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UPDATE 1-Sweden finmin: need UK to stay at heart of Europe

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(/GlobalPost)

* Borg warns of danger of Britain sliding out of European Union

* Says Sweden ready to keep up stimulative policies

* Expresses concerns about two-tier Europe forming

By Alistair Smout and Marc Jones

LONDON, Jan 16 (Reuters) - Swedish Finance Minister Anders Borg said on Wednesday it was crucial to keep Britain at the centre of the European Union and warned it would be a serious mistake if it left the bloc.

Speaking in London at an event organised by the London School of Economics, Borg said he was worried to see the European project becoming less and less popular in the UK.

"We would not like to see the UK sliding away from the European Union."

"For Europe, for Sweden, for the UK it is a key interest to keep Britain's perspective in the European Union."

Sweden like Britain belongs to the European Union but has not adopted the euro.

While eager to prevent a splintering of Europe, Borg warned that the string of proposals put forward to bolster the 17-member euro bloc could lead to a two-tier hierarchy in the region.

"I'm very sceptical of a fiscal union. I don't believe in a euro budget, I don't believe in euro bonds, I don't believe in a finance minister of the euro zone, and I definitely don't believe that the project will be more popular because we are forcing people to bail out banks in other countries."

He also said the economic crisis may not be over, adding that he expected Sweden to post meagre economic growth this year and that the government was ready to continue, if needed, with its stimulus policies in 2014.

"It would be dangerous to call the crisis over. It is quite clear we have political uncertainty in the U.S. that might come back to the market... We might come back to uncertainties over some member states that come back to the forefront of the market," Borg said.

The Swedish Finance Ministry recently forecast the country's economy grew just 0.9 percent in 2012 and sees it expanding only 1.1 percent this year, down sharply from September forecasts of 1.6 percent and 2.7 percent.

Borg declined to say how much support Sweden could provide to its economy if growth remained lacklustre, adding only that it would decide later in the year when the budget was set.

"This year Sweden has done a stimulus programme of 8 percentage points of GDP, and we are ready to continue those kinds of policies in 2014."

Despite his concerns about the dampening impact on the economy of the strong Swedish crown, he noted the country's central bank could be ahead of its European neighbours in winding in its accommodative policies.

The Riksbank cut interest rates to 1.0 percent from 1.25 percent last month but is becoming increasingly concerned about rising house prices and high debt among Swedish citizens.

"Monetary policy in Sweden will have to be very cautious moving forward. It is more likely the Riksbank will be early on when it comes to pulling back stimulus measures than other central banks," Borg said.

http://www.globalpost.com/dispatch/news/thomson-reuters/130116/update-1-sweden-finmin-need-uk-stay-at-heart-europe