The Social Democratic government began dismantling on Friday the welfare state it built, proposing sharp cuts in benefits and state jobs to stop the country's economic decline.

Prime Minister Ingvar Carlsson presented an austerity package to slash $2.65 billion from the national budget and eliminate 10 percent of the approximately 185,000 civil service jobs over the next three years.The government proposed cuts in sick pay, defense, education and price subsidies in an attempt to control inflation, increase worker productivity and restore confidence in the currency.

"I think voters realize that we have a problem," Carlsson said.

He acknowledged the "forceful steps" represent a drastic turnaround from the traditional policies of the Social Democratic Party, which has dominated politics in this country of 8 million people for more than 50 years.

In the past, the party has focused on a bigger, better public sector with more services for the people. Now, Carlsson said, his government aims to consider the high costs and the poor results of some of the state's largesse.

But union spokesmen, opposition party leaders and economists said the proposals were insufficient to slow the 11.5 percent inflation rate. Inflation in Western Europe averages less than 5 percent.

Carlsson also said he would push for Sweden to join the European Community.

Most of Carlsson's proposals would not be implemented until Parliament considers a new budget in January.