Swedish poll battles send krona tumbling

THE battle for the Swedish taxpayer reached fever pitch yesterday, a month to the day before the general election. Fears that the Social Democrats will take the country back to high taxation and public spending, when they almost certainly regain power next month, sent the krona plummeting to its lowest level ever against the German mark.

The Social Democrats, with about 50 per cent of support in opinion polls before the official start of the election campaign this weekend, refuse to explain how they would curb the budget deficit when in power. Carl Bildt's conservative-led government, on a spending-cut spree since it took office in 1991, argues that further cuts cannot wait and blames the opposition for refusing to ease the onslaught on the currency.

The krona has dropped below the psychological benchmark of five to the mark this week - compared to 3.65 less than two years ago. One headline shouted: 'Sweden lives dangerously - without a vigorous sanitation policy, financial crisis looms'.

The Social Democrats, due to present their election manifesto today, have ducked questions on how they will make the cuts necessary to fund election pledges such as job-creation schemes. Their leader, Ingvar Carlsson, would only say that 'we will declare in very concrete terms what we believe must be done', adding this would cover both fiscal policy, to cut the budget deficit, as well as measures to spur growth. Among the latter is a measure to create 90,000 jobs in the public sector, under the slogan 'At the moment people get paid to not work. They could be paid to work instead.' The Social Democrats also plan to introduce a 'protection tax' of five additional per cent on those earning more than pounds 18,000 a year.

Mr Bildt's supporters argue that there is no real demand for the 90,000 proposed additional workers in health, education, child-care and transport and that Mr Carlsson is misleading the electorate by refusing to admit the need for cuts elsewhere to fund them.

Goran Persson, the Social Democratic spokesman on finance, yesterday began to speak the language of the markets, when he argued that a change in government would bring down interest rates. Sweden could not accept the current level of interest rates 'for another single day', he said.

Adding to the uncertainty is the referendum on entry to the European Union on 13 November. Again, support for membership hovers around 50 per cent, although all the main parties are firmly in favour.

At a time when Swedes are reverting to their traditional concerns with pensions, jobs and security, a continuation of Mr Bildt's austerity policies might frighten them off the venture into the unknown in Brussels.

EU observers say the Swedes are in for a rude shock there. 'They'll suddenly discover they are only one of 15 countries and being terribly clever and rational does not always help you here,' said one. 'Not when you're sitting across the table from a Spaniard who's furious about fish.'