Sweden has been social democratic for a very long time with just one exception – your own conservative government in 1991–1994. Do you think the moderate right-wing coalition now in power is representing a long-term trend or is it again just a brief exception?
I think we’ve had the trend now for quite a number of decades – social democrats have clearly lost their dominant position. I think it is already a different pattern. It is very difficult to see that they could come back to power on their own; they’d have to go to a coalition and, at the same time, the non-socialists have solidified themselves. Going back to the myth of the 1950s, the 1960s and the 1970s, we should not forget either that at least until 1970 the success of the Social Democratic Party was dependent on the constitution which overrepresented the biggest party. Since we changed the constitution, we’ve had more or less constant changes of government.
Is Sweden thus losing the strongly social democratic image that it has on the international arena?
I think we now have an image of a country that has been able to undertake a rather successful course during the last 20 years – trimming the welfare state, becoming more competitive to a certain extent by liberalising the economy and reducing taxes. We have taken down public expenditure’s share of GDP quite substantially. We have liberalised parts of the economy quite substantially and, as a result, have now a more competitive economy. And we have somewhat changed the balance in our welfare system in a more competitive way.
How do you manage to combine the welfare state and a balanced budget?
As a matter of fact, the European economic forecast that the European Commission published the other day shows that according to the present trends, Sweden is going to be the only country that has a surplus of the public sector by next year – not a big one, but we have one. How do we achieve it? Well, by prudent fiscal management and also by changing the structure of the tax system so that it doesn’t impair competitiveness, which means that we’ve got fairly good growth figures. That also makes it possible, of course, to sustain social spending.
Do you agree with what Alexander Stubb said today [May 12] at the LMC [Lennart Meri Conference] that there was no conflict between growth and austerity?
Oh, absolutely. As a matter of fact, if you look at the record in Europe, the countries with fiscal consolidation have growth, while the countries with big deficits are in crisis. So, I think it’s fairly clear-cut.
There has been some talk about ‘two-speed Europe’ in connection with the crisis and the ability of countries to keep their budgets in balance. What do you think of the idea?
I think that should be avoided as far as possible. I think the core of what we are trying to do in terms of the economy is, of course, the single market. When you start to break up or fracture the single market, everyone will lose. Within the single market, not everyone is in the euro zone. That’s OK, although we are all moving in that direction over time, but to preserve the integrity of the single market is absolutely the key to the European project.
Is it possible that Sweden will join the euro zone any time soon or are you going to stay outside?
History takes a long time. At the moment, it is not on the agenda for somewhat obvious reasons. But in the long term, I think it will be. Swedish economy is very highly integrated with those parts of the euro zone that are doing well. So, the long-term lot is clearly that. But in the short term, it is not on the agenda.
Sweden is known as a cosy, well-organised, safe society, but at the same time you have had two prominent politicians murdered within a few decades. Do you think the concept of ‘folkhem’ applies to Sweden any more? Can Sweden still be described as a safe and cosy ‘bird-nest’?
Well, we are part of the world for better and for worse, primarily for better. The concept that you refer to as ‘folkhem’ is a concept that I personally associate with an age that is gone because it basically means ‘one people, one home’. We are now a much more multifaceted society and a much more vibrant society as well than I think is encompassed by that particular concept.
Has the election of Sverigedemokraterna to parliament changed Swedish politics in any significant way? Do you see it as a worrying sign? Or is it a disappearing trend?
Well, that, of course, remains to be seen. If you look at it from a broader perspective, I am rather surprised that they are as weak as they are. If you look at the changes that have happened in Sweden during the last 20 years, there have been problems associated with that and the fact that there haven’t been more problems is remarkable.
You wrote beautifully in your blog when President Ilves visited Sweden at the beginning of 2011 of how his parents had once come to Sweden as refugees and now he was coming as a president of a free republic. Could you predict this development or foresee today’s Estonia 20 years ago?
