Edited by Thane Peterson

Swedish Prime Minister Gouran Persson has played a key role in bringing his country's economy under control as Finance Minister from 1994 to 1996 and in his present job. Persson recently talked about his goals in an interview with Business Week's London bureau chief, Stanley Reed, at the Prime Minister's Stockholm office.

On his austerity program:

We had to do this, and now we can see that in 1998 we will have a balanced budget. The outcome has been much more favorable than anticipated. We have stronger public finances than Germany.

On plans to increase public spending:

To have an economic policy that takes the deficit from 12% [of gross domestic product] to a balanced budget in four years is rather harsh. We will have a surplus in 1998 if we don't take these resources and use them for health and education. We have been extremely hard toward those sectors. Perhaps we have been too hard. We have really done something, and we have paid a high political price for that.

On complaints from business leaders about high taxes and labor costs:

They are always complaining. [But] we are now being attacked by Germany and other countries that say Sweden's taxes on companies are too low. Business leaders have the task of [lowering wages] in the upcoming negotiations with the trade unions. There is a connection between unemployment and high salaries. If unemployment falls, we will have better public finances because we pay huge amounts in unemployment benefits. If we have that space in public finance, I can see tax reductions -- not for companies but for individuals.

On Sweden's competitiveness:

We must realize that without excellence in educational systems we will soon begin to lose our competitiveness. We have too few young students who choose science in the system today. That is a problem for a country with such a highly developed technical industry.

On joining the European Monetary Union:

It is still an open question. We have reached the convergence criteria; that's the first stage. The second is that we must discuss what type of European Union this monetary union will create. Is it possible to have a central bank on a European level and fiscal policy on the national level? Or will you in the long run also have [decisions on] fiscal policy, taxes, and spending on the European level? Those are questions to be discussed before we take our decision in October.