administration will have around SEK 120 billion to play with in the form of extra spending.
Some of that is already earmarked for defense spending as Sweden raises its budget to 2% of GDP from the current 1% to support its bid to join NATO, and for other measures such as strengthening healthcare and hiring more police to tackle gang crime .
Meanwhile, GDP growth is expected to slow to around 0.4% next year, according to a government forecast, and even stop altogether if inflation worsens and interest rates rise more than now expected.
Advertisement 7
Article content
An increased national debt would “fuel inflation and further raise interest rates and could also threaten public finances, threaten welfare and pensions,” warned Finance Minister Mikael Damberg last month.
Diverting cash to support households will leave less for structural reforms needed to support the transition to a “green” economy, to rebuild the welfare state and to address skills shortages in the labor market.
The Social Democrats’ plan to subsidize the energy bill is to be paid from a fund which, among other things, is to be used to expand the transmission capacity – one of the major reasons for record high domestic electricity prices in Sweden.
The right’s plans to reduce the amount of biofuel in petrol and diesel, making them cheaper, will also make it harder to reach the country’s net zero emissions target by 2045.
It is also uncertain which policies will win approval from the next parliament, given that even within the centre-left and right blocs there is great disagreement over what to do and how to pay for it.
“No responsible politician can say they will compensate for every price increase,” Andersson said last month. ($1 = 10.7646 Swedish kronor)
(Reporting by Simon Johnson Editing by Frances Kerry)