Sweden PM Faces Confidence Vote as Parties Unite Against Him

(Bloomberg) -- Sweden’s fragile ruling coalition looks increasingly shaky after a leftist party withdrew its support and formed an unlikely alliance with the right in a bid to topple Prime Minister Stefan Lofven through a vote of no confidence.

The Left Party, the Moderates, the Christian Democrats and the anti-immigration Sweden Democrats have teamed up to oust Lofven’s minority coalition. They pose the most serious threat yet to Sweden’s government, which was formed after an inconclusive election result in 2018.

The dispute centers on plans by Lofven’s Social Democrats to let landlords charge market rates for new rental apartments. The Left has slammed the proposal, which it says lets down the tenants the government should be protecting. The conservative parties, meanwhile, are just eager to see Lofven go, even though they traditionally embrace deregulation.

A no confidence motion formally put forward by the Sweden Democrats is now set to be held on June 21. If successful, it would topple the coalition of Social Democrats and Greens that’s ruled for 2 1/2 years with the support of two center-right parties. From the get-go, the alliance has been an uneasy one, and analysts say it may now have reached its limits.

“This is serious and there is a large probability that the no confidence vote will be passed,” said Jenny Madestam, an associate professor of political science at the Swedish Defense University.

But rather than lose a no-confidence vote, the prime minister might opt for snap elections, she said. “Stefan Lofven hasn’t shied away from announcing an extra election before...so it wouldn’t surprise me if he fights fire with fire.”

Speaking at a news conference in Stockholm, Lofven said he would have a week to call a snap election, if he loses the confidence vote. He said he doesn’t intend to negotiate with the Left Party “on the side,” and underpinned his intention to move ahead with a reform of Sweden’s rental market.

Lofven’s options are limited as his coalition relies on the continued support of the Left, which is pro-regulation, and of a more center-right faction that wants deregulation.

At Nordea Bank, the view is that Lofven might be able to resolve the dispute through talks between now and Monday. “A likely scenario” is that such talks “will result in a compromise, which in turn means that the Left Party will abstain on the no-confidence vote,” said Torbjorn Isaksson, an economist at Nordea in Stockholm.

Ultimately, the latest development shows how frayed Swedish politics have become since the rise of the Sweden Democrats prevented the country’s traditional blocs from forming their own majorities. The Sweden Democrats hold just under one-fifth of the seats in the country’s parliament.

The krona weakened as much as 0.6% against the euro and fell 1.1% versus the dollar on Thursday. “It is not entirely unlikely” that krona trading will start to reflect the political uncertainty, said Jesper Petersen, an analyst at Danske Consensus in Stockholm. “In the short term, it is definitely something that can weigh on the krona.”

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