Sweden’s Election

I’m always seeking product differentiation from the Klen/Drum/Chait/Benen/Cohn blogs, and I know people count on this site to offer semi-informed commentary on Northern European politics so why not offer a comment or two on this weekend’s Swedish election? Sweden long had a multi-party system dominated by the Social Democratic party. But in recent years it’s shifted to something more like a two-party system as the four right-of-center parties forced a stable liberal/conservative coalition called The Alliance. In response, the Social Democrats formed a fact first with the Greens and then later with a far-left party. It hasn’t gotten nearly as much coverage as the rise of the populist anti-immigration right, but parties of the populist far left have also been on the rise in Europe and mainstream social democratic parties have generally declined to cooperate with them. An important exception is Norway where a red-red-green coalition has been governing the country successfully, and Social Democratic leader Mona Sahlin thought she could pull something similar off in Sweden.

Instead, Sweden blessed with a small open economy and a floating currency has had one of the mildest recessions in the developed world and seems to be galloping toward growth:


The result was essentially the worst result ever for the Social Democrats and the first re-election for a center-right Swedish government in many, many decades. But a far right party called the Sweden Democrats got into parliament for the first time and thereby caused the Alliance to lose its majority. Prime Minister Frederick Reinfeldt is trying to push the Greens to support his government and give him a working majority but they don’t seem to like this idea, even though they cooperate with liberal parties in some localities.

Minority governments are common in Swedish history, however, so there’s no reason to think Reinfeldt can’t simply proceed without the greens. What’s more, the Social Democrats are indicating that they have no intention of trying to topple the government. Sweden also has an unusually procedural rule (thanks to David Weman for pointing this out) that allows a minority government to pass a budget unless the opposition can muster a majority behind a single alternative proposal. That means an Alliance government can carry the day unless the leftwing opposition unites with the far-right, which isn’t going to happen.

This all has limited relevance to Americans, but I do think part of the lesson is simply that monetary stimulus can work. As the crisis hit, the SEK went down relative to the dollar and the Euro which bolstered growth and employment and when the situation stabilized the currency began to recover. This all seems pretty uncontroversial when it comes to small countries, but it’s possible for big countries to make this work too.