Swedish budget targets extra 1.9 billion pounds for jobs, education, refugees

The minority coalition aims to rebuild the cherished welfare state after years of centre-right tax cuts, solve a housing crisis and meet the challenge of integrating refugees fleeing war in Syria.

"To solve these challenges we need to invest in Sweden," Finance Minister Magdalena Andersson said.

"In homes, and infrastructure, in knowledge and competitiveness, in the transition to a sustainable society."

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

Local authorities will also get more than 1 billion crowns extra to support up to 80,000 refugees expected to arrive in Sweden this year.

"We face large inflows of refugees and we need to work together," Andersson said.

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

Sweden's economy has outpaced much of Europe in recent years but the coalition blames the previous government for squandering the money on tax cuts for the rich.

Public finances are expected to run a deficit of 0.9 percent of gross domestic product this year, reaching balanced finances in 2018.

The economy is expected to grow robustly - 2.8 percent this year and next. But a slowdown in China and economic problems in neighbours Finland and Norway are threats and Andersson said there was "a substantial risk of weaker growth".

(Reporting by Stockholm Newsroom; Editing by Simon Johnson and Angus MacSwan)