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The Swedish government, due to present its budget next month, will encourage investment in sectors like housing to support ultra-loose monetary policy, Finance Minister Magdalena Andersson said on Monday. The AAA-rated economy, seen as a safe haven from the eurozone, has one of the strongest growth rates in Europe. That has pushed up the crown, feeding into stagnant prices and fears of Japan-style deflation.
The central bank has taken the historic step of adopting negative rates and launching bond purchases - steps not deemed necessary even during the 2008-2009 crisis. Some argue there is little more the central bank can do.
Andersson said the government, which consists of her Social Democrats and the Green Party, should make sure interest rate cuts were used to boost investment.
"What we can do is to ensure the low interest rates will be reflected in the real economy," she told Reuters in an interview.
She said it was paramount that more homes were built than the current forecast of 42,500 new homes this year, but would not say if that would translate into new money in the budget.
The centre-left government said last week it wanted to drop a long-standing budget surplus target to free up cash for investment in areas such as housing, infrastructure and education while avoiding tax rises.
Andersson will present the spring budget mid-April. The government lost a budget vote in December when the anti-immigration Sweden Democrats voted for an opposition budget, prompting mainstream parties to agree on a deal to sideline that party.
She said the upcoming budget bill would contain "big reforms" and that jobs, education and environment would be priorities. Reforms would have to be fully financed, she said.
The Riksbank's measures have been outgunned by the ECB's "big bazooka" of 60 billion euros a month in bond purchases and the Swedish crown has strengthened over the last month, raising fears a recent uptick in inflation could be scotched at birth.

Copyright Reuters, 2015

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