The New Zealand government on Wednesday announced it will close its embassy in the Swedish capital of Stockholm as a result of budget cuts required among diplomatic posts in Europe.

New Zealand Foreign Affairs Minister Murray McCully said the closure of its Stockholm embassy will be accompanied by other measures, including moving into less expensive accommodation, that will save the government about $10 million per year among its diplomatic posts in Europe.

"New Zealand enjoys an excellent relationship with Sweden and with its Scandinavian neighbors, but in today's world it is not always necessary to have a diplomatic presence to maintain such a relationship," McCully said. "Sweden does not have an embassy in New Zealand and I am confident that we can manage the relationship through an accreditation."

The Stockholm embassy was opened by the Labour government of Helen Clark in 2008 but was downsized just months later by the new and current government of Prime Minister John Key, who leads the National Party. "The move is part of a series of decisions that will enable the Ministry of Foreign Affairs to meet the government's expectations of a $24 million efficiency dividend and then manage within a flatline budget for the next two years," McCully added.

New Zealand currently has 29 embassies around the world, including its post in New Zealand.