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CNBC Transcript: Interview with Stefan Löfven, Prime Minister of Sweden

Following are excerpts from the transcript of a CNBC interview by Julia Chatterley and Stefan Löfven, the Prime Minister of Sweden.

JC: I'm happy to say that the Prime Minister of Sweden, Stefan Lofven joins us now. You expressed great anger over reports of attacks in Germany over the New Year, you've also had issues in Sweden yourself, they've been tied to the refugee crisis and new members of the society. How much more difficult does it make selling a message that you're welcoming new people when actually things like this are going on?

SL: Well, first I think it's important to clarify that sexual harassment is not automatically binded to migration and immigration. We have had sexual harassment in Sweden for many, many years, unfortunately. What it now takes is to be very clear that this is not appropriate, it is absolutely out of line, and we need to take very clear measures now to show to these young girls and women that they are of course entitled to walk in a city, to take part in a concert or whatever, to be outside without sexual harassment. We shouldn't tie that to immigration.

JC: But more broadly, we've had the Paris terrorist attacks. These events, whether or not they're tied to the refugee crisis, and to refugees in the country, they establish a fear factor among the population at a time when we're trying to absorb more, expecting further migrants probably to arrive later on, particularly in the summer of this year. How do you sell that message to the people, the balance between these two things, because it does feel like a security issue that we don't have a handle on.

SL: But the security issue is serious enough. I mean, we have IS attacking, and they are not taking a responsible journey through Europe to do what they want to do. They take the first best flight if they want to hurt us. So that is also a wrong combination, to say automatically that if we have refugees we will have more insecurity, but at the same time we need to show our population that we stand up for security, but this automatic combination and mix up with immigration and security problems, that is wrong.

JC: Do you not believe then that the Schengen zone is security risk? Just because once somebody's in Europe they can travel?

SL: The Schengen zone needs to be taken care of much more carefully, and I've warned about this since I took office, that we need to make sure that the Schengen borders are handled in a correct way, in a safe way, because if we don't do that, that will jeopardise the inner movement, so to speak.

JC: Would you be willing to see it banned and dropped for a certain period of time, just until we get the security situation under control?

SL: No, I think, no, we can take other measures, I believe, and that is to make sure that we handle the situation. We are a number of member countries in the European Union, we need to do this much, much better. So the refugee crisis, in Europe, is much about that we haven't handled it together as 28 member states.

JC: Italy and Greece would say that it's a funding issue as well, it's a personnel issue. Wolfgang Schäuble, the German Finance Minster suggested an EU wide tax on petrol in order to push funds to address the refugee crisis. Would you be in favour of that?

SL: I'm not sure if that's exactly the right move, but of course we have to help one another. It is a concern for 28 member states, so we need to find a solution, but as important is to find a system that works. Today it is not working, and we need to get a grip on this otherwise it'll collapse. So specific taxes, I cannot say whether that is wrong or right, but we need a system, we need to control our borders, we need a system where refugees come into Europe, seek asylum and can be transferred to another country, so we share the responsibility, and return programmes are also working, cooperation with Turkey and Lebanon and Jordan. So there's a mixture of measures that are needed.

JC: You've been quite critical of some of the Eastern European countries that were very negative about the prospect of quotas, the pushback that they gave, saying that, 'Look, we all have to work together here.' How concerned are you about the prospect of a potential future US President saying that he wants to ban Muslims? How concerned are you?

SL: I'm concerned in general of the tone in the debate, that concerns me in general, because we hear a lot more hard words now, and the hatred is growing, and that concerns me, because that is not the future for our societies. We need to build a society on trust. So I am a bit concerned about the debate in general. I think we, leaders, and everybody, we have a responsibility now to show that we can handle this in a much more balanced way.

JC: So I want to round up talking about Sweden, talk about something a bit more positive, because you're seeing strong growth, exports are recovering, unemployment's coming down, a lot of positive signs, as a beacon of light, I think, in the EU, tell us what's going on.

SL: Yes, as you say, our growth is good, now we're close to 4%, which is good for our economy, of course. Part of the reason for that is of course that we have people coming into the country. So the country is, right now, growing. It doesn't mean that we don't have challenges, we do have challenges, but with growth, investment, it gives us a good possibility now to build our society, which we will do. So we are now investing in housing, in infrastructure, in schooling, education, training for grownups, as well, and in our welfare system.

JC: Just very, very quickly. Biggest risk out there when we look at the global economy, oil concerns, China concerns? What do you think the biggest risk out there is to the European recovery story?

SL: Of course uncertainty, and stories like what we hear from China now, the uncertainty of China's progress is of course one of the most important factors, absolutely, so uncertainty is the most dangerous, because that will make investors hesitate, so the more we can do together, also on the global level, to make sure that we have growth, that we have investment, and that we, that we do the same thing all over the world to make sure that we have growth, that is a very important partner.

JC: So it's a good message, the Swedish Prime Minister speaking to us there. For now guys, we'll be back in just a few hours with the Davos special, but in the interim I'll hand you back to my US colleagues.