Sweden is currently governed by a coalition known as the Alliance, which includes several conservative parties. Most opinion polls show that center-left forces are capable of forming a coalition that would pose a serious challenge to the Alliance's power. The tight race could lead to a minority government — with no coalition controlling enough seats to reach a majority — or to a grand coalition of half a dozen parties. However, the most significant outcome of the election will be the consolidation of the anti-immigration Sweden Democrats as a political player in a traditionally migrant-tolerant country.
Sweden is not a member of the eurozone, and the country managed to navigate the European crisis relatively well. After a serious contraction in 2008 and 2009, the Swedish economy returned to growth in 2010 and has maintained decent growth rates since that year. According to the European Commission, Sweden's gross domestic product will increase by some 2.8 percent this year and by 3 percent in 2015 — some of the highest growth rates in the European Union. Neighboring Finland, on the other hand, is still suffering the effects of the European crisis. Helsinki faces sluggish growth and is finding it difficult to apply structural reforms to regain competitiveness.
This does not mean that all is well in Sweden. Unemployment is still above pre-crisis levels — around 8 percent, compared to some 6 percent in 2007 — and the country is facing deflation, which could increase the debt burden for households and companies and weaken domestic consumption. More important, Sweden faces a problem with private debt. Sweden's public debt is one of the lowest in Europe at roughly 40 percent of GDP. However, the country's private debt reached 255 percent of GDP in 2013, a stark increase from the 176.9 percent registered by Eurostat a decade earlier. Moreover, Sweden's household debt-to-income ratio, currently at more than 170 percent, is one of the highest in Europe.
Swedish property prices have nearly tripled over two decades, creating fears that a new housing bubble is slowly forming. A real estate bubble in the early 1990s led to a financial crisis that forced the government to bail out Swedish banks. Denmark saw a similar bubble burst in the mid-2000s, and its financial sector is still recovering from the aftermath. In early September, Sweden's central bank said efforts to contain consumer debt have fallen short as risk to the financial system continues to grow. The Swedish government and the country's most important banks recently announced plans to address this problem, but whoever wins the elections will be forced to deal with the potential of a financial crisis.
Rising Immigration Creates Concerns
Sweden's solid economic performance has kept Prime Minister Fredrik Reinfeldt in power for eight years. But despite Sweden's macroeconomic stability, opinion polls show that Reinfeldt's government will not notch an easy electoral victory Sept. 14. The center-left opposition has concentrated its focus on high youth unemployment and a growing income gap in Sweden. The government, in turn, accuses its adversaries of being fiscally irresponsible and warns about policies that could increase the country's deficit and its debt.
These are standard debates during any electoral campaign. However, a new issue has marked this year's elections: growing immigration and its financial and cultural impact. Sweden has long been a country open to refugees and asylum seekers. In absolute terms, larger countries such as Germany and France receive more asylum seekers, but Sweden has the largest number of asylum applications per capita in the European Union. This has become particularly disruptive in recent years, as sustained political violence and several crises in the Levant and the Middle East have led to growing numbers of asylum seekers in Sweden.
Swedish authorities have said they expect some 80,000 applicants for asylum this year. In July, Sweden's migration authority requested additional funds to handle an upsurge in refugees from countries such as Syria and Somalia. Last year, violent riots shook Stockholm's immigrant-heavy suburbs, revealing Sweden's struggle to integrate immigrants into mainstream society. Surveys show that most refugees have a hard time finding work. And though opinion polls show that Swedes still largely support the idea of living in a country that is open to asylum seekers, they are also worried about the economic and cultural impact of increased immigration.
The Rapid Rise of the Sweden Democrats
This is one of the drivers of the significant support for the anti-immigration Sweden Democrats. The party was created in the late 1980s but was mostly irrelevant until recently. The Sweden Democrats entered the Swedish Parliament for the first time in 2010 after garnering 5.7 percent of the vote. In May European Parliament elections, support for the Sweden Democrats measured 9.7 percent of the vote. (The party recently formed an alliance within the European Parliament with the British anti-immigration U.K. Independence Party.) Alongside its strong anti-immigration rhetoric, the party maintains a conservative stance on family and social issues and pledges to protect Sweden's generous welfare state. These stances broaden the Democrats' appeal, and they are currently polling at around 10 percent, which would make them the third- or fourth-largest party in Parliament.
At first, Sweden's mainstream parties tried to isolate the Sweden Democrats by rejecting any possibility of a political alliance. However, on the campaign trail both the center-left and center-right parties included immigration issues in their rhetoric — issues that had formerly been off-limits for political debate. Finally, on Sept. 10, Reinfeldt said he was open to working with parties outside the Alliance, including the Sweden Democrats. Reinfeldt said that he would continue to exclude the Sweden Democrats in deals on issues such as asylum and immigration but that he might seek cooperation in other policy areas.
This is not without precedent, and the Sweden Democrats have supported the Alliance on issues such as cutting taxes and boosting Sweden's defense budget. However, Reinfeldt's words are significant because they are a recognition of the Sweden Democrats' new electoral weight and another milestone in the party's rapid growth. As Stratfor has said, far-right and nationalist parties are still not strong enough to form governments of their own in most European countries. However, they are already having an impact on the political agendas of moderate parties, and the next step in their evolution will be to gain access to ruling alliances. Even if Sweden is still far from reaching this point, the evolution of the Sweden Democrats confirms that nationalist and right-wing parties are growing, and not only in those countries that have been hit hardest by the economic crisis.