| STOCKHOLM, June 2
STOCKHOLM, June 2 When Swedish Prime Minister
Fredrik Reinfeldt celebrated his 45th birthday, his finance
minister gave him a framed graph showing the tax burden falling
to 45 percent of GDP for the first time in decades. It still
hangs in his office.
The gift reflected the celebratory mood of a centre-right
government boosting economic growth while reducing taxes and
cutting unemployment and sickness benefits, shrinking a welfare
state that is among the most generous in the world.
Three years later, engulfed in the worst riots in decades,
that optimism is questioned. The torching of cars and battles
with masked youths from poor immigrant suburbs has exposed
another side of Sweden's welfare reform.
Still, given globalisation and the need to be competitive,
the fact that people live longer and that state finances need to
be kept sound, Sweden and other Nordic states face more reforms,
a lite version of austerity forced on many European nations.
"We are far more aware that Sweden is part of a competitive
environment," said Minister for Social Security Ulf Kristersson.
Sweden is eyeing more cuts to pensions and sickness
benefits, but it is not alone in the region. Denmark too is
cutting benefits. Finland is under pressure to raise the pension
age. Even oil rich Norway has concerns it is becoming
But Sweden faces political headwinds before a 2014 election.
Cuts have pushed the Danish government to historic poll lows. In
Norway, reforms are on a back burner.
THE NEW SWEDISH MARKET MODEL
For a glimpse of a market-oriented culture that increasingly
permeates Sweden's state, look no further than St. Goran's
hospital, Stockholm's only privately run emergency hospital.
From the offices of chief executive Britta Wallgren, it can
be difficult to know she is talking about running a hospital. A
video compares emergency checkups with Formula 1 pit stops and
her conversation is littered with words like "lean" and "flows".
Stockholm council pays St Goran's, privatised in 1999 and
owned by private health provider Capio, on a formula based on
the number of patients and treatments.
The contract has been renewed this year. Costs are around 8
percent lower than other Stockholm hospitals. But they lead
other hospitals in many indicators, including reducing hospital
infections and waiting times.
"We believe the drive for efficiency also means a drive for
quality," said Wallgren. She pointed out how simple changes in
treatment - making sure teams included specialists as well as
nurses - cut costs and reduced waiting times.
She is proud of one reform in particular - placing yellow
stickers on floors to locate defibrillator saved some 40 hours a
week of wasted time searching for them.
The Nordics enjoy some of the world's most generous welfare.
Sweden has subsidised, universal child care with up to 480 days
of parental leave per child. It spends 12 percent of GDP on
family, housing, sickness and labour market policies, compared
with an OECD average of under 9 percent. Denmark is at 14
Reforms have helped economic growth outstrip most of Europe
and accelerated entry of private companies into the public
sector. Private firms run a fifth of hospital services and many
publicly-funded schools. Stockholm has ostentatious wealth -
Michelin star restaurants, top end fashion - rare decades ago.
But Sweden also has the fastest growing inequality of any
OECD nation - so much so that last year one group offered "class
war safaris" so Swedes could see how the other half lives.
"The extent of the cuts would surprise many people outside
Sweden," said Ola Pettersson, economist at the LO trade union
federation. "We can see the early signs of a backlash."
The market model has also been overshadowed by scandal,
including reports workers at homes for the elderly run by one
private equity firm were told to weigh adult diapers and not to
change them until they were full in order to keep costs down.
Recently, hundreds of nurse also protested over poor
resources for maternity wards.
Reinfeldt's government has been forced by popular anger to
close tax loopholes used by private equity companies, some of
them active in running health services. Some centre-left
opposition parties want to ban profits being made by companies
in tax-payer funded sectors.
In immigrant suburbs where May's riots exploded, benefits
cuts have come, but not jobs. At the same time, a growing
minority of Swedes complain about the cost of asylum seekers on
welfare. Foreign-born unemployed rates, at 16 percent, compare
with 6 percent for native Swedes.
"Conditions for receiving welfare are now much tougher, so
it's very hard to get it, and even when you do the payments are
meagre," said Mia Paarni a local opposition politician in the IT
hub of Kista, close to May's riots.
Poverty rates have risen in Sweden, being most pronounced
among immigrants and single mothers.
In the university town of Uppsala, Charlotte Bjornstrom says
she was paid sick leave for 10 years, with a host of ailments,
before reforms introduced a two-year limit, forcing many to
transfer to unemployment payments and look for a job.
"That was torture, especially the first time, because I was
so ill then and I didn't know what it was," she said.
Denmark, nearly in recession, has been forced to make
changes to its welfare system. Two highly publicised social
benefits scandals accelerated the reform.
One involved "Poor Carina", a single mother of two picked
for a television programme meant to expose hardship. But that
backfired when it turned out she received around $2,700 a month
- more than many full-time workers.
Later in the year, a man labelled "Lazy Robert" further
fuelled the debate when he told his story of being on welfare
since 2001 with no plans to take a lower-paid job.
While Denmark enjoys a triple-A credit rating, at least 18
percent of the population is over 65.
But reforms such as cutting unemployment benefits from four
years to two years and reducing student grants and early
retirement scheme have proved costly in political terms.
Prime Minister Helle Thorning-Schmidt's standing is under 20
percent in polls, a historic low.
"The crisis is not a small detour that can be solved through
a fiscal fix or a quick cuts," she said in parliament on
Wednesday. "We live in a new reality where all tools must be
pulled out of the toolbox in our bid to change Denmark."
In Norway, worries have emerged that oil wealth and generous
welfare means many can afford not to work and that
competitiveness is suffering from rising wages.
Norwegians have even added a new word to their vocabulary -
"to nave", or to get benefits from NAV, the labour and welfare
agency. It was named word of the year for 2012 after it became
popular shorthand among youngsters, as in: "I am going to 'nave'
this year rather than work."
But while there have been efforts to rein in high sick leave
levels, tax rates have remained elevated and the opposition
Conservatives, likely to win September elections, see little
impetus for major reforms.
"I don't think we'll make any major changes to our welfare
benefits, such as sick leave, as long as the economy is faring
well," said Conservative leader Erna Solberg.
That aspect of faring well is one which is key to future
reforms in the Nordic countries.
While finances for now are better than elsewhere in Europe,
long-term challenges remain to maintain traditions of a strong,
protective state, said Stephanie Janet, head of the Denmark and
Sweden desk at the OECD economics department.
"While they do not have the urgency of many European
countries, reforms are something they need to do in order to
ensure they can continue with their welfare model," she said.