UPDATE 3-Swedish opposition unveils benefit, tax hike plans

* Centre-left to hike jobless benefits, pensions

* To revive wealth tax in 2012, cut defence spending

* Remains committed to public spending ceiling

(Adds government, business federation comment)

By Oskar von Bahr and Niklas Pollard

STOCKHOLM, May 3 (BestGrowthStock) – Sweden’s centre-left opposition
on Monday promised more spending on the welfare state funded by
tax rises as it aimed to turn an opinion poll lead into an
election victory in September.

The “red-green” alliance of the Social Democrats, Green
Party and Left Party have criticised tax cuts made by Fredrik
Reinfeldt’s centre-right government coalition as increasing
social gaps without bringing the jobs Reinfeldt promised.

Swedes, who have mostly kept the Social Democrats in power
since World War Two, seem to have accepted the message and the
opposition has held strong opinion poll leads, analysts said.

“Our message is clear — full employment, welfare before new
large tax cuts and strong public finances,” the opposition said
in a shadow budget.

Swedes have long cherished their welfare state — dubbed the
Swedish Model — seeing it as protecting jobs and high living
standards even during times of crisis.

Reinfeldt’s 2006 election victory came after 10 years of
Social Democrat rule and after he brought his Moderate Party
closer to the centre. He also portrayed the centre-right as the
“new working man’s” party with pledges to create more jobs.

But unemployment is now at 9 percent due to the global
crisis, compared with 6 percent when he came to office.

The Social Democrat-led opposition said spending of 34
billion crowns ($4.68 billion) over 2011 and 2012 would be
balanced by the same amount of tax rises and spending cuts.

It said it would create 100,000 jobs and education places
and bring higher benefits for the unemployed and sick. It also
topped government promises for tax cuts for pensioners and
pledged 12 billion crowns to local authorities.

REVERSING TAX CUTS

Some of the funding would come from an unwinding for higher
earners of Reinfeldt’s centre-piece income tax cuts, which he
made at the same time as pledging to protect the welfare state.

“Those who earn more should also contribute by paying more,
we think that it is reasonable,” said Thomas Ostros, Social
Democrat finance spokesman and potential finance minister.

Finance Minister Anders Borg said the opposition’s plans
were “dangerous” and put a nascent economic recovery at risk.

“This means costs rise, companies have less money to use on
new jobs while the households get less to spend,” he told a news
conference. “The wheels revolve slower.”

Sweden’s business lobby also criticised the proposals,
saying they would produce a “tax shock” for companies and hold
back job creation, while organised labour, a traditional ally of
the Social Democrats, lauded the plans.

The latest poll gave the centre-left bloc led by Social
Democrat leader, Mona Sahlin, 51.2 percent versus the
government’s 43.1 percent. This has been mainly due to more
support for the Greens. [ID:nLDE62E0Z4]

“The main brunt of tax increases will burden the richer
portion of voters, which is a fairly small proportion of
Swedes,” said Soren Holmberg, political science professor at
Gothenburg University.

“The opposition is trying to create the image that they want
more justice in terms of carrying the burden because rich
people, according to the opposition, have benefitted more from
the government’s tax cuts.”

Financial market analysts saw the opposition plans as fairly
neutral. “There are no huge differences between the (governing)
alliance and the opposition,” Nordea analyst Annika Winsth said.

Stock Market Advice

UPDATE 3-Swedish opposition unveils benefit, tax hike plans