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Last Updated: Monday, 11 September 2006, 13:32 GMT 14:32 UK
Beauty of Swedish model disputed
By Laurence Peter
BBC News, Malmo, Sweden

Children playing in Malmo
Swedes are generally proud of the country's family-friendly policies
Lagom - meaning "in moderation" - is a concept dear to most Swedes, and appropriately the centre-right Moderate Party is a strong contender in the 17 September general election.

It is spearheading the opposition to the Social Democrats, who have ruled Sweden for most of the last 70 years.

The Social Democrats see no reason to change a system that has delivered strong economic growth along with public sector benefits.

In the second quarter of 2006 growth reached 5.6% - the best rate for six years.

On top of that, the nine million Swedes enjoy high-quality public services and generous welfare benefits - funded largely by high levels of income tax, which ranges from 30% to 55%.

The large public sector accounts for 30% of all employees.

Battle for centre

According to Fredric Karen, senior editor at the Svenska Dagbladet newspaper, "voters are not much concerned about taxes, but they want changes - to make more of their own choices about daycare centres, schools, hospitals".

We need to deregulate the labour market. We need to accept that some people have success and get rich
Tore Robertsson, president, Skydds AB
Recognising that the lagom tradition runs deep, the centre-right alliance is not planning to impose an Anglo-Saxon model of tax cuts and large-scale privatisations.

Unlike the last election in 2002, the Moderates have downplayed the issue of tax cuts and have advocated more support for schools and the elderly.

But the need to create more jobs tops the agenda in this election and the centre-right alliance insists that labour market reform is long overdue.

The Confederation of Swedish Enterprise, a body representing about 55,000 Swedish companies, argues that "the Swedish model is capsizing" and asks "who will right it?"

It says it is too easy for trade unions to strike and that the very threat of labour unrest makes employers take short-term measures to avert a conflict - measures that can undermine their competitiveness.

Consensus rules

Centralised wage negotiations and strong trade unions are traditional features of the Swedish economy.

Swedish voters in Malmo give their views.

The tradition of consensus goes back as far as the 1938 Saltsjoebaden Agreement, which regulated relations between employers and unions. Nearly 80% of Swedish workers are currently union members.

The Moderate Party argues that, with an ageing population, Sweden - like its European neighbours - needs a more dynamic labour market.

The party wants to reduce unemployment benefit, saying "there has to be a bigger difference between working and not working".

There has been fierce argument about the true unemployment figure in the run-up to the election, with the opposition accusing the government of massaging the statistics.

The official rate in the first half of 2006 was 5.7%, but another 2.7% who were on job training programmes were not included.

According to a study by the McKinsey Global Institute think-tank this year, the unemployment rate is actually about 15%.

Structural change

Henrik Brors, political editor of the Dagens Nyheter newspaper, notes that in addition "the sick leave figures are very high - it is said Sweden has the healthiest people but the longest sick queues in the world".

Election poster for Feminist Initiative
The Feminist Initiative party says sex discrimination is still rife
Tore Robertsson, president of a Malmo-based defence firm called Skydds, told BBC News that "there won't be a liberal revolution in Scandinavia - we won't come close to the Anglo-Saxon idea - but we might change a bit, so that we encourage more people to start companies, to start working".

"We need to deregulate the labour market. We need to accept that some people have success and get rich."

Such talk does not go down well with the Swedish Trade Union Confederation (LO), representing nearly two million "blue collar" workers.

Lena Westelund, an LO economist, told BBC News that "cutting unemployment benefit would lead to a downward spiral in demand - the unemployed would have less money and that could affect confidence".

Such cuts would also increase workers' resistance to structural change in the economy, she warns.

She believes the Swedish model is well adapted for tough international competition and can continue delivering growth.

"Collectively agreed wages have flexibility - the wages are adjustable," she said.

"The individual worker needs to have good security so he doesn't resist social change. There are opportunities for retraining in the way our model is designed. We're not protecting jobs, we're protecting individuals."

Swedish tolerance has been strained in this election campaign, marred by a scandal involving some opposition Liberal Party activists who hacked into the Social Democrats' computer system.

Despite the Liberals' crisis many observers still expect the race to be uncomfortably close for the Social Democrats, and a German-style "grand coalition" is a real possibility.

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