Sweden

VII - Six-Pack

The ‘Six-Pack’ is a package of six legislative measures (five regulations and one directive) improving the Economic governance in the EU. The Commission made the original proposals in September 2010. After negotiations between the Council and the European Parliament, the package was adopted in November 2011 and entered into force on December 13, 2011. Part of the ‘Six-Pack’ measures applies only to the Eurozone member states (see the individual titles below).        
The ‘Six-Pack’ measures reinforce the Stability and Growth Pact (SGP), among others by introducing a new Macroeconomic Imbalances Procedure, new sanctions (for Eurozone member states) and reversed qualified majority voting. Also, there is more attention for the debt-criterion.
(
http://ec.europa.eu/economy_finance/economic_governance/index_en.htm)

Negotiation
VII.1
What positions did Sweden adopt in the negotiation of the ‘Six-Pack’, in particular in relation to the implications of the ‘Six-Pack’ for (budgetary) sovereignty, constitutional law
, socio-economic fundamental rights, and the budgetary process?

The Swedish government detailed its views in a memorandum issued to inform the Riksdag.[1] The Government welcomed all six Commission proposals. It was of the view that financial policy should continue to be within the sphere of Member State competence, but that the national legislation in several Member States was not sufficient to secure a responsible financial policy in the EU.

The Commission proposals were discussed in the Committee of Finance, which supported the Government’s Opinion.[2] A representative from the Left Party was dissenting. She argued that it was ultimately a question of democracy and national sovereignty. By introducing sanctions, the people in some Member States would suffer for something that they had not caused themselves.[3]

Directive 2011/85/EU       
Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States

Implementation
VII.2
What measures are being taken to implement Directive 2011/85/EU on requirements for budgetary frameworks (required before 31 December 2013, article 15 Directive 2011/85/EU)?

In December 2012, the Government decided to set up a parliamentary ‘Inquiry Body’ (called the ‘Budget Process Committee’), which has the task to review the budget process in light of Directive 2011/85/EU.[4] The Budget Process Committee presented an interim report on the 3rd of May 2013,[5] and the final results on the 3rd of October 2013.[6] The interim report includes the proposed amendments of the Swedish legal framework in light of the EU Directive. The Committee emphasises that the Swedish budgetary framework ‘has proven to function well and in line with the Directive’. It concludes:

‘The Committee’s overall assessment is that the Swedish budgetary framework fulfils the requirements of the EU Directive in all areas, except for the requirement concerning regular, objective and comprehensive evaluations of the Government’s macroeconomic and budgetary forecasts. The Committee therefore proposes an amendment to the Budget Act (2011:203) to the effect that the Government is obliged to regularly furnish evaluations of the forecasts presented in the Budget Bill and the Spring Fiscal Policy Bill.’

The Budget Process Committee suggested only some minor amendments of the Budget Act (ordinary legislation). It pointed out:

‘Certain requirements in the EU Directive have no equivalent in Swedish law or legislative history. However, it is the Committee’s view that Sweden, through its practice, fulfils almost all of these requirements. This practice is assessed as being so well-established that deviations from the established procedure are judged likely to generate public criticism, from such sources as independent monitors of the application of the budgetary framework by the Riksdag and the Government. This warrants that the practice can be viewed as being sufficiently binding that most of these requirements can also be considered to be fulfilled.’[7]

The Budget Process Committee’s report was only one of the first steps in the legislative procedure: the inquiry stage. This is the stage when the issue is analysed and examined by an Inquiry Body, which, in this case, operates independently of the Government. The Inquiry Bodies can be of different kinds; in this case, a parliamentary Inquiry Body was set up in order to gain broad political support in the Parliament. The Budget Process Committee’s report was the result of this first step.

The next step is the ‘referral process’, where the report is sent out to stakeholders such as government agencies, interest groups, and local authorities. Through this process, the Government gets input to its draft proposals (if the referral bodies are very critical to the report, the Government may even choose not to draft a proposal). Thereafter, the responsible Ministry of Government (in this case, the Ministry of Finance) drafts a bill.

The Government presented its proposal in September 2013.[8] In its proposal, the Government explained that the Swedish legislation already conforms to most of the obligations set up in the EU Directive (this was also the view of the Budget Process Committee). In the area of forecasts, however, the Government was of the view that it was necessary to introduce some minor additional measures and clarifications in the Budget Act (2011:303) (which is an ordinary legal act). The Government proposed introducing an obligation to provide evaluations of the forecasts presented in the ‘Spring Fiscal Policy Bill’ (presented by April every year) and the ‘Budget Bill’ (presented by September every year). The Government also proposed to codify some current practice. The Government suggested that the Budget Act should specify that the Government shall provide forecasts of the macroeconomic development and the revenues, expenditure and debts in the public sector. In the Spring Fiscal Policy Bill, the Government is also to present an assessment of the long-term sustainability of general Government finances.[9]

The Parliament approved the Government’s Proposal on December 18, 2013.[10]

Implementation difficulties 
VII.3
What political/legal difficulties
did Sweden encounter in the implementation process, in particular in relation to implications of the directive for (budgetary) sovereignty, constitutional law and the budgetary process?

