Sweden Plans $2 Billion in Extra Defense Spending from 2022-2025

Sweden’s Social Democrat-Green Party minority government is planning to plow SEK20 billion ($2 billion) into defense between 2022 and 2025. The government, led by Prime Minister Stefan Lofven, intends to finance the defense budgetary boost via a bank tax. The initiative was announced in statements from both the finance and defense ministries on August 31. The coalition government has sought, and received, backing for its initiative from the Centre and Liberal parties in Parliament.

Few details on how the tax will be structured were forthcoming in the announcement, though Sweden’s finance minister, Magdalena Andersson, stated the additional defense monies would be derived from taxes imposed on the financial sector. The taxing of banks has been a cornerstone of Social Democrat policy plans since 2014, though to date it has yet to be implemented. But with the tax tied to re-investment in defense to make it more politically acceptable, the opposition Center and Liberal parties are more willing to throw their support behind the plan.

The step to increase defense spending – enough to drive it up from its current level of 1 percent of GDP to 1.5 percent by 2025 – comes as Sweden continues to re-focus its energies toward defense of the homeland. With tensions with Russia rising in the Baltic Sea region, Swedish politicians are no longer turning a blind eye to Kremlin behavior. Instead, the total defense concept – featuring both military and civil elements – that formed the core of Sweden’s Cold War footing is slowly being resurrected.

But while the increase in funding is indeed congruent with the cross-party Defense Committee’s white paper on development of Sweden’s defense released back in mid-May,  the effects, as is often the case with such planning papers, are downstream and therefore susceptible to political vagaries.

Though the cross-party consensus and the reality of Russia’s opportunism in the Baltic region serve as a political adhesive, the next election looms in 2023 at the latest. Therefore, political unity and willpower will be necessary if Sweden is to rebuild a defense capability, which had severely eroded from the late 1990s until quite recently.

Events such as Russia’s cyber attacks on Estonian government servers in 2007, its military intervention into Georgia in 2008, and a military exercise in March 2013 that simulated an air attack on Sweden did little to motivate Swedish politicians to refocus their energies on defense.  Instead they voiced the obligatory concerns and then promptly turned their attention to other issues, despite Russia’s annexation of the Crimean Peninsula from Ukraine in early 2014 and the penetration in the fall of 2014 of the Stockholm archipelago by a mysterious submarine the Swedish military suspected of being  of Russian origin .

The first minority Lofven government took office in October 2014 proposing to “boost” Swedish defense investment by $120 million per year. Instead, a symbolic defense budget increase that did little to plug capability gaps and a range of basic requirements were presented and approved in early 2015. The new spending package called for an increase of $236 million per year on average from 2016 through 2020. This again fell way short of what would be required for the neutral nation to conduct critical air-sea surveillance and rapid response duties while rebuilding its overall defense capabilities.

Around September 2016, bolstered by a study commissioned by the government entitled “Security in a New Era” which noted that any Russian attempt to exert military force in the Baltic region would likely draw Sweden into conflict, the Swedish armed forces began to re-militarize the strategic Baltic Sea island of Gotland.

Now with the latest Defense Commission white paper calling for defense spending to increase to SEK84 billion ($8.6 billion) by 2025 – enough to bring it up to the targeted 1.5 percent of GDP allocation – Sweden’s government is finally beginning to act more vigorously on the military investment side.

About Daniel Darling

Dan Darling is a senior analyst covering both the Europe and Asia-Pacific regions for Forecast International's International Military Markets group.

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