Sweden Finance Minister: Crucial that Italy Continues Reforms

STOCKHOLM--Fourth-quarter gross domestic product figures indicate that Sweden's economy is stabilizing, but it is crucial for Europe's economic development that Italy resolves its political situation and continues to implement reforms, Finance Minister Anders Borg said Friday.

"We are seeing a certain stabilization in the Swedish economy," Mr. Borg said, after official data showed fourth- quarter Swedish economic output was unchanged compared with the previous quarter. Economists polled by Dow Jones Newswires had expected a quarterly contraction of 0.8%.

However, Mr. Borg said "you have to be aware that political downside risks [in the euro zone] are still clear and may resurge." Highlighting the risks arising from this week's election outcome in Italy, he said forming a government there will be very complicated.

The minister added it is crucial that Italy continues to implement economic reforms.

"It is not enough to hold on to what the Monti government did," Mr. Borg said. It is obvious that a stronger reform program is needed, said the finance minister, but "it's unclear how that will be possible," after the election, which failed to produce a strong parliamentary majority.

As Sweden relies heavily on its export industry, and with 35% of its exports going to euro-zone countries, the country's economy is very sensitive to the impact of developments elsewhere in the monetary union.

In 2012, Sweden's economic growth slowed to 0.8% from 3.7% in 2011, as demand for its export products fell in the debt-ridden euro zone.

Write to Niclas Rolander at niclas.rolander@dowjones.com

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