May 12, 2020 / 2:33 PM / 15 days ago

Breakingviews - Swedish virus outcomes will be hard to copy

A sign assures people that the bar is open during the coronavirus outbreak, outside a pub in Stockholm, Sweden March 26, 2020. Picture taken March 26, 2020.

LONDON (Reuters Breakingviews) - Sweden’s coronavirus choices are unique. The Scandinavian country is the only Western one not to impose a lockdown and will suffer less economic damage as a result. Others would struggle to emulate its example.

First, Sweden’s minority government relies on centre-left, centre-right and green parties to pass laws so there’s more political consensus around its pandemic policy than might be the case elsewhere. Second, public trust in the authorities meant guidelines on social distancing were largely followed without a lockdown.

Third, 56% of Swedish households are single occupants without children, by far the highest proportion in the European Union. Viral transmission among cohabitants is therefore less of a worry than, say, in Italy where intergenerational households are more common. That explains why Sweden’s Covid-19 death rate, of around 322 deaths for every million people, is substantially below the UK, Italy and Spain, which imposed full lockdowns.

Still, Sweden’s death toll is higher than its Nordic peers or Germany as a result of the trade-off to limit the economic damage. At least the bet paid off. Swedish GDP shrank 0.3% in the first quarter from the previous three months, less than a tenth of the pace at which the euro zone economy contracted. But other countries might not end up with the same outcome even if they copied Sweden’s virus response.

The generous welfare system makes it easy for Swedish workers to self-isolate without suffering financial hardship. Their country spends roughly a quarter of its GDP on social spending, among the highest in the Organisation for Economic Co-operation and Development, and compensates workers for the majority of wages if they are furloughed. This applies even to the self-employed.

And given public debt amounted to only 35% of GDP in 2019, fiscal policy had plenty of room to help the economy. The government last month announced a 39 billion Swedish crown ($4 billion) scheme to reimburse up to three-quarters of businesses’ fixed costs, based on lost turnover. That will limit layoffs and ensure a brisk recovery. Any country that wants to copy Sweden’s approach to lockdowns would have to replicate a lot more to end up with similar outcomes.

Breakingviews

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