 As explained in Question VII.2, the ‘Budget Process Committee’ (which consisted of representatives from all political parties in the Parliament) came to the conclusion that Swedish legislation and practice already conforms to the Directive. Only minor changes in the budget law were needed; this might explain the lack of debates on (budgetary) sovereignty and constitutional law. It should be noted, however, that the Left Party’s representative issued a dissenting opinion attached to the Committee report.[11] He argued that the Member States’ budgetary frameworks should be decided on a national level and that the Directive is a sign of a more ‘federal EU’, which is something the Left Party opposes.

It could also be noted that during the ‘referral process’, some stakeholders opposed the Budget Process Committee’s view that the existence of ‘practice’ was an appropriate way to implement the Directive.[12]

Macroeconomic and budgetary forecasts     
VII.4
What institution will be responsible for producing macroeconomic and budgetary forecasts (article 4(5) Directive 2011/85/EU)? What institution will conduct an unbiased and comprehensive evaluation of these forecasts (article 4(6) Directive 2011/85/EU)?

In the view of the Budget Process Committee (see Question VII.2), ‘the Swedish budgetary framework fulfils the requirements of the EU Directive in all areas, except for the requirement concerning regular, objective and comprehensive evaluations of the Government’s macroeconomic and budgetary forecasts’. It is the Government that produces the forecasts (see Question II.1).

The Committee proposes an amendment of the Budget Act (2011:203), obliging the Government to regularly furnish evaluations of the forecasts. The Committee also proposes that the Government should be obliged to explain any significant differences relative to the forecasts produced by the European Commission. It further proposes to ‘somewhat clarify the regulations guiding the Government’s forecasts’, but the amendments of the Budget Act would only be minor. The Committee proposes that the Budget Act shall explicitly state that the Government is also to present forecasts of macroeconomic developments and public sector revenues, expenditures and debts. This is, however, in line with current practice, and the amendment of the Budget Act would only clarify status quo.

Assessments of the Government’s forecasts are also conducted by the National Institute of Economic Research (Konjunkturinstitutet)[13] and the Swedish Fiscal Policy Council (Finanspolitiska rådet, see also Question VII.5).

Fiscal Council  
VII.5
Does Sweden have in place an independent Fiscal Council (article 6(1) Directive 2011/85/EU: ‘independent bodies or bodies endowed with functional autonomy vis-à-vis the fiscal authorities of the Member States’)? What are its main characteristics? Does Sweden have to create (or adapt) a Fiscal Council in order to implement Directive 2011/85/EU?

In the view of the Budget Process Committee (see Question VII.2), the Swedish framework fulfils the requirements of the Directive concerning independent monitoring of the fiscal rules.[14] The Budget Act (2011:203) provides that the Swedish National Audit Office (Riksrevisionen)[15] has the task to examine the central government annual report and to present a follow-up of the budget policy targets adopted by the Riksdag.

The Swedish National Audit Office (NAO) is an independent authority under the Parliament. Its independence is protected by the Constitution. Its task is to ensure that the Parliament receives an independent audit of the state finances. In addition, it audits the government authorities’ efficiency and engages in international operations and collaborates with other Audit Institutions around the world. Three Auditors General, who are appointed by the Parliament for a term of 7 years, manage the NAO. The NAO submits financial audit reports to the Government and Annual Reports to the Parliament. It also submits follow-up reports on the findings and recommendations in the audit reports.

The Budget Process Committee also emphasises the role of the Swedish Fiscal Policy Council (FPC; Finanspolitiska Rådet),[16] which shall perform an independent evaluation of the Swedish Government’s fiscal policy. Its main task is to evaluate whether the government’s policies are consistent with the fiscal policy targets.[17] The FPC publishes a report on the Swedish fiscal policy in May each year.[18]

The FPC was established in August 2007, as a Government Agency. It consists of six members, which are appointed by the Government for a period of 3 years (6 years for the FPC President). It should be pointed out that in carrying out their responsibilities, Government Agencies should not take instructions from the Government; they are considered legally and politically independent.

The Budget Process Committee does not propose any adaption of these two bodies.

Note: On the FPC’s website, there is a link to Professor Simon Wren-Lewis list of Fiscal Policy Councils in different countries (and also academic papers regarding the presence of Fiscal Policy Councils).[19]

Regulation No 1176/2011 on the prevention and correction of macroeconomic imbalances 
(
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32011R1176:EN:NOT)

MEIP difficulties    
VII.6
What political/legal difficulties
did Sweden encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law, socio-economic fundamental rights, and the budgetary process?

