Sweden

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Fall and Return of the Social Democrats

Sweden weathered the world economic slump of 1974 and 1975 well, but it was troubled by growing inflation and foreign debt and by large annual budget deficits. Many Swedes grew dissatisfied with the high rates of taxation required to fund the country’s generous welfare state. At the same time, the Center Party attacked the government’s nuclear energy program as dangerous to the environment. In the September 1976 general elections the Social Democrats were ousted after 44 years in office, losing to a coalition of the Center, Conservative, and Liberal parties.

In 1977 the center-right government of Prime Minister Thorbjörn Fälldin introduced austerity measures to dampen inflation and encourage sales of Swedish goods abroad. Fälldin’s Center Party also sought to abandon Sweden’s nuclear program, a proposal opposed by the party’s coalition partners. The government resigned in 1978 after Fälldin failed to win support for a national referendum on the nuclear issue. Fälldin returned to the helm after the 1979 general elections to lead another center-right coalition government, and in 1980 a referendum on the future of nuclear power was held. Approved by a narrow majority, the referendum authorized the continued development of small-scale, nuclear power generation, with the eventual phasing out of all nuclear power plants during the early 21st century.

In May 1980, in the midst of escalating inflation, a rare general strike brought the country to a virtual standstill for ten days. In October of that year the government survived a no-confidence motion by just one vote. In May 1981 thousands of white-collar workers went on strike as the government coalition split over economic policy and tax reforms. Fälldin then formed a Center-Liberal minority government to lead Sweden pending the 1982 general elections.

The Social Democrats reclaimed power in the 1982 elections following a campaign that focused on Sweden’s lagging economic performance. Olof Palme returned as prime minister to implement an economic program based on greater state intervention in the economy. The government increased public expenditures, provided subsidies to key industries, and devalued the krona, the national currency, to make Swedish exports more competitive. In addition, the government backed the creation of highly controversial “wage-earner funds,” to be controlled by organized labor and used as a source of investment capital. By 1984 inflation and unemployment had declined, and industrial production reached record levels.

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The Social Democrats retained their dominance in the 1985 elections, gaining a mandate to continue the government’s economic policies. On February 28, 1986, Prime Minister Palme was assassinated in Stockholm by an unknown assailant. The assassination shocked Sweden—a nation accustomed to domestic peace and a long tradition of political compromise. He was succeeded by Deputy Prime Minister Ingvar Carlsson, who retained Palme’s cabinet and vowed to remain loyal to his predecessor’s policies.

The Social Democrats held their comfortable majority in the 1988 elections. But Carlsson faced growing labor strife, scandals, and after 1990 a rapidly deteriorating economy. Environmental concerns remained prominent with marine animal deaths in coastal waters and growing apprehension over air pollution and global warming. Carlsson resigned in 1990 after the Riksdag rejected a proposal for a temporary freeze on wages, prices, and rents. He later formed a new government, and a modified austerity program was adopted that allowed some wage increases.

In the September 1991 elections the Social Democrats suffered a stunning upset, although it remained the largest party in the Riksdag, with 138 seats. Ingvar Carlsson resigned, and the leader of the Moderate Party, Carl Bildt, formed a coalition of the Moderate, Center, Liberal, and Christian Democrat parties. Amid the worst economic recession in Sweden since the 1930s, the new government began to accelerate deregulation of the economy, including the eventual privatization of several dozen state-owned companies. It also made some cuts in government spending and removed restrictions on foreign-controlled enterprises in Sweden.

The new coalition’s tenure was brief, however. In elections in September 1994, the Social Democrats returned to power, garnering just over 45 percent of the popular vote. The party better than recouped its losses from the previous election, winning a total of 161 out of the 349 seats in the Riksdag. The elections were notable also for the strong showing of women; the number of seats held by women increased from 116 to 143, or 41 percent of the Riksdag. After the elections, Ingvar Carlsson was asked to form a coalition government, but he opted instead for a minority government. Carlsson resigned as prime minister and chair of the Social Democratic Party in March 1996. He was succeeded by Göran Persson, a moderate Social Democrat who had served as finance minister.

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European Union Membership

Prior to joining the European Union (EU) in 1995, Sweden conducted trade with other EU member states through a free-trade zone called the European Economic Area (EEA). The EEA was created in 1994 by Sweden and other members of the European Free Trade Association (EFTA), a trading bloc established in 1960. Sweden first applied for EU membership in 1991, and formal negotiations for Sweden’s admission began in 1993. Sweden’s EU application sharply divided the Swedish public; many Swedes voiced concern that membership in the organization—including participation in a common foreign and security policy—would compromise the country’s traditional neutrality and sovereignty. Other Swedes argued that neutrality was less relevant in a post-Cold War Europe.

In May 1994 the European Parliament recommended Sweden for EU membership, which was narrowly approved by Swedish voters in a November referendum. The referendum drew 83 percent of Swedish voters, 52.2 percent of whom backed Sweden’s membership bid. The Riksdag formally ratified membership in December, and Sweden entered the EU on January 1, 1995, at which time it also withdrew from the EFTA.

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Recent Events

Led by Göran Persson, the Social Democrats maintained their hold on power in the 1998 and 2002 elections, each time forming a minority government. To achieve a working majority, Persson obtained support from the Left Party and the Green Party in exchange for allowing the two smaller parties some influence over government policies. However, as part of the partnership, the Greens and the Left Party retained their prerogative to oppose the government on European Union (EU) issues, especially the Social Democrats’ effort to lead Sweden to adopt the euro, the EU’s single currency. Persson pledged to hold a referendum on the euro in 2003, and in September of that year Swedish voters resoundingly rejected the euro.

The Swedish government was heavily criticized over its slow response to the Indian Ocean tsunami disaster on December 26, 2004. An estimated 500 Swedes who were vacationing in Thailand and other parts of the region struck by the tsunami were killed or remain missing. The disaster was the country’s largest peacetime loss of life since the sinking of the ferry Estonia in 1994, which killed 551 residents of Sweden.

The general election of September 2006 was closely contested, with a center-right alliance led by the Moderate Party’s Fredrik Reinfeldt defeating Persson’s Social Democrats by just 7 seats in the 349-seat legislature, the Riksdag. Reinfeldt campaigned on a platform of cutting taxes and reforming Sweden’s generous social security system, seen as one of the best but also one of the most expensive systems in the world. Reinfeldt officially became prime minister in October 2006.

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