New Job Target For Swedish Central Bank Faces Huge Legal Obstacles

 The new Swedish government's hopes of introducing an employment goal for the central bank are likely to be stillborn as any relevant adjustments would require EU treaty changes, legal experts say.

New center-left Prime Minister Stefan Lofven and Finance Minister Magdalena Andersson both said on taking office Oct. 3 that they wanted to introduce the target to get the central bank more involved in the fight against unemployment.

Lofven's Social Democrats won the election on promises to create new jobs and aims for Sweden to have the lowest unemployment in the EU by 2020 - a title currently held by Austria at around 5 percent to Sweden's 8 percent.

Lofven, in a Reuters interview before the election, pointed to the Federal Reserve's dual mandate of maximum employment and stable prices when discussing an addition to the inflation target.

But the government might be in for a much tougher job than most people think.

"He must initiate a treaty change, so it will be very difficult," said Eric Frieberg, the Riksbank's General Counsel.

He added that the central bank's role as an independent inflation fighter was well protected while the lawmakers had its hands pretty much tied on this issue.

The EU treaty spells out that the primary objective for the union's central banks "shall be to maintain price stability".

Carl Fredrik Bergstrom, professor of European Law at Uppsala University, says changing the treaty for something like this is "quite unrealistic".

"In a strictly legal sense it is fiendishly hard to change the treaties," he said.

Any change to the treaties of the European Union requires the approval of all 28 member countries. Changes are very rare and often include referendums in some of the countries.

"If you still want to do it, what will determine if you succeed is how strong political support there is for the change, and that political support needs to be total," Bergstrom said.

    "It is enough that you have one bullheaded government that is opposing it, and it is over. Then it is not happening."

The legally binding preparatory works for the Riksbank Act says the bank is to "support the objectives of the general economic policy with the purpose of achieving sustainable growth and high employment", although not at the expense of the inflation target.

The government could possibly opt to move the part about growth and employment to the Riksbank Act itself, although that would be more of an empty gesture, Riksbank's Frieberg said.

"Then there is no change, that is valid already today. It is a waste of time and ink," he said.

And adding only jobs but not economic growth in general to the Act to show jobs are more important might also "spark a discussion" on the legality of doing so, Frieberg said.

The Riksbank has drawn heavy criticism for setting its 2 percent inflation target aside in favor of a policy of keeping rates higher than warranted by inflation alone in order to stem ballooning household debt.

A spokesman for Lofven had no immediate comment.

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