Sweden expands scheme to help cover wages for workers as pandemic hits

STOCKHOLM, April 14 (Reuters) - Sweden’s government said on Tuesday it would increase the amount it would pay to companies to cover salaries of employees who had been put on reduced hours, as it fights to lessen the effects of the COVID-19 outbreak on the economy.

The government said in a statement it would temporarily cover up to 86% of wage and labour tax costs for workers who were partially laid off.

The government announced a more limited scheme at the start of April with employees able to work 40% of their hours and retain the bulk of their salary. Workers will now be able to go down to 20%.

It said measures could cost up to 127 billion crowns ($12.74 billion) if 700,000 workers were on the scheme.

“Then we would be in a very very serious and deep economic crisis and it would be reasonable to use more of the muscles we have thanks to our low state debt to stimulate the economy,” Finance Minister Magdalena Andersson told a news conference.

If the scheme were to be used by around 180,000 workers, the cost would be around 32.7 billion crowns, the government said.

So far, the government has received 24,000 applications for wage support at an estimated cost of 9 billion crowns.

Unemployment in Sweden could reach 10% in the coming months if the current wave of lay-offs due to the outbreak of the novel coronavirus continues, the Labour Board said on Tuesday.

The government, which expects the economy to shrink 4% this year as a result of the virus outbreak, has already announced extra spending worth around 100 billion crowns as well as 550 billion to 600 billion in loans and guarantees to businesses.

($1 = 9.9650 Swedish crowns)

Reporting by Simon Johnson