The Government calculates that in 1997 the deficit will be 2.1 per cent and that the target of eliminating it in 1998 will be achieved. •  With the improved confidence in budget and monetary policy, together with the tighter interest rate policy from the second half of 1994 up to the end of 1995, it has been possible to check the earlier inflationary tendencies and bring inflation expectations down appreciably. Sweden is now among the countries in Europe with the lowest inflation rate regardless of which measure one uses. This, in turn, paved the way for a gradual lowering of our main instrumental rate - the repo rate - in 1996. •  What used to be an almost chronic deficit on current account has now been turned into a substantial surplus. This is reducing Sweden’s external debt, which also contributes to greater financial stability. •  Many structural measures have been implemented since the late 1980s. There are signs that, together with economic policy’s focus on stability, this has reduced the economy’s inflation propensity and raised potential output. Against this background, the direction of Sweden’s economic policy contrasts sharply with the unstable, inflationary path we experienced in the 1970s and ’80s and which contributed to the recession in the early ’90s, which was the worst for over sixty years.
Average life expectancy continued to rise sharply over the period, however. When it then became increasingly obvious during the 1990s that the ATP system was also going to be under-financed, a number of years of political debate passed before a majority of the Swedish parliament could agree on a new pension system that would be sustainable in the long term. With the implementation of the premium-reserve pension reform of 1998, a system was created that indeed is not guaranteed to result in high pensions for pension savers, but that at least will enable the public finances to bear the costs as an increasing number of people retire. However, Sweden is not the only country to be facing a difficult demographic challenge, quite the reverse. In the euro area, some countries will have a considerably larger frequency of retirement in the coming decades, which means that in 30 years there will be twice the number of pensioners per worker compared with today. Nevertheless, until recently pension reforms in most euro area countries have been conspicuous by their absence. In addition, the majority of these countries have only used a system whereby current pensioners are paid directly by current workers, and no funds have been reserved. The fact that this is unsustainable in the long run has been obvious for a long period. Yet, it has been politically impossible to bring about the kind of reforms that we in Sweden succeeded in introducing through political accord.