Sweden moves to the right

The much vaunted 'Swedish model' is set for a major overhaul, with a four part centre-right alliance defating the Social Democrats in Sunday's election. Reuters's report Center-right alliance wins power in Sweden

A Center-right alliance led by Moderate Party leader Fredrik Reinfeldt won power in Sweden in an election on Sunday, ending 12 years of Social Democrat rule by vowing to lower taxes and trim the welfare state.

Reinfeldt, who will be the next prime minister, declared victory in a tight election. Social Democrat Prime Minister Goran Persson, one of Europe's longest-serving leaders, conceded defeat after 10 years in office and will quit as party chief.

According to almost complete results from Sweden's Election Commission, the four-party opposition bloc had won 48.0 percent of votes to 46.2 percent for Persson and his allies.

Taking the stage with his arms raised, a jubilant Reinfeldt told supporters: "We campaigned as the New Moderates, we won as the New Moderates and together with our alliance partners we will rule Sweden as the New Moderates."

The result was a victory for the alliance's pledges to stimulate job growth by fine-tuning, but not dismantling, the welfare system. Persson, whose party has ruled Sweden for six of the last seven decades, had vowed to continue government largesse and keep one of the world's heaviest tax burdens.

Despite Sweden's strong economic performance under the Social Democrats, opinion polls had shown many favored change in the Scandinavian country of just over 9 million people due to voter fatigue with Persson and a perceived lack of new ideas.

...The Moderate Party was crushed at the last election in 2002 but 41-year-old Reinfeldt enhanced his party's appeal by shifting it toward the center and paring down earlier tax and benefit cut promises.

He leads an alliance with the Folk Liberals, Christian Democrats and Center Party that says years of excessive benefits and high taxes have eroded Swedes' will to work. Reinfeldt also said the real unemployment rate was about 20 percent, almost four times the official level. Reinfeldt says changes are necessary now to preserve the welfare system for the future, a theme of reform across Europe.

Press reports are describing it as a shock - but to those who have been talking to Swedish friends, it was no surprise. The Moderate Party have engaged in a similar rebadging of their image to the overhaul the British Tories have undergone under David Cameron. They are no longer scare Swedes in the way they once did. Bloomberg's election report by Jonas Bergman adds:

Reinfeldt toned down the Moderate Party's previous tax- cutting message, which brought it only 15 percent support at the last election in 2002, and emphasized that the alliance would not cut spending on education and health care.         

The alliance has promised income and corporate tax cuts of about 60 billion kronor ($8.2 billion), partly financed by reductions in unemployment and sickness benefits, arguing that Sweden needs to stimulate hiring and wean people off welfare.         

"They have done almost everything right,'' said Anders Sannerstedt, a professor of political science at Lund University. "They changed their profile, Reinfeldt has transformed the Moderates and they have acted almost as one.

Comments

[finnsense]

I think "major overhaul" is probably a bit strong. They'll probably take a Danish approach to employment and a Finnish approach to welfare and taxation. They'll still have some of the highest tax rates and the strongest welfare in the world.

I think it's a good thing. Sweden needed tinkering with and they will tinker with it in line with typical Nordic commonsense. Soon the Finns will be able to get back to their favourite pastime of opining on how wonderful everything in Sweden is.

Members of Finland's Kokoomus (Coalition or Conservative) Party are secretly hopeful that if Sweden dares to elect a party on the right, the Finns might do the same. That would be interesting.

[Edward Hugh]

"by vowing to lower taxes and trim the welfare state"

Well looking at the demographics moving forward, I don't see much margin on the lower taxes front, quite the contrary, the most probable outcome is higher taxes and welfare trimming, the question is, of course, the mix.

They will - Berlusconi style - undoubtedly get some short term cash from selling off some state assetts.

To some extent their situation can be eased by putting economic migration more to the forefront on the Swedish agenda, and the new government may well do this. Interesting to note (following your point about Cameron) how the centre right are becoming much more immigrant friendly. I suppose you followed Cameron's recent visit to India.

Incidentally, don't miss my piece "Of Population Pyramids and Value Chains" on Afoe. I think it is a first stab at a framewaork for thinking about these issues.

[A. PERLA]

Once the euphoria is over, perhaps the Moderate Party will realize that a plurality of 1.8% is nothing to crow about?

Sweden needs a couple of years of state budget cutting and a loosening of its labor regulations in order to jump start the economy once again. The timing may be right for Sweden.

Europe shows some tentative signs of rebounding. But, this happened before (in 2000) to no avail. Will the rebound sustain itself?

[A. PERLA]

"with typical Nordic commonsense."

And, where, pray tell, will they find that ... ?

Remember a chap called Carl Bildt ... gone and forgotten.

Wikipedia: "His government program was one of liberalizing and reforming the Swedish economy as well as making Sweden a member of the European Union. It initiated the negotiations for Sweden's accession to the European Union, and Bildt signed the accession treaty at the European Union summit at Corfu in Greece on June 23, 1994.

Far-reaching economic reforms were enacted, including a new pension system, voucher schools, liberalized markets for telecommunications and energy as well as the privatization of publicly owned companies, privatization of health care, contributing to modernizing the Swedish economy.

The period was also marked by a severe economic crisis, and a European financial crisis in 1992. The Swedish currency had to be floated in the fall of 1992. The different measures, including large cut-backs in public spending, did contribute to a rapid increase in economic growth as well as a reduction in the public deficit in 1994 and 1995.

THIS NOTWITHSTANDING (my emphasis), the Social Democrats returned to power in September 1994, although Bildt's Moderate Party scored a slight gain."

[Finnsense]

I wish people would stop talking about the economic crises Finland and Sweden faced at the start of the 90s as though they came about due to something they did. The Soviet Union collapsed and with it a huge part of both their markets. Both countries responded decisively and saw years of growth afterwards which continues to this day. You can argue they shouldn't have traded so much with the USSR but it's not very realistic. You trade with whoever will trade with you and line your pockets.

[A. PERLA]

"I wish people would stop talking about the economic crises Finland and Sweden faced at the start of the 90s as though they came about due to something they did."

Tell Wikipedia.

The fact that both Sweden and Finland had too many eggs in one basket was unfortunate for both in the early nineties. But, it is an economic context that can repeat itself, only differently.

Nothing will prevent the Swedes from voting for the socialists should another crisis hit them in the future. It is an instinctive reflex for protection, as if the socialists new how to protect jobs any better than any one else - which is a common European myth.