Sweden's drinks industry is suffering from the lowering of alcohol taxes in neighbouring Denmark and Finland.

According to figures from Stockholm University, the first two months of 2004 saw more liquor carried into Sweden from abroad than sold in the state-owned Systembolaget stores. There has also been an increase in smuggling according to the report.

Systembolaget's problems are expected to increase now countries such as Poland and Estonia have joined the EU with their even lower tax rates.