The McKinsey Quarterly: Please summarize the lessons you have learned about leading, designing, and implementing the process for putting state finances in order.

Göran Persson: First, it is extremely important to be in the driver’s seat. You must make it clear that you are responsible for the process and that you are prepared to put your position at stake. Second, the consolidation program must be designed so that the burdens are shared fairly. Public-sector cuts will hurt the most vulnerable people in society, so those who are better off need to contribute—for example, by paying higher taxes. Public support for tough policies would quickly deteriorate if they were not perceived as fair, and parliament would lose the political will to make hard decisions. Third, the consolidation program has to be designed as a comprehensive package; if you are in as deep trouble as we were, an ad-hoc hodgepodge of measures will only have a limited chance of success. Moreover, by presenting the measures together, it becomes clear to all interest groups that they are not the only ones being asked to make sacrifices. It also has to be a front-loaded program. By starting with the most difficult measures, you demonstrate your resolve and increase the chances of achieving the early results, which will be important for getting the continued support that is critical for sustaining the effort.

Transparency is the fourth lesson. You must never play down the effects of the program’s measures. On the contrary, remind the public again and again that this will hurt. It is one thing to get support in parliament for the program; it’s another to stay in control during the implementation phase, when the measures become real for ordinary people in their daily lives. You must also be completely honest when you communicate with financial markets. Clarify assumptions and calculations. Don’t use any bookkeeping tricks. Only then can you recover credibility; only then can the program earn legitimacy. Indeed, you should always go for conservative estimates. If, for instance, you estimate that economic growth will be 1.5 percent and you end up with 2.5 percent, you will have solved much of the credibility problem.

– Alastair Levy and Nick Lovegrove

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