Wednesday, the Swedish government allocated SEK 10 billion in its supplementary budget to active measures and unemployment insurance.

In a press statement released in connection with the 2009 Spring Fiscal Policy Bill, the finance ministry said resources for labor market policy are being strengthened in order to prevent persistent high unemployment.

According to the ministry, total labor market policy expenditures are set to increase by over SEK 20 billion between 2008 and 2009 and by about SEK 100 billion for a few years after that.

The government also announced additional financial support for the local government sector to reduce the impact of the financial crisis on jobs and key parts of the welfare systems. Accordingly, a temporary counter-cyclical support of SEK 7 billion for 2010 was announced, which would be paid in December 2009.

Further, the government revealed an increase of SEK 5 billion in the central government grant to municipalities and county councils in 2011 and 2012.

Along with the measures presented earlier in the 2009 Budget Bill and afterwards, the government is thus allocating a total of SEK 45 billion in 2009 and SEK 60 billion in 2010 to combat the crisis, the ministry said.

In a situation where we are experiencing the weakest growth since the Second World War and unemployment is rising dramatically, the Government has chosen a clear path marked by responsibility for public finances, for jobs and for the core welfare activities, Minister for Finance Anders Borg said.

The government will continue to monitor the situation to see if additional measures are needed, the ministry said. However, the government sees little scope for additional reforms, the statement read.

On April 1, the finance ministry had lowered GDP estimates for this year and the next two years citing lower demand due to economic crisis. The ministry expects the economy to contract 4.2% in 2009, a sharp revision from its December forecast of a 0.8% decline. It lowered 2010 growth outlook to just 0.2% from 1.5% expansion initially projected. Borg forecast the unemployment rate to rise to 8.9% this year and to increase until 2011 to reach 11.7%.

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