from Sputnik News:
Earlier this year, even the outgoing Swedish government admitted that a combination of high energy, food prices and rising interest rates is expected to stifle growth in the years ahead and undermine households’ purchasing power and, consequently, private consumption.
Inflation will impoverish Sweden and the country must accept a lower standard of living – a fact politicians must convey clearly to the population, Lars Heikensten, former head of the Central Bank and now chairman of the Fiscal Policy Council which evaluates government policy, has said.
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If the fiscal policy framework is to be maintained, major compromises must be made by the next government, Heikensten told Swedish Radio. Instead, he said, the parties tipped to form the next government after the general election in September, have issued “counterproductive” election pledges that risk fueling inflation further. He said that promises of compensation for higher petrol and electricity prices, which both the outgoing and the incoming governments have made, were particularly unhelpful.
“This will strengthen demand for electricity and petrol, but what we need to do in this situation is to save electricity and petrol to bring the price down,” Heikensten emphasized.
Furthermore, the proposed measures risk hitting the housing market, which has been dubbed the holy cow and the very engine of the Swedish economy, bolstering employment and fueling numerous tax deductions. However, severe price drops in the housing market are now expected to lead to an increase in unemployment, which in turn will promote more price drops when interest and amortization cannot be paid by unemployed mortgage holders, resulting in a vicious circle.