Prior to the adoption of the six-pack, three of Sweden’s biggest trade-unions sent a formal letter to the Swedish Parliament’s EU Committee, arguing that the Commission’s proposal (COM(2010)527 final) implied that the EU would have a say in setting the Swedish level of income. They strongly opposed such a development.

Regulation No 1175/2011 on strengthening budgetary surveillance positions    
(
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1997R1466:20111213:EN:PDF)

MTO procedure
VII.7
What changes to the rules on the budgetary process are made to accommodate the amended Medium-term Budgetary Objective (MTO) Procedure?

In its interim report, the Budget Process Committee (see Question VII.2) also considered the fact that there are no provisions which clarify the Riksdag’s responsibility to ensure there is a medium-term perspective. However, for the last 15 years, there is an established practice to use of medium-term objectives. The Committee considers that explicit provisions can be introduced in the Riksdag Act (Constitutional instrument) to ‘better reflect’ this practice. It suggests that such provisions could govern how the Riksdag would decide on the targets and also the relationship between the targets and annual budgetary decisions. The Committee concludes that these questions should be addressed in the Committee’s main report and not in its interim report (see Question VII.2).

European semester 
VII.8
What changes have to be made to the rules and practices on the national budgetary timeline to implement the new rules on a European Semester for economic policy coordination (section 1-A, article 2-a consolidated Regulation 1466/97)?

The Budget Process Committee (see Question VII.2) has in its interim report also considered the question of whether it is necessary to clarify the relationship between the national budget process and the European Semester.[20] It pointed out that while there is a limited time for coordination between the national budget process and the European Semester, the Government’s practice has now evolved in a way so that consistency can be ensured. The Committee further points out that the Government informs and consult with the Riksdag on the European Semester in accordance with the relevant provisions of the Constitution (in particular, the Instrument of Government and the provisions of the Riksdag Act), and that no further regulation is needed in this regard.

MTO difficulties        
VII.9
What political/legal difficulties
did Sweden encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?

No debates so far, see explanation under Question VII.2.

Respect MTO     
VII.10
How is respect of the Medium-term Budgetary Objective included in the national budgetary framework (section 1A, article 2a consolidated Regulation 1466/97)?

The Budget Act (2011:203) provides the MTOs.

Current MTO    
VII.11
What is Sweden’s current Medium-term Budgetary Objective (section 1A, article 2a consolidated Regulation 1466/97)? When will it be revised?

There are two main budget policy objectives. First, the Swedish Budget Act (2011:203) provides that the Government has to submit proposals to the Riksdag on surplus targets (Chapter 2, Article 1), which has a medium-term definition. The surplus target was introduced in the year of 2000, and since then, it has remained unchanged. The budget surplus is set to 1 % of GDP on average over the business cycle. The Government aims to maintain this level as long as it is necessary to enable general government finances to develop in a sustainable way. This provides a considerable margin for increased expenditure and lower tax revenue during a recession. The Government can run a structural deficit during a recession provided that this is counterweight by a correspondingly greater surplus during the next upturn. Over time, the 1 % level can also contribute to a reduction of the central government debt.

In order to clarify the difference between the national framework and the obligations imposed on Sweden as a Member of the EU, the convergence programme 2012 makes a distinction between the surplus target and the MTO. Sweden’s MTO is set to minus 1 % of GDP in accordance with estimations by the European Commission. However, this is seen as a minimum requirement; Sweden’s own objective, the surplus target of 1 % of GDP, is considered more ambitious.

Second, the Budget Act provides that the Government in its Budget Bill (see Question II.1) shall propose expenditure ceilings for the third year ahead (Chapter 2, Article 2). This means that the budget for each year is constrained by the three previous years. The system with expenditure ceilings have been applied since 1997, but it only became mandatory in 2010. The Budget Act does not explicitly provide that the Riksdag must adopt the Government’s proposals, but this is assumed.

The Budget Act also provides that the Government (in the Budget Bill) presents an estimate for the distribution of expenditures between expenditure areas. This shall be done in the second and third budget years ahead.

As stated in Question VII.7, there are no plans to revise the Medium-term Budgetary Objectives.

Adoption MTO  
VII.12
By what institution and through what procedure is Sweden’s Medium-term Budgetary Objective adopted and incorporated in the stability programme (Eurozone, article 3(2)(a) consolidated Regulation 1466/97)?

As explained in Question VII.11, it is the Budget Act that provides the Medium-term Budgetary Objectives. This has the status of ordinary law and can be amended by the Riksdag. It is the Government that implements the objectives, after the approval of the Riksdag.