We could dream about it, which we did. Could we predict it in a sense that it was certain? No, it wasn’t certain. Things could have gone wrong as well. There were quite a lot of hurdles, quite a lot of difficulties on the road, but it was a dream – no question about it. The fact that it’s been realised is to a major extent due to the far-sighted and wise Estonian policies during these decades.
Estonians like to think about Estonia as part of the Nordic countries. Would the Swedes agree? How well do the Swedes generally know Estonia? Has anything in this sense changed in these 20 years?
Oh, clearly. During the latter Soviet decades, of course, Estonia was beyond the horizon in a sense. It was not entirely unknown, but to a large extent unknown. But then there has been a vast increase in contacts. So, it’s a very different situation now.
Sweden is the most important trade partner for Estonia, but in connection with the crisis there was some criticism here about the Swedish banks making great profits here and then blaming the Baltic peoples when things went wrong. What have we both learnt from the crisis?
There was a credit expansion that went too far, that was really fuelled by the United States. That is really where the crisis had its origins. We tend to forget that. Then it was imported into Europe, including the Baltic states. But I think we managed to sort it out fairly well in our countries. We have preserved the balance. I’ve also said that from the point of view of the Baltic states, it was fortunate that it was the foreign, Swedish banks that really got into trouble – the recent examples we have in Lithuania, not in Estonia. So, from that point of view, the financial integration that we’ve had in the Nordic area has provided stability.
Regarding security and defence cooperation, in a recently published collection, Till bröders hjälp, there are different possible scenarios about military threats around the Baltic Sea and Sweden’s possible responses. Do you think Sweden would help us if we got into trouble?
Clearly, inside the European Union we have an obligation to help each other in different ways. Exactly what that would mean in exact situations, no one knows partly because we don’t want it to happen and partly because if it happens, it’s probably going to happen in a way that cannot be predicted. That is what history teaches us. But political solidarity in the European Union is clearly there.
Does the fact that Sweden is not a member of NATO have any influence here?
Not much, I would say. Of course, it has some influence in the legal sense; otherwise not necessarily that substantially. I just visited Tallinn Harbour during a NATO mine clearing operation (Open Spirit 2012); we have five Swedish ships participating there. So, our forces have a very close practical relationship with the NATO forces.
Do you regard Swedish NATO membership possible in a foreseeable future?
Not really, because to take such a step, it requires a fairly big national consensus and we don’t have that. At the same time, it has to be said that we don’t feel we need it that much at the moment. We have a level of integration that goes quite far. So, I could say that the need does not look that urgent at the moment, given the level of cooperation and integration that we de facto have. And we don’t have the required political consensus.
What about Finland? Some Estonian top politicians have recently pretty openly admitted that they would prefer Finland to be a NATO member. What is your opinion if you have any?
It is up to Finland to decide, but I think the same applies to Finland – that it requires a broad national consensus and I don’t really see that in the foreseeable future.
As you do have a tight cooperation with NATO, is there anything left of the ideal of political neutrality for which Sweden also has been known? Is the concept meaningful for Sweden any more?
No. I mean the concept of neutrality, that’s disappeared from our vocabulary since quite a number of years back because we are in a political alliance with 27 countries – soon to be 28 – of the European Union. The concept of neutrality doesn’t apply any longer.
Looking back a long way in history, how did you manage to avoid wars for 200 years?
Well, history was kinder to us than to our neighbours perhaps because of our geographical location. The last major wars we were involved in were the Napoleonic wars – then we lost Finland. Finland became part of the Russian empire for nearly a hundred years and then had to go through three wars to safeguard its independence. Norway was dragged into WWII for a number of reasons that we know quite well and Denmark was the way to Norway. And, of course, the fate of the Baltic nations is fairly well known. But it was a combination of factors – partly luck, partly the way history shaped itself – that made it possible for us to stay outside.
So, it’s more a matter of luck and circumstances than wise policies?
