Spain and Italy should take measures to reinforce growth amid renewed turmoil over European government finances, Swedish Finance Minister Anders Borg said.
Spain will need to deliver more measures, “particularly when it comes to the growth-side of the economy,” Borg said in an interview on Bloomberg TV.
Renewed concerns over Spain’s economy and deficits sent Spanish bond yields surging last week. European officials travel to Washington this week seeking a bigger global war chest to combat the debt crisis as Spain’s government battles to quell renewed market turmoil over its finances.
“They do have a deficit problem but they also have a regulatory burden and lack of competitiveness in their private sector that should be dealt with,” Borg said. “They have been ambitious when it comes to the labor market but I would see an alternative both for them and for Italy to start to think about what they can do to reinforce the growth forces.”
The Swedish government today cut its growth forecast for the largest Nordic economy to 0.4 percent, less than half its previous prediction, and estimated an expansion of 3.3 percent next year. The government also said it expects a budget deficit this year, before finances improve in 2013.
“We should see some better growth in the years to come but obviously, I mean, if the uncertainty in Spain and the risks considering the political process in Italy go on we’re also prepared for that,” he said.
Sweden’s economy shrank at the end of last year as slumping demand from Europe reduced exports. Prime Minister Fredrik Reinfeldt ’s minority-government, which won a second four-year term in 2010, has scrapped plans for more income tax cuts after lowering taxes five times since taking power in 2006.
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