Regulation No 1177/2011 on the excessive deficit procedure

(http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1997R1467:20111213:EN:PDF)

EDP difficulties           
VII.13
What political/legal difficulties
did Sweden encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?

Not relevant for Sweden.

Regulation No 1173/2011 on effective enforcement of budgetary surveillance
(
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32011R1173:EN:NOT)
Sanctions
VII.14
What political/legal difficulties
did Sweden encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?

Not relevant for Sweden.

General changes     
VII.15
What further changes have to be made to the rules on the budgetary process in order to comply with the Six-Pack rules?

Not relevant for Sweden.

Miscellaneous
VII.16
What other information is relevant with regard to Sweden and the Six-Pack?

No other relevant information.

[1] See Faktapromemoria 2010/11:FPM7, Kommissionens förslag om förstärkt ekonomisk styrning Available at: http://www.riksdagen.se/sv/Dokument-Lagar/EU/Fakta-PM-om-EU-forslag/Kommissionens-forslag-om-forst_GY06FPM7/.

[2] Utskottsdokument 2010/11:243AF3, Protokoll utskottssammanträde 2010/11:4, October 26, 2010.

[3] See the dissenting opinion by Ulla Andersson (V).

[4] Dir. 2012:124.

[5] “Budgetramverket – uppfyller det EU:s direktiv?”, SOU 2013:32 (published in the Swedish Government Official Reports series) http://www.riksdagen.se/sv/Dokument-Lagar/Utredningar/Statens-offentliga-utredningar/Budgetramverket—uppfyller-de_H1B332/?html=true. For a summary of the report in English, see http://www.regeringen.se/content/1/c6/21/61/43/62e1236f.pdf

[6] “En utvecklad budgetprocess – ökad tydlighet och struktur,” SOU 2013:73. For a summary in English, see A developed Budget Process – Increased Transparency and Structure, summary

SOU 2013:73. Available at: http://www.regeringen.se/content/1/c6/22/60/75/7fe3c7e7.pdf

[7] See the English Summary of the Budget Process Committee’s interim report on the Swedish implementation of Council Directive 2011/85/EU, page 10.

[8] The Government’s Proposal (Budgetpropositionen för 2014), Prop. 2013/14:1, September 18, available at: http://www.regeringen.se/content/1/c6/22/37/09/c4d88fcf.pdf at Para 12.1, p. 655.

[9] The Government submitted its proposal to the (‘permanent’) parliamentary Committee on the Constitution and the Committee of Finance. See Konstitutionsutskottet betänkande 2013/14:KU1, available at: http://www.riksdagen.se/sv/Dokument-Lagar/Utskottens-dokument/Betankanden/Utgiftsomrade-1-Rikets-styrels_H101KU1/?html=true ; and Finansutskottets yttrande, Yttrande 2013/14:FiU10, Ändring i Budgetlagen, available at: http://www.riksdagen.se/sv/Dokument-Lagar/Utskottens-dokument/Yttranden/ndring-i-budgetlagen_H105FiU2y/ The Committee on the Constitution submitted an Opinion to the chamber of the Parliament for approval, suggesting that the Parliament should approve the Government’s Proposal.

[10] Riksdagsskrivelse 2013/14:139.

[11] See the dissenting opinion by Jacob Johnson (V).

[12] See the opinion of the Swedish Institute for European Policy Studies, available at: http://www.sieps.se/sites/default/files/Budgetramverket_uppfyllerdetEUdirektiv.pdf.

.[13] See the webpage of the National Audit Office: http://www.konj.se/698.html

[14] See the English Summary of the Budget Process Committee’s interim report on the Swedish implementation of Council Directive 2011/85/EU, page 19.

[15] See the webpage of the Swedish National Audit Office:  http://www.riksrevisionen.se/en/Start/About-us/

[16] See the webpage of the Swedish Fiscal Policy Council: http://www.finanspolitiskaradet.se/english/swedishfiscalpolicycouncil/abouttheswedishfpc.4.6f04e222115f0dd09ea8000950.html

[17] The FPC shall also examine the clarity of the Government’s budget bill, evaluate the quality of the economic forecasts on which the Government’s assessments are based, and stimulate public debate on economic policy.

[18] Förordning med instruktion för Finanspolitiska Rådet (SFS 2011:446).

[19] See the Swedish Fiscal Policy Council’s website: http://www.finanspolitiskaradet.se/english/swedishfiscalpolicycouncil/fiscalpolicycouncilsabroad.4.6f6062da12c1b40043e800010053.html and Professor Simon Wren-Lewis’s website https://sites.google.com/site/sjqwrenlewis/fiscal-councils.

[20] See the English Summary of the Budget Process Committee’s interim report on the Swedish implementation of Council Directive 2011/85/EU, page 21.