Primarily geographic location and the way the wars evolved.
Right after the LMC in Tallinn you will be on your way to the meeting of EU foreign ministers in Brussels. What is currently on the agenda? What are the expectations for that meeting at this time?
As these meetings take place every month, the agenda is very much the agenda of the day. I think Ukraine is going to be high up on the agenda; we’re very concerned with the developments there obviously. Syria is going to be high up on the agenda and discussions and preparations for the next summit between the EU and Russia coming up in June.
Is Sweden also taking part in the Chicago Summit as a NATO partner?
Well, sort of. We take part in the ISAF meeting, of course, because we have got quite substantial forces in Afghanistan. Then there is going to be a special meeting for the close partners of NATO as well.
Any hopes and expectations in connection with the summit?
I think it’s extremely important in Afghanistan that we have a credible political strategy for the future. The security situation, the security transition is one thing. I am less worried about that than I am about the political transition and about whether we have a sufficiently strong and coherent strategy for that.
I think it’s good that we’ll now establish a closer relation between NATO and those countries that are the most relevant of the partner countries of NATO. That’s a good step from the Swedish point of view. Therefore Chicago is important for Sweden.
President Ilves has emphasised that the ‘Nordic-Baltic 6’ have more in common between themselves than the EU-17 (the euro zone), even though some of the NB6 are outside the euro zone and NATO. This means that, in a way, regional identity offers stronger commonalities than the official institutions some of those countries belong to. Do you agree with that?
It is certainly the case. In the Nordic countries, we have very close cooperation with each other on a number of different issues. During the last 20 years, the Baltic countries have become more and more part of that. That’s fairly obvious: we are near by geographic terms, we have a fairly high level of economic integration and we see each other eye to eye on quite a number of different issues. We normally have the same approach to most issues and that makes it very natural to work closely together. For example, before every foreign ministers’ meeting, we have the Foreign Affairs Council – we have a breakfast between all of the Nordic and Baltic foreign ministers. And before every European Council meeting, the prime ministers and the presidents do the same.
Should regional cooperation be somehow institutionalised to reflect those de facto similarities more fully than so far?
No, because we’ve got too many institutions. I think it works very well within the institutions that we have – be that the EU, be that in NATO, in certain circles, whatever. We’ve got the Nordic Council and the Baltic Council and cooperation between them. I don’t think we need to set up any new structures now.
The title of the LMC 2012 was ‘The Future of Democratic Capitalism’. What is your opinion on that future?
I think the future of democratic capitalism is bright. What we’ve seen in the last 20 years has been a spectacular development in a number of different countries – when they started to open up their economies; when we started to expand global trade more rapidly – than we’ve seen before. We have also seen, as a matter of fact, an expansion of democracy. I mean it is not uniform; there have been setbacks. Not everyone is perfect. China is certainly not a democracy, but it is a far more open economy than it was 20 years ago. Accordingly, this leads to economic success.
I just came from Africa that is also part of that particular process. Africa is becoming a more mature, more equal partner to us. That is not uniform either. Zimbabwe is going backwards because it is a different kind of regime. But if you look at Botswana, Mauritius and whatever countries with representative governments, they have good economic development as well. So, I think the pattern is very clear and I think that is going to be the route for the future as well.
At the same time, the number of countries that Freedom House classifies as ‘free’ has reduced.
Somewhat. But if you look at it at a longer perspective, it is increasing. I mean you have ups and downs. But the long-term trend, I think, is distinctly up.
So, you don’t believe the claims about the decline of the West?
No. What you see is that other parts of the world are getting richer and better by adopting open societies and open economies, essentially our values and our interests. So that’s a good thing for us.
 Since 1970, Sweden has introduced a more proportional system of electoral representation, instead of the earlier two-chamber system in which the first chamber was indirectly elected by local governments. The new constitution was approved by the Riksdag in 1974. – Ed.