STOCKHOLM: Sweden's government said on Tuesday it would launch a new round of tax cuts later this year, but would tread cautiously so as not to stimulate the country's high-performance economy into overheating.
The centre-right government also said it would raise capital requirements for banks and take steps to cool surging household borrowing as it looks to foster continued financial stability.
Sweden has bounced back quickly from its worst recession since World War Two and its public finances are robust, giving the country room to increase spending while much of the rest of Europe remains mired in debt.
Outlining its plans ahead of its spring budget, the minority government said it would cut taxes further from the start of next year after steady reductions over the last four years, assuming the economy remains robust.
The measures will be formalised in its autumn budget.
"Growth is high, public finances are strong and unemployment is falling. That gives us room for reforms," the leaders of the four government parties said in a signed article in daily Dagens Nyheter.
"At the same time, there is a risk that recovery will be disrupted by the development of imbalances."
The fiscal reforms will include lowering the threshold for state income taxes, reducing taxes for pensioners and cutting VAT on restaurant meals.
Last month, Sweden's budget watchdog said robust economic growth and an ongoing privatisation programme would give the government a 45 billion crown ($7.18 billion) surplus this year, providing scope for increased spending.
However, the four parties have consistently said strong public finances are its main goal and sharply criticised some European neighbours for running up soaring deficits.
The Alliance has also taken a firm line with its financial sector, even though it did not have to bail out any banks during the financial crisis.
The four Alliance leaders said they would introduce measures related to risk-taking by banks and their exposure in other countries -- an important issue in Sweden where Swedbank and SEB were hit by big loan losses from their Baltic operations in the downturn.
"Sweden will set an example for other countries in securing a robust financial system," the government said.
Finance Minister Anders Borg has repeatedly said Sweden should introduce tougher rules on capital buffers than other countries, irritating banks in the country which say this will saddle them with higher costs than rivals.
In addition to banks, the government has fretted over increased borrowing by households in Sweden that some have warned could lead to a housing bubble.
The Alliance leaders said they would consider additional measures to control rising household debt. Sweden has already introduced a loan-to-value cap for mortgage borrowing.
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