A Guide to Sweden's Next Government as Talks Start in Parliament

(Bloomberg) -- Sweden’s center-right opposition joined forces with the nationalists to oust Sweden’s Prime Minister Stefan Lofven, ending four years of Social Democratic rule.

The vote on Tuesday came after an election a little more than two weeks ago left Lofven’s coalition with a one-seat lead over the four-party Alliance opposition and saw the Sweden Democrats grab 62 seats in the 349-person legislature. With the nationalists as power-brokers, there’s no clear path to power for either of the two establishment blocs.

The speaker of parliament will on Thursday start talks with all the party leaders to see who has the best chance of forming a new government. Talks could take days or weeks, and there are only four tries to form a government before a new election must be held.

Given the uncertainties, here’s a guide to the possible configurations that could assume office.

Lofven II

A Guide to Sweden's Next Government as Talks Start in Parliament

Stefan Lofven has headed a minority center-left government together with the Greens, backed by the Left Party. His Social Democrats have lost seats but remain parliament’s biggest party. The Green Party lost 9 seats, but that has in part been compensated by a better performance from the Left Party.

A Guide to Sweden's Next Government as Talks Start in Parliament

Although it’s still the biggest bloc, regaining power may prove difficult unless some of the Alliance parties lay down their votes. The Social Democrats and the Greens are seeking to boost spending on welfare and also want to introduce a new tax on banks.

Alliance Cabinet

A Guide to Sweden's Next Government as Talks Start in Parliament

Moderate Party leader Ulf Kristersson is the candidate for prime minister for the Alliance, the center-right party bloc which has been in opposition after ruling the country from 2006 to 2014. But the Alliance, which plans to form a minority government, can do so only if the Sweden Democrats, the Left Party and the Greens don’t join forces and vote against them.

A Guide to Sweden's Next Government as Talks Start in Parliament

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. The Liberals and the Center Party are against forming a government that would rely on the help of the Sweden Democrats, meaning Kristersson may attempt to go it alone or just team up with the Christian Democrats. For this scenario to work, he would need the external support of the nationalists, and would try to build majorities with different parties on different issues.

A Guide to Sweden's Next Government as Talks Start in Parliament

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 Sweden's Next Government as Talks Start in Parliament

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 the inconclusive result may eventually force them to think again.

A Guide to Sweden's Next Government as Talks Start in Parliament

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

What Next?

Parties have a maximum of four attempts to form a government or face a new election within three months, although in the past parliament has always accepted the speaker’s first government proposal.

The new government will need to present a 2019 budget to parliament within three weeks of assuming office, or November 15 at the latest. A budget vote will be held in December.

©2018 Bloomberg L.P.