Financial and Monetary Systems

Why Sweden has entered unchartered territory

Carl Bildt
Co-Chair, European Council on Foreign Relations (ECFR)
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After decades of adherence to more or less stable rules and predictable patterns, Swedish politics has entered uncharted territory in recent weeks. Many are shocked that the government collapsed and had to call a new election only two months after taking office. After all, Sweden had been a rare beacon of success in Europe in the years since the 2008 global financial crisis. So what happened?

The immediate cause of the government’s demise was Parliament’s rejection of the center-left coalition’s proposed budget, in favor of the budget presented by the center-right Alliance parties, which formed the previous government. Having failed to pass its first budget – owing to the abrupt decision by the far-right Swedish Democrats (SD) to support the Alliance alternative – the government could not simply continue as if nothing had happened.

The background to this episode was the September election, which the four-party Alliance lost after eight years in power (during which I served as Foreign Minister). The Alliance government was widely considered to have been successful; but eight years is a long time in politics.

Fair enough. But, though the Alliance certainly lost, the main opposition Swedish Social Democratic Party and its allies on the left did not win. In fact, the three leftist parties in Parliament gained a slightly smaller share of the popular vote than they did in the 2010 election. The big winner was the populist SD, which doubled its share of the vote, to more than 13%. And, because no other party was prepared to cooperate with the SD, the only viable alternative was a minority government.

To be sure, the Social Democrat-Green coalition, with the support of only 38% of MPs, was bound to be an uncertain exercise. But it could have worked, had the government not quickly veered sharply to the left, forging budget and other agreements with the ex-Communist Left party. That strategy sealed the government’s fate, though the end came sooner and more dramatically than expected.

But Sweden’s current political muddle is also rooted in longer-term changes, which to some extent reflect broader European trends. One is the structural decline of the once-dominant Social Democrats. For decades, any election in which the party won less than 45% of the vote was viewed as a disaster. Now the Social Democrats’ popular support hovers at around 30%, and the last two elections yielded the worst results in a century.

The other trend is the rise of the populist SD. Until 2010, Sweden seemed immune to the rise of far-right parties like those in Denmark, Norway, and Finland. Since then, however, the SD has fundamentally changed the country’s political landscape.

Anti-immigrant sentiment is part of the story, though Swedish public opinion has become much more favorable toward immigration since the early 1990s. For some, immigration has become a symbol of a society gone astray. For others, the number of immigrants over the last few years has simply been too high.

In fact, the numbers are high – not in comparison with a country like Turkey, but certainly relative to other European Union countries. Sweden and Germany receive the largest inflows of immigrants by far – and Germany is nearly ten times the size of Sweden.

Our tradition of being open to refugees is not new. People came from the Baltic countries in the 1940s, Hungary in 1956, Chile after the 1973 coup, and Iran after the 1979 revolution. For decades, Swedish industry was dependent on immigrant workers.

During the Bosnian War of the 1990s, Sweden opened its doors to some 100,000 people – a challenge at any time, much less during a period of profound economic crisis. But it still turned out well: The Bosnian immigrants have fared roughly as well as the Swedes who received them, and they have enriched our society.

In the new century, refugees have come increasingly from the Middle East and the Horn of Africa. One percent of Sweden’s population today is from Iran, and almost 2% are from Iraq. Indeed, after the Iraq war, the small town of Södertälje took in more Iraqi refugees than the United States did.

Given the numbers, immigration in Sweden has worked much better than expected. But there are problems. The Swedish labor market’s sometimes rather strict systems and stable structures have impeded integration relative to many other countries. And now the number of immigrants is increasing again, reflecting chronic turmoil in the Middle East and elsewhere, as well as Europe’s increasingly turbulent and dangerous neighborhood, largely owing to Russian revisionism and military expansion.

Sweden, already a humanitarian superpower in terms of the aid it provides to conflict regions, certainly will not close its doors. But other European countries will have to bear more of the burden, and the authorities will have to do more to facilitate integration.

In particular, the pace of job creation achieved in the last few years must be maintained. For all of its economic success during the past two decades, not least since the 2008 crisis, industry is hollowing out, and structural issues are beginning to be felt. Our celebrated welfare state will come under strain from an aging population. Indeed, in this respect, immigration is more a part of the solution than a part of the problem.

There is no guarantee that the election in March will resolve Sweden’s political crisis, particularly if the SD performs well again. A German-style grand coalition has never been tested in Sweden; and Austria’s experience suggests that it could play into the extremists’ hands. But a more cooperative atmosphere might well be needed. In that case, the key question will be whether the Social Democrats can ditch their allies further to the left.

This article is published in collaboration with Project Syndicate. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Carl Bildt was Sweden’s foreign minister from 2006 to October 2014, and was Prime Minister from 1991 to 1994, when he negotiated Sweden’s EU accession. 

Image: A general view of the Swedish Parliament during the debate about the government’s budget proposal in Stockholm December 3, 2014. 

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