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The government said it would invest an additional 85.5 billion kronor ($13 billion) in infrastructure projects for the years 2014 to 2025.
Investments include a high-speed train line between Stockholm and the city of Linköping, and other train lines across the country.
"Sweden's main lines date to the middle of the 19th century and clearly Sweden is very different now," Prime Minister Fredrik Reinfeldt said in a press conference.
"The Sweden of today has a greater need to bind different parts of the country together, enable people to commute to work and create the conditions for industry to be competitive."
Politicians in affected municipalities were applauding the initiative and even the green-red political opposition gave it the thumbs up.
The Finance Ministry said in a separate statement that the country's public finances are among the strongest in Europe, which provides scope for boosting investment to create more jobs in growing enterprises.
"To equip Sweden for even tougher international competition, the government will focus on infrastructure and research, as well as measures to improve the Swedish investment climate," said Minister for Finance Anders Borg.
The government has also said it wants to cut the level of corporate tax.
The government is looking at spending measures and tax cuts totalling 23 billion kronor in the budget, double this year's level, and 27 billion kronor in the 2014 finance bill. The four-party ruling Alliance will present its government budget for 2013 late September.
Last Updated (Friday, 31 August 2012 02:20)