Sweden: Prime Minister Steps Down Ahead of Next Year's Election
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22 August 2021 Sweden: Prime minister steps down ahead of next year’s election Torbjörn Isaksson Prime minister Stefan Löfven announced today that he will in November resign as party chairman for the Social Democrats as well as prime minister. Löfven resigns for personal reasons. The timing of his announcement came as a surprise. He has been head of the Social Democrats since 2012 and prime minister since 2014. Löfven’s resignation could make the already tricky political situation even more complicated as the government must step down if the new candidate for prime minister is not accepted by the Riksdag. It is uncertain whether the Left Party and the Center Party will once again accept a government with the Social Democrats and the Greens. However, the first challenge for the government is the budget bill for 2022 due 20 September. The budget process will be led by Löfven and Finance Minister Andersson. Löfven has emphasised that if the budget is not accepted by the Riksdag, then the government will resign. The current government has governed on the oppositions’ budget before, though. The red-green government’s budget proposal needs at least indirect support from the Left Party and the Center Party. The Center Party doesn’t accept any negotiations with the Left Party, while the Left Party has presented a list with reforms ahead of the budget. Thus, much suggests that it will be a turbulent autumn for Swedish politics. An extra election is still unlikely. The next general election to the Riksdag is scheduled for September 2022, which will take place even in the case of an extra election before that. Obviously, there is uncertainty regarding the budget bill for 2022. The budget will probably be expansionary ahead of next year’s election and as it needs to be backed by several parties. However, more important for the growth outlook is the aftermath of the pandemic, how strong and long-lasting the rise in global demand is, and how the favourable financial conditions will boost domestic demand. The Swedish economy has recovered from the pandemic and the public finances are robust with low debt and a relatively modest budget deficit of around 2% of GDP this year, making the SEK exchange rate and e-markets.nordea.com/article/67285/sweden-prime-minister-steps-down-ahead-of- next-years-election interest rates resilient to the political turbulence. During the June government crisis, the financial markets didn’t react much. Markets will probably not react this time either, although market's patience is tested every time new political turbulence arises. The most likely successor is Finance Minister Magdalena Andersson. Other possible candidates are Mikael Damberg, Lena Hallengren, Anders Ygeman, Morgan Johansson and Ibrahim Baylan. It is not obvious that any of these candidates will lead to any major change of the Social Democrats political stance. It cannot be ruled out that the Social Democrats may turn somewhat to the left and be less fiscal prudent, but that is in such a case a question for economic policy in 2023 and beyond. Torbjörn Isaksson Chief Analyst [email protected] 4684079101 e-markets.nordea.com/article/67285/sweden-prime-minister-steps-down-ahead-of-next-years-election .