Sweden budgets extra $3 billion for jobs, education, refugee influx

STOCKHOLM (Reuters) - Sweden will spend an extra 24 billion crowns ($2.91 billion) next year to cope with record numbers of refugees looking for a safe haven as well as to increase the number of jobs and turn around falling school results, the government said on Monday.

The center-left minority coalition aims to rebuild the cherished welfare state after years of tax cuts under the center-right, build its way out of a housing crisis and get more people into work.

But it also faces a rising bill to accommodate refugees fleeing the protracted civil war in Syria. Local authorities will get more than 1 billion crowns extra for integrating refugees this year, with government also increasing spending to support refugee children in school.

Total spending on refugees will rise to 19.4 billion crowns in 2016 out of a total budget of around 920 billion and up from an estimated 17.4 billion this year.

With unprecedented numbers of refugees arriving in Sweden, the bill could yet be higher as the current estimated figure for asylum applications this year - 74,000 - is likely to be raised.

"It will of course have an effect (on the budget)," Finance Minister Magdalena Andersson said. "In the short term, those costs will be taken from international aid, but in the long run it is all about how fast we can get people into the labor force."

The Migration Agency said on Monday a record 6,901 people had sought asylum in the affluent Nordic country in the last seven days, 3,467 of them from Syria.

Migration Agency chief Anders Danielsson said earlier this month that the latest annual forecast for asylum applications would need to revised upward to the 85,000-90,000 range.

Weekly asylum applications have doubled since he spoke.

Syrians enjoy an automatic right to asylum in Sweden, making it - along with Germany - their preferred destination in Europe.

Recent polls give the anti-immigration Sweden Democrats around 20 percent of the vote, up from around 13 percent in the general election in 2014.

WELFARE MODEL AT ISSUE

The government took power late last year with jobs, education and housing as policy priorities, accusing the previous center-right government of weakening the Swedish welfare model by squandering money on tax cuts for the rich.

Aiming to reverse course, the budget includes 5.5 billion crowns to ease a housing shortage, money to raise teacher salaries and improve the worst-performing schools, a tax cut for pensioners and measures to fight climate change.

The new measures will be paid for through cuts to in-work tax credits, reduced tax breaks for home improvement and raised fuel taxes.

Public finances are expected to run a deficit of 0.9 percent of GDP this year, but reach a balance in 2018.

The economy is expected to grow robustly - 2.8 percent this year and next, but with the risk of a slowdown due to the slump in China and economic problems in neighbors Finland and Norway.

($1 = 8.2445 Swedish crowns)

(Additional reporting by Daniel Dickson; Editing by Mark Heinrich)