UPDATE 2-Sweden wavers on EU fiscal pact, could join UK

Tue Dec 13, 2011 11:23am EST

Related Topics

* PM says unclear if will sign up to EU agreement

* Opposition Social Democrats say won't back pact

* Sweden opposes financial transactions tax

* Inches closer to UK's post-summit stance

By Patrick Lannin and Simon Johnson

STOCKHOLM, Dec 13 (Reuters) - Sweden said on Tuesday it is uncertain of signing up to a European pact on budget discipline, raising prospects it could join Britain on the sidelines of a fiscal reform drive the EU executive hopes to set in motion by March.

Prime Minister Fredrik Reinfeldt told reporters it was too early to say how a parliamentary vote on the pact, thrashed out at an EU summit on Friday, would pan out.

"I would not speculate," he said. "To my mind it is very clear that we do not have all the facts on the table and unless we have that, it is tough to make a final verdict.

"Let's stay open, let's keep our contacts also with the Social Democratic Party and hopefully we can have the same position when we arrive at the March summit next year."

Reinfeldt, who leads a minority government, would need broader backing to secure parliamentary approval for joining the pact, something the Social Democrats - the biggest opposition party - have shown no sign of giving.

"We say 'no' to what the summit came up with," Social Democrat leader Hakan Juholt told reporters. "We will not go into this (the euro zone) by the backdoor," he added.

In 2003, 56 percent of Swedes voted against adopting the euro in a referendum. Relative economic success and the euro zone crisis has hardened people's attitudes, with a poll on Tuesday showing that 80 percent of Swedes were now opposed.

All 27 EU states apart from Britain agreed at Friday's summit in Brussels last week that they would pursue deeper fiscal integration as part of efforts to tackle the euro zone debt crisis.

But doubts over whether Sweden will in fact back the fiscal reforms threaten to undermine efforts by European Council President Herman Van Rompuy to get the pact finalised across the continent by the spring.

Stockholm's wavering also offers a measure of support to UK Prime Minister David Cameron, left looking increasingly isolated within Europe since refusing to agree to push the tougher budget rules after failing to win special treatment for London's financial services industry.

'NO' TO FINANCIAL TAX

Sweden unambiguously lined up with Britain as well as the Czech Republic - another EU state outside the euro zone - in strongly opposing a new EU financial transaction tax.

The draft law proposes a bloc-wide tax on financial transactions such as stocks, bonds and derivatives from January 2014.

"The proposal is poorly thought through and ill-founded," Sweden's debt office, which oversees the management of Sweden's borrowings, said on Tuesday in an unusually strongly worded statement.

The Debt Office, which manages debt for the state, said the tax would worsen conditions to finance borrowings at a reasonable cost.

It said the tax wrongly identified transactions as a source of financial instability.

The proposed tax needs approval from all 27 EU states to become law. Britain is opposed, but euro zone countries may push ahead with a voluntary levy.

Premier Reinfeldt first raised doubts last Friday about whether his country - one of the best budget performers in the EU with low levels of debt and deficit - would join the fiscal pact, which seemed strongly focused on euro zone countries.

Social Democrat Juholt, who campaigned for a yes in the 2003 referendum, said he backed the idea that euro zone countries deepen their cooperation, which would help those outside the euro zone.

He also supported eventual Swedish adoption of the euro, though he did not see that question being taken up in the next few years.

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