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Sweden Has Turned Left but not in the Southern Sense

Published on , , Twitter: @euinside
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There is a bad and a good news from the recent elections in one of the influential EU member states - Sweden. The bad news is that there, too, the anti-migrant moods are gaining territory after the Sweden Democrats ended up a third political force and got 13% of the votes. The good news is that significant change in Sweden's behaviour in the EU is not to be expected, despite the decision of the Swedes their country to make a left turn after Fredrik Reinfeldt's 8-year-old centre-right rule. His ruling coalition received 39.3% of the votes on Sunday and Stefan Lofven's Social Democrats emerged as winners with just a small lead (43.7%). Tough negotiations to form a ruling coalition are already under way as the expectations of analysts and journalists are that the long Swedish political stability has come to an end.

Unlike other big and influential member states, the change of the political direction in Sweden will not lead to significant disturbances in the EU. So far, Sweden has been a strong player on European stage, whose positions are between those of Germany's Chancellor Angela Merkel and British Prime Minister David Cameron. In other words, Sweden is a strong representative of nordic Europe and the nordic understanding for governance. Mr Reinfeldt and his government, especially Finance Minister Anders Borg, were among the highly respected politicians in Brussels and have also been among the most active ones on key European dossiers. And regarding foreign policy, Sweden's voice was Carl Bildt's voice - strongly committed to the countries from the Eastern Partnership and the Balkans.

From a northern periphery to a leading economy

Reinfeldt has been a vivid defender of fiscal discipline. His dogma, often stated in Brussels, is that "growth can be created only when public finances are stable". He was an eminent representative of the reformist wing in the European Council. His philosophy is that a return to "business as usual" should be avoided because there are always new market conditions and new business logic. In the same time, Sweden is of the countries that have been trying, together with Poland and UK, to keep a good balance between the interests of the euro area countries and those outside the currency block. Sweden is of the few member states that have the privilege not to be obliged to adopt the single currency and decided to stay out of the banking union.

Reinfeldt and his government have had for 8 years self-confidence and radiated authority in the EU - all this furred with solid reasons. After the severe Scandinavian economic crisis from the early 1990s, the Swedish economy is among the best performers. It has been developing rather well compared to the ailing eurozone. The European Commission predicts that this year the country will have economic growth of 1.5% and for next year the spring economic forecast sees a doubling. Unemployment is worrying, but is still under control - 8.0% last year and this year it is expected to drop to 7.6%. Sweden is among the best performers in terms of public finances as well. The country's public debt is expected to reach 41.6% of GDP this year, which is significantly below the ceiling set in the Stability and Growth Pact (60%). The government leaves behind solid finances with completely acceptable budget deficit of 1.8% this year (projected data). In 2013, the hole in Sweden's finances was 1.1%.

But despite its good performance, Sweden is among the countries in the macro economic imbalances procedure because, according to the Commission, it suffers from imbalances that need monitoring and action. The biggest problems are the high household indebtedness in a combination with deficiencies in the housing market. Like UK, Sweden, too, has suffered from sharp rises of housing prices in the past two decades, which the Commission sees as a source of instability. Another big problem is the deteriorating quality of school education. "Despite high funding levels, there is evidence that learning outcomes in compulsory school as measured by international student assessments are worse than in the early 2000s, with Sweden now performing below both the EU and OECD averages in all three areas tested (reading, mathematics and science)".

Against the backdrop of all this, it comes as a natural consequence that the youth unemployment in Sweden is above the EU average. The deterioration of the quality of education and the growing youth unemployment have proved to be at the centre of the decision of the Swedish voters to reach out to the left options. The political parties' election platforms were mainly aimed at education, employment, reducing the youth unemployment, Sweden's return at the top of the PISA scoreboards, gender equality. The EU was completely absent from the debates, as Adelina Dankova, who lives in Sweden, and the editor in chief and founder of the ETC daily Johan Ehrenberg told me.

According to him, a significant change in Sweden's behaviour at EU level should not be expected, but the country will change the rhetorics. Instead of austerity, there will be more talk about jobs creation but, generally, the government Stefan Lofven is expected to form will not be very much different than Mr Reinfeldt's, Johan Ehrenberg believes. The turn to the left does not at all mean that Sweden will join the flexibility camp led by Italy's Prime Minister Matteo Renzi, the journalist believes. On the contrary, the Swedish Social Democrats are strong opponents of investments based on fiscal expansion. The rhetorics of former Social Democratic governments, based on "debtors are not free", will be maintained even at EU level. It is hard, Johan Ehrenberg explained, to demand a balanced budget in Sweden and then say something completely different in the EU.

But he is of the opinion that the understanding toward a more flexible policy in Greece and Spain will be greater than Anders Borg demonstrated, which will leave Sweden in Germany's orbit, where Social Democrats, too, participate in the ruling coalition, but there will be greater openness to the Renzi's southern perception of flexibility.

Despite the good performance of the anti-immigrant far-right party Sweden Democrats, no one in Sweden is willing to work with them. This calms to some extent the fears that another EU country will join David Cameron's camp for limiting the free movement of people. This, however, is not for granted, Johan Ehrenberg warned. Depending on the European economic crisis the situation might change. Sweden needs immigrants to support its economy, but if there are problems with the economic growth in the EU this will open space for tougher measures against the migrants.

A more neutral foreign policy

The journalist expects a significant change in Sweden's foreign policy. Carl Bildt has been a very active supporter of NATO and as foreign minister has worked more in his own views than those of the Swedish parliament. Ehrenberg expects the new foreign minister to be more neutral and will probably not support the tough tone against Russia. The path toward NATO will also be frozen for the time being. However, many joint military exercises are to be expected. This will be a huge blow for the Baltic nations and Poland because Sweden was their strongest ally in their fight the EU to realise that Russia is a threat for the Union's security. Carl Bildt's leaving will be felt very much in the Balkans to which he has been strongly committed. In the 1990s, he was EU's special envoy in former Yugoslavia, he co-chaired the Dayton peace conference and was a High Representative for Bosnia and Herzegovina. Carl Bildt is one of the strongest supporters of EU's enlargement to the Western Balkans.

As things currently stand, it seems Sweden will continue to be a stable and predictable member of the EU, but this can quickly change if there is no political stability in the country. Besides, it is clear that although no significant change can be expected, Sweden will be different.

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