Sweden's new leader reaches out to foes after shock far-right gains
By Simon Johnson and Daniel Dickson STOCKHOLM (Reuters) - Sweden's centre-left leader began efforts to forge a minority government by reaching out to his defeated centre-right foes on Monday, a day after winning an election marked by big gains for an anti-immigrant party that now holds the balance of power. Stefan Lofven's Social Democrats and two other left-leaning parties garnered more votes than the outgoing centre-right Alliance of Prime Minister Fredrik Reinfeldt in Sunday's election but fell short of a parliamentary majority. The far-right Sweden Democrats, which includes neo-Nazi supporters among its founders and wants to slash immigration by 90 percent, has emerged as the third largest party after doubling their share of the vote to 13 percent. Its surge has shocked mainstream parties which all refuse to deal with it. In the space of one night, Sweden's image has changed from that of a liberal, tolerant nation that excels in combining a generous welfare state with fiscal rigour to one facing political gridlock and overshadowed, like many other European countries, by fears about mass immigration and unemployment. "A victory became a defeat," blared the editorial headline of Dagens Nyheter newspaper. "Alliance government lost, but only populist right won," tweeted Foreign Minister Carl Bildt. Lofven, a former trade union boss who negotiated tough wage deals with some of Sweden's biggest companies during the global financial crisis, swiftly appealed across the aisle to the centre-right to work together with a new centre-left government. "The hand is there outstretched," Lofven told reporters. "Now we are going to start talks with the Green Party and then continue with the Left Party and then we will make contact also with the Centre Party and the Liberal Party (of the outgoing Alliance coalition)," he said. Asked if he excluded a coalition with centre-right parties, he said: "I don't exclude anything. I'm not closing any doors." FRACTURED PARLIAMENT But it could be hard for centre-right parties to cooperate with Lofven after they flatly refused to before the election. They are keen not to dilute the power of the Alliance, which in its eight years in power has slashed income, wealth and other taxes and has increasingly allowed private firms to run Sweden's state hospitals and schools. The three centre-left parties won 158 parliamentary seats in total, well short of the 175 needed for a majority. The four-party Alliance, which includes Reinfeldt's Moderate Party, won 142 seats, while the Sweden Democrats got 49 seats. The Swedish crown, which had eased against the euro ahead of the vote on concerns about political stability, recovered on Monday to trade about 3 ore above Friday's close, with political risks already priced in. However, Sweden, a triple A economy that emerged from the global economic crisis in better shape than most of its European Union peers, faces an increased risk of policy stalemate. The worst case scenario would be for Lofven to lose a budget vote later this year, which could trigger another election. Most analysts expect Swedish political pragmatism and its tradition of minority governments to ensure Lofven stays in power, though he will be forced to live from day to day. "A government can survive, but its not clear how it can do much more than that," said Nicholas Aylott, associate professor of political science at Sodertorn University. "I think that's the most likely scenario. A coalition of the Social Democrats and the Greens surviving as a minority government and trying to do deals with other parties on a more or less ad hoc basis, at least in the short term." Sweden does have a history of the centre-left and centre-right reaching deals on bills. Under Reinfeldt, the centre-right won the support of the Greens to undertake one of Sweden's most far-reaching liberalisations of labour migration rules. In the mid-1990s, the Centre Party, which is part of the centre-right coalition, cut deals with the Social Democrats. (Additional reporting by Johan Sennero and Anna Ringstrom; Writing by Alistair Scrutton; Editing by Gareth Jones)
