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Sweden plans major reform of welfare system

Sweden has announced plans to curtail the cradle-to-grave welfare system for which the country has been famous for almost 60 years. In measures intended to halt a crippling loss of confidence in Sweden's ailing economy, the Social Democratic government at weekend meetings unveiled a wide-ranging reform program.

Proposals include cutting the state bureaucracy by 10 percent, reducing sickness benefits and reducing state involvement in nationalized companies to make them more profitable.

"This will affect all of society," Prime Minister Ingvar Carlsson said. "A negative economic trend cannot be reversed with cosmetic measures."

The government also said it would seek Parliament's endorsement of European Community membership, after long insisting that joining the EC would compromise Sweden's long-cherished neutrality.

"What you see is an end of that history _ the fall of the Swedish model and the start of Sweden's entry to the European model," economist Per-Martin Meyerson said.

What that means, Meyerson said, is sharply reducing state involvement in the economy, as well as reforming taxes and other measures to increase incentives to work and save.

The centerpiece of the "Swedish model" has been full employment backed by generous social benefits financed by heavy taxes. The model depended on broad agreements between industry and labor to provide jobs at non-inflationary wages.

But consensus has weakened since the 1970s. Labor split into factions, each demanding its own settlement. Companies, burdened by rising costs, moved factories abroad to survive.

Companies also expanded in the European Community to ensure access to its markets, regardless of whether Sweden joined.

This year, the inflation rate has reached 11.5 percent, and annual growth is forecast at a sickly 1.1 percent, far behind that of other developed European nations.

Economists and opposition politicians said the measures were a step in the right direction but denounced them as too little, too late to stave off further economic decline. Liberal Party leader Bengt Westerberg called the package "an almost shocking disappointment."

But others said the Social Democrats, who have ruled Sweden for all but six years since 1932, are committed to further changes.

"There is no way back for the Social Democrats," said Olof Petersson, a political scientist at Uppsala University. "They must go further."

Carlsson, explaining the reform package, said, "Sweden has chosen to be an open nation in the international economy. That means we, in all cases, must follow a policy that wins national respect as well as international credibility."

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