Swedish PM Faces Labor Dispute That Could Destabilize Government

(Bloomberg) -- Trade unions and employers are approaching a deadline for talks that could determine the future of Sweden’s center-left government, and challenge the country’s established model for labor market relations.

The negotiations will need to be concluded by Wednesday. Failing that, Prime Minister Stefan Lofven may need to force through a solution, potentially triggering a vote of no confidence in his government as he breaks with tradition.

The issue originates with the 2018 elections, in which the ruling coalition failed to gain a majority. One of the key concessions that Lofven had to make in return for the support of the Center Party and the Liberals was a deal to “modernize” the labor market and make it more flexible.

A parliamentary committee has since drafted proposals based on that January 2019 deal. One of the most controversial issues concerns granting employers a bigger say in who they can fire in case of redundancies. The opposition Left Party has promised to bring a vote of no confidence if the government endorses it. And with conservative opposition parties eager to topple Lofven, he’d be unlikely to survive the motion.

Lofven’s best bet is that trade union and business leaders agree on the terms of the reform among themselves. The assumption that labor market parties, rather than the government, take responsibility for setting the rules dates back to 1938, with an agreement that ended years of Swedish labor market strife.

If the sides fail, Lofven faces possibly the hardest political choice of this term in office: He can either go ahead and table the existing proposals, which would likely be met by a no-confidence motion, or risk losing the support of the center-right parties that his fragile government relies on.

Read more: Sweden’s Governing Coalition Fractures Over New Labor Proposals

The current proposals haven’t just drawn the ire of the formerly communist Left Party, they’re also wildly unpopular with Lofven’s Social Democrats. His own labor market minister, Eva Nordmark, has described them as severely lopsided toward employers.

Sweden’s unemployment rate has surged during the coronavirus pandemic, reaching a peak of 9.8% in June.

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