Sweden: Sweden shifts back to the left, but political uncertainty reigns
September 30, 2014
The general elections that were held on 14 September marked an important shift in the political landscape in Sweden, yet the results also stirred up the risk of parliamentary gridlock and are generating a sense of uncertainty about the future. Coalitions and concessions will have to be made in order to pass a budget for 2015 before the end of this year and to steer the economy forward in the long term.
The Moderate Party, which led a center-right alliance in governing the country for the past eight years, received only 23% of the vote, representing a 10% drop compared to the 2010 elections. The opposition left-leaning Social Democratic Party came out ahead with 31% of the vote, which was roughly the same amount of votes the party obtained four years ago, although well short of a majority. The outcome has been interpreted as a rejection of the Moderate Party’s policies, which were seen by many as a dismantling of the country’s iconic welfare state. Several rounds of tax cuts, privatizations in the health sector, declining educational performance, high unemployment, growing inequality, and the outbreak of scandals in the management of social programs, were all seen as factors behind the Moderate Party’s poorer performance.
Stefan Löfven of the Social Democratic Party is set to be approved as Prime Minister by the parliament on 2 October. However, he faces the difficult task of forming a solid governing coalition with other parties. This will be crucial from the start in order to get the 2015 budged passed, a draft of which must be presented to parliament before November 17. The formation of an alliance with the Green Party is underway, but it would give them just 39% control of the parliament. Support from the Left Party would be crucial, but policy differences are a major barrier between the two and might not be overcome. Consequently, Löfven is attempting to recruit one of the smaller center-right parties to push through the budget. However, there is the possibility that the outgoing center-right alliance might stick together and challenge the budget with a counter proposal. It is unlikely that either side will cooperate with the far-right anti-immigrant Sweden Democrats party, which has been emboldened by a surprising third place in the elections with 13% of the vote. However, if the Sweden Democrats were to support an alternative proposal from the right, this could trigger a deeper parliamentary crisis.
Much will be determined in the coming days as the Social Democrats push to form a viable coalition and other parties decide on a position and make concessions ahead of the budget debate. In the meantime, Löfven’s campaign promises to improve education, create jobs and renew the welfare system will be on hold. However, the Social Democrats have argued that austerity has gone too far and that fiscal policy needs to be relaxed. Once the dust settles, the new government is widely expected to raise income taxes and increase public spending.
Author: Carl Kelly, Economist