Sweden Mulls New Economic Rulebook Citing ‘Acute Climate Crisis’

(Bloomberg) -- In the home of climate activist Greta Thunberg, a key government minister is calling for economic policy to be overhauled to acknowledge the dangerous pace at which the planet is overheating.

“In this acute climate crisis, we need to invest,” Asa Lindhagen, Sweden’s financial markets minister and a member of the Green Party, said in an interview. The existing framework for fiscal policy “is important for the government’s finances, but it’s also important that it’s adjusted to climate change, so that it doesn’t become a stumbling block for investments that are necessary.”

The comments reveal the anxiety felt by a growing number of politicians over the legacy they’ll leave if they don’t take more resolute steps to fight climate change. The European Union has already made clear its recovery plan will include a sizable chunk of green projects, and has launched the world’s biggest green bond program to help finance its goals. That’s as scientists warn that time is running out to save the planet from a climate disaster as temperatures rise much faster than previously feared. 

Lindhagen wants the government to end its dedication to budget surpluses as it prepares to unveil its proposal for 2022. Sweden currently targets a surplus of 0.33% of gross domestic product over the business cycle.

Talks to ratchet up spending come amid a phase of considerable political instability. Prime Minister Stefan Lofven, battle-worn after a series of legislative crises, has announced he won’t be seeking re-election when Swedes go to the polls next year. That’s as the country grows more anxious about a range of controversial topics spanning immigration to violent crime to health care. 

Finance Minister Magdalena Andersson, a Social Democrat who’s widely seen as Lofven’s natural successor, has said she’s willing to move away from a budget-surplus target and over to a balanced-budget target. But Lindhagen says there’s scope to go even further and to add to Sweden’s debt level, which is currently well below the average in the European Union.

A review of Sweden’s fiscal policy is currently planned for 2026. Lindhagen says the latest assessment from the United Nations’ Intergovernmental Panel on Climate Change makes clear that’s too late for meaningful action.

“The IPCC report is crystal clear; we need to invest now, we have very limited time,” she said. “We need a climate-adjusted framework, and we need to do what it takes. There is no other way forward.”

©2021 Bloomberg L.P.