Swedish leaders have decided to borrow €27.5 billion for a major military investment that Ulf Kristersson describes as the “biggest rearmament since the Cold War“.
Daniel Waldenström is a professor of economics, and he thinks it is perfectly reasonable that future generations of Swedes will have to pay for the current governments project.
The Moderate-led government has announced that Sweden will spend 3.5 percent of GDP on defense – compared to the current 2.4 percent. To achieve this, they intend to borrow the equivalent of €4,600 per Swede of working age – a total of €27.5 billion.
Waldenström, who works at the Institute for Business Research, does not think the sum is anything to argue about – and points out that during the Second World War, Sweden went from spending 2% to 10% of GDP on defense in a single year.
He acknowledges, however, that the military effort will mean cuts in several areas.
– It means that we will have to reprioritize our spending. We will have to cut back on some things and give more priority to civilian and military preparedness and war capacity. This will mean reducing or eliminating some spending, otherwise we cannot afford it.
“Will take a bigger hit”
The fact that the huge investment is financed with borrowed money is not strange but fully justified, as long as you have a clear plan about what you need to borrow for.
– Only after we say, ‘this is how much money we will need for this expenditure’. Instead of starting by collecting money and putting it in a bag for unclear purposes and then risking that politicians will be able to ‘draw’ from this bag for lots of things that we had not intended. I would say that is a risk in such cases that we can avoid.
Since the money will be paid back with interest in the future, taxes will also have to be raised in the future, and Waldenström is clear that future generations of Swedes will be forced to finance the decisions made today.
– It’s clear that future generations will have to take a bigger hit than if we were to just go on this year’s budget. But it also seems reasonable that future generations should help finance reconstruction because it will also benefit them.
– It’s simply that they will have to pay a bit more tax as a result of this. They will have to pay taxes to finance our repayment of these loans, concludes the professor.