INTERVIEW: Sweden's PM - signs of EU crisis easing

STOCKHOLM Mon Feb 6, 2012 2:00pm IST

Sweden's Prime Minister Fredrik Reinfeldt arrives at a European Union summit in Brussels January 30, 2012. REUTERS/Eric Vidal

Sweden's Prime Minister Fredrik Reinfeldt arrives at a European Union summit in Brussels January 30, 2012.

Credit: Reuters/Eric Vidal

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STOCKHOLM (Reuters) - There are signs the European debt crisis is easing but more structural reforms, such as cutting state subsidies, are needed in southern and central Europe, Swedish Prime Minister Fredrik Reinfeldt said on Friday.

The Nordic region's biggest economy is set for a slowdown this year as weak European demand hits the key export sector, but Reinfeldt told Reuters he was against any short term stimuli to boost what will be near stagnant GDP growth in 2012.

"I think the shift in the ECB just before Christmas has been very important because it has eased the tension of the international system in Europe," Reinfeldt said, referring to the European Central Bank's flooding of banks with cheap money.

"I think it is a good message now coming from many countries which are shifting to more clear reforms."

But Reinfeldt, head of a minority four-party centre-right coalition, said south Europe, especially, must speed up reforms.

"The question to answer is everyone going home and doing what they should? No, they are not. They are not implementing all of these measures that we are talking (about), that the (European) Commission are presenting."

"Still there is too much of a view in parts of central and southern Europe that you should try to give subsidies to the companies as they look now -- as if all the jobs we had are the ones we should keep. I believe more in mobility."

SWEDEN NO TO EURO

Swedes rejected the adoption of the euro in a 2003 referendum and there is little appetite for joining amid the euro crisis. But unlike Britain, Sweden has said it will back a EU budget pact aimed at restoring market confidence.

Despite being out of the euro, Sweden's views carry weight due to its widely-respected sound management of public finances.

Europe's debt crisis appeared to have choked off Sweden's growth in the fourth quarter. Sweden's trade surplus narrowed in December, manufacturing confidence fell and unemployment rose, painting a gloomy picture of the economy at the end of the year.

The government has forecast growth of 1.3 percent this year, but many think this is too optimistic, One influential think-tank NIER said Sweden may not see any growth this year. It has previously forecast an expansion of 0.6 percent in 2012.

"We are not ready to put a new figure yet, but it's pretty clear that the demand in Sweden has gone down," Reinfeldt said.

"At this time we still believe that we have a growth figure on plus. We can discuss how much, but it's not a contraction. So I don't see the same need for short sighted stimuli."

"Sweden should not join the others, we should be on the safe side, showing public finances in good orders."

Reinfeldt hinted there could be a fifth round of tax cuts before the next general election - he has won electoral support for his careful cutting of taxes and trimming of the welfare stare to help reduce public debt.

"I would like to do that (a fifth tax deduction), but I will be very responsible because I've promised the Swedish people that my first concern is public finances."

"It might push on into the election year before we will be able to propose that."

(Editing by Ron Askew)

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