A Guide to What Could Be the Most Uncertain Swedish Election Yet

(Bloomberg) -- The general election on Sept. 9 could rewrite Sweden’s political rule book.

That’s because of the rise of the Sweden Democrats, a nationalist party that has its roots in the country’s white supremacy movement. Despite being ostracized by the mainstream parties, the group’s message of stopping immigration has resonated with voters after a record inflow of foreigners over the past few years.

Polls show that the party will need to be catered to by whatever minority coalition attempts to form a government after the election. If it becomes the biggest among all parties, as some polls suggest, then Sweden will find itself in a totally new situation.

The most obvious outcome is some form of minority government led by the Social Democrats or the conservative Moderates. But such a government would have “a weak and uncertain mandate, which will have trouble implementing the necessary structural reforms and, in the event of an economic downturn, pursuing effective stabilization policies,” Svenska Handelsbanken AB said.

Unlike in other European countries, governments in Sweden don’t necessarily need an absolute majority in parliament to be in power. In fact, minority governments are quite common in Scandinavia. Whoever will be nominated as prime minister can still be confirmed by parliament as long as a majority of lawmakers doesn’t vote against them.

Sweden’s electoral system is based on proportional representation, adjusted to favor bigger parties. Parties must overcome a certain threshold (4 percent of the national vote or 12 percent of the votes cast in a single constituency) to enter the 349-member parliament.

Given the uncertainties, here’s a guide to the possible government configurations that might assume office after the vote:

Lofven II

A Guide to What Could Be the Most Uncertain Swedish Election Yet

Outgoing Social Democrat Prime Minister Stefan Lofven heads a minority center-left government together with the Greens, backed by the Left Party. Although the Social Democrats are still topping the polls, both government parties have lost support since the 2014 election, reducing the likelihood that they might win another mandate.

A Guide to What Could Be the Most Uncertain Swedish Election Yet

Should they nevertheless manage to form a government, expect a third attempt from the Social Democrats to introduce a tax on banks’ operations, as well as higher capital taxes for the richest Swedes. The Social Democrats have also vowed to raise spending on welfare and lower taxes on pensions.

Alliance Cabinet

A Guide to What Could Be the Most Uncertain Swedish Election Yet

Moderate Party leader Ulf Kristersson is the candidate for prime minister for the Alliance, the center-right party bloc currently in opposition, and may have the best chance of forming the next government. But the Alliance parties, which plan to form a minority government, can do so only if the Sweden Democrats don’t vote against them.

A Guide to What Could Be the Most Uncertain Swedish Election Yet

Should Kristersson and the Alliance succeed, income taxes will be lowered, spending on defense and police will be raised considerably, and they will aim to bring Sweden even closer to NATO.

Moderates Cabinet

The Alliance has been under some pressure due to contrasting views on the Sweden Democrats, with the Liberals and the Center Party not wanting to form a government if it is the smaller bloc and would have to rely on the external support of the Sweden Democrats. Depending on the election results, Kristersson may therefore attempt to go it alone. For this scenario to work, he would need to rely on the external support of the nationalists.

A Guide to What Could Be the Most Uncertain Swedish Election Yet

A Moderates-led government would be stricter on crime and immigration than an Alliance government. The party has also promised cuts in social benefits in order to make working more attractive.

Social Democrats-Led Cabinet

If forming a minority government proves too difficult, Lofven might attempt to cobble together a broad coalition. The most likely candidates to join such a configuration are the Green Party, the Center Party and the Liberals, perhaps also supported by the Left Party.

A Guide to What Could Be the Most Uncertain Swedish Election Yet

Such a configuration would most likely be less strict on immigration and spend more on measures to protect the environment. On the fiscal front, it would have to find a way of reconciling the center-right’s aim of lowering income tax and the left’s view that taxes on capital should be raised.

Grand Coalition

One of the least likely scenarios would see the two biggest mainstream parties get together in a German-style grand coalition. Both Lofven and Kristersson have publicly ruled out this option, but electoral arithmetic may eventually force them to think again.

A Guide to What Could Be the Most Uncertain Swedish Election Yet

In this case, expect a tightening of immigration policies and more spending on the police, defense and welfare.

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