SWEDEN – The Swedish government should take advantage of its current budget surplus to safeguard the future of public pensions and healthcare provision by injecting up to e50bn into the country’s AP funds over the next ten to fifteen years, according to LO, Sweden’s largest public and private sector union.

In a forthcoming book examining possible Swedish EMU membership, LO chief economist and head of the policy department, Dan Andersson, argues that the impending demographic shock allied to a less flexible monetary policy under EMU could lead to funding difficulties ahead.
“We learnt from Denmark that a lot of people are asking what will happen to their pensions if they join up to monetary union.
“ We know that in ten or 15 years we will have a demographic shock and so we are trying to construct a sound, long-term financial policy to give the possibility that the public sector could finance pensions and healthcare.
“ Under monetary union if public funds run short we can’t use monetary policy to help – therefore we should save much stronger.”

Andersson believes the system could be tagged on to the existing AP-fonden framework
“ I’m not proposing an insurance system, just a buffer fund of say e50bn within the government, which could be allocating a couple of hundred million krone each to the existing AP funds each year.
“ We already have the institutions with experience in fund management and what I am suggesting is to add to these.”

He notes that Sweden is currently running a budget surplus of 2.5%-3%, one of the strongest in Europe, and argues that it is easier to decrease a fund in the future than to rely on a bail out through government debt.