Sweden's Stalemate Nears End With Deal to Keep Nationalists Out
(Bloomberg) -- Sweden is nearing an end to a record-long political stalemate after Social Democratic leader Stefan Lofven struck a deal across the aisle to remain in power and deny influence to the country’s growing nationalist party.
The accord comes after four months of tumultuous talks, but risks raising the ire of voters who demanded change in an election that handed big gains to the anti-immigration Sweden Democrats and the Social Democrats its worst election result in a century. It also breaks apart the center-right opposition Alliance, leaving the conservatives out in the cold.
With a snap election threatening, the Social Democrats reached an accord with the opposition Center Party and Liberals and its ally, the Greens. But there are still hurdles to clear, with party meetings scheduled over the weekend to vote on the deal and Lofven will also need backing of the Left Party. There’s also a competing offer for a Conservative-led government
The agreement with the Social Democrats is “important for Sweden,” Center Party leader Annie Loof said at a press conference at parliament in Stockholm, calling it the “best possible in a difficult situation.”
As other countries across the world, Sweden has been rocked by a political upheaval. An election in September saw the nationalist Sweden Democrats (SD) emerge as the third-biggest party and left neither of the two main blocs with a majority. A deal with the two smaller opposition parties, who were unwilling to work with SD because of its neo-Nazi roots, will allow Lofven to remain in power.
The agreement means the Center Party and Liberals will give backing to a Social Democrat and Green Party government that will be evaluated annually and would represent a sharp shift from the tax-raising policies over the past four years. The deal includes cuts to marginal tax rates, eased rules on options, broader subsidies for hiring home help and a stop to efforts on limiting profits for private welfare providers. It also proposes to increase taxes on pollution and the finance industry and look at shifting pension fund investments out of fossil fuels and study issuing green government bonds.
Loof said the deal isn’t a “free pass” for Lofven to return to “left-wing policies.”
Her opposition colleagues in the larger conservative Moderate Party and the Christian Democrats were swift in their condemnation. Sara Skyttedal, a key Christian Democrat, lashed out on Twitter, calling the Center Party both “traitors” and “Quislings” with a picture of Loof.
Moderate Party leader Ulf Kristersson said the opposition Alliance, formed in 2006, is now over on a national level. It’s a “really bad decision,” he said at a press conference.
In a statement, Lofven said on Friday that the proposal “takes responsibility” and brings the country forward. There will now be “democratic processes” before party leader talks with the speaker on Monday, he said.
With 167 seats of a total of 349, the constellation would still be short of a majority in parliament and would need backing from others to get measures through the legislature. But its budgets would still pass since they only need a plurality.
As talks have dragged on since September, with both Lofven and Kristersson losing parliamentary prime minister votes, speaker Andreas Norlen last month set a deadline for talks to end on Monday and a vote on Jan. 16. If that fails, a final and fourth premier vote would then be held on Jan. 23 in a last effort to avoid a new election.
Norlen said on Friday that he would meet with party leaders on Monday and later that day announce who would be voted on as prime minister on Wednesday.
If the deal clears the last hurdles, the vote on Wednesday would extend Lofven’s time in power even after his disastrous election. He will also need the Left Party, which was kept out of the deal, to either back him or abstain in the prime-minister vote. Lofven has steered the nation over the past four years with the help of the Left, raising taxes and struggling to absorb a record number of immigrants during the migrant crisis.
The Left Party declined to comment on Friday on how it intends to vote.
The Swedish krona initially rose on the news on Friday, but ended the day little changed.
Martin Enlund, an analyst at Nordea Bank, said there now could be “upside” for the krona ahead of Wednesday’s vote. “Lofven’s government has been extremely unpopular, possibly weighing on consumer confidence,” he said. “Unclear if that will change, but would be good news for consumption and the krona if it did.”
--With assistance from Love Liman.
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