Swedish public finances have shown considerable cycles, in response to economic activity, during the last decades. The budget cycles have been asymmetric in the sense that surpluses during expansions have been smaller than deficits during recessions. This has led to a trend increase in public debt. The crisis in Swedish public finances at the beginning of the 1990s has been solved in the short term. It is less clear that the long-term trend has changed. The EMU convergence criteria and the "peer pressure" within the union comprise restrictions on public debt and budget balance. The medium-term target of a general government net lending of 2 per cent of GDP is a response to this. Our first main conclusion is that this target is not ambitious enough in the short term, while it is too ambitious in the long term – the trend will be excessively reversed in the long term. A "top-down" budget process and expenditure ceilings are intended to help in reaching the target. Our second main conclusion is that, while measures like these may be effective inreducing expenditure in the short term when they are introduced, the long term efficiency is less clear. In the long term there needs to be strong political commitment to the necessity of fiscal discipline. "Straitjackets" cannot work alone, and particularly not against the intentions of the political decision-makers.
2000. no 4, 81-102 p.