Scraping the Barrel

The Social Democrats and Greens have been spending the week since the new Government took office taking stock of the budget situation. It is clear that the Moderate-led Government of Reinfeldt-Borg have left Sweden’s finances in disarray. Dagens Nyheter (13 October) puts it like this (rough translation): “Government finances are in such poor condition that the surplus target will not be reached until at least after the next election” claims finance minister Magdalena Andersson (S) and she promises not to implement any reforms that are not fully funded: http://www.thelocal.se/20141013/sweden-has-large-hole-in-finances.

This is the narrative of the new Government, but what it fails to say is that Löfven’s early decision to accept the 5 rounds of income tax reductions is what really limits the room for manoeuvre of the new government. This simply reflects the similarities between the Social Democrats and the Moderate Government. The Social Democrats will instead raise taxes elsewhere, which the Moderates are now saying they will oppose in the budget debate. See http://www.dn.se/nyheter/sverige/sa-vill-alliansen-stoppa-skattehojningarna/.

Foreign policy is another area of potential conflict. The Foreign Minister is Margot Wallström who announced Sweden’s recognition of the Palestine state. Sweden was the first EU member state to do this. Interestingly, Britain has already followed suite, so the first small pebble (Sweden) may be the one to start the landslide across Europe.

There are many hurdles to overcome until the budget debate. I wrote in the preceding post that the Government is likely to be a Centre-Right one. Löfven was very blunt with the Left party that he would not even consider it as part of his government. He then initiated discussion with the V leader, Jonas Sjöstedt, to come to a compromise over the V position that profits extracted from welfare by private companies are unacceptable. After the appointment of the new government ministers and the opening of the new parliament, Lövfen announced that he had come to a compromise agreement with Sjöstedt over this issue.

By doing it in this way, Löfven has ensured that V will not be in the new Social Democrat/Green government. The cold power politics of this is that the Social Democrats do not need V as they are likely to vote with the government on all issues, including now the profits from welfare issue.

So it still looks as if Löfven will try to tempt two of the Bourgeois parties – Centre and Liberals – to join the government. The prospects for that are currently dim, as the leaders of these two parties have made crystal clear. The way this may be achieved is by Lövfen losing a crucial vote – for example over the budget in late October – though if this is forced by the Sweden Democrats who hold the balance of power in the Riksdag it would precipitate a new general election that the Moderates would do badly out of. See this Local article. This, at least is the situation as I read it.

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