Sweden’s Premier Resigns and Warns Against Early Election

Sweden’s Prime Minister Stefan Lofven resigned, urging parties to keep trying to find a ruling coalition and warning that an early election during a pandemic would be a bad outcome.

The biggest Nordic economy is mired in a crippling political crisis after the government collapsed following a clash over relaxing rent controls. Lofven lost a confidence vote in parliament last week after parties across the political spectrum united against him. He then tried and failed to reconcile key partners.

Sweden’s Premier Resigns and Warns Against Early Election

Lofven, a 63-year-old former union leader and welder, said at a press conference that it’s now up to the speaker of parliament to ask the biggest parties to try to form a new government until scheduled elections take place next year. If that fails after four attempts, an early vote will have to be called -- the first of its kind since 1958.

He will stay on as caretaker until then. After inconclusive 2018 elections it took four months to stitch together a government. The speaker, Andreas Norlen, indicated he did not want the process to drag on that long.

“I am completely convinced that the Swedish people don’t want an extra election,” Lofven said in Stockholm. “I think it’s important to avoid a right-wing, conservative government but the Speaker is now in charge of the process, and we’ll see where that leads.”

Sweden’s Premier Resigns and Warns Against Early Election

Swedish politics have been fundamentally altered since the rise of the anti-immigration Sweden Democrats, who command just under a fifth of the seats in parliament. That reality has prompted parties to the right to agree to consider working with a populist party with roots in the neo-nazi movement.

An extra election might not solve the political deadlock. Polls indicate that there is no clear majority for either Lofven’s Social Democrat-led bloc or its main adversary, the Moderates, backed by the Sweden Democrats as well as smaller liberal and conservative parties.

What Bloomberg Economics Says...

“The main reason to expect the speaker to succeed in finding a new coalition is that most parties would prefer to avoid a snap vote one year ahead of regular elections. The current minority government could still return if it manages to retain support from the Center Party and keep indirect support from the Left Party -- securing a slim majority in parliament.”

--Johanna Jeansson, Nordic economist

Investors were relaxed about the news. As Handelsbanken analyst Claes Mahlen put it: “Fiscal policy, including crisis measures, for this year will be unaffected. Swedish public finances remain solid and there is broad-based support for the fiscal framework.”

Lofven, who had a history of surviving seemingly intractable conflicts, spent the last 2 1/2 years in a coalition that looked shaky from the start. His Social Democrats govern together with the Greens, and can only stay in power as long as they’re backed by the Left Party, the Center Party and the Liberals.

This time, he had to concede it was time for someone else to try forge a path out of the crisis.

©2021 Bloomberg L.P.

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