Presentation on theme: "THE SWEDISH ELECTION: HOW SCARY AN OUTCOME? Klas Eklund American Chamber of Commerce, Oct 2, 1998."— Presentation transcript:
THE SWEDISH ELECTION: HOW SCARY AN OUTCOME? Klas Eklund American Chamber of Commerce, Oct 2, 1998
1 A RECORD ELECTION Worst SDP result since universal suffrage Worst ever for liberals Worst ever for Centre party Best ever for Christian Democrats Best ever for Leftists Lowest turn-out since the 1950s
ELECTION RESULT 1998: Per cent and seats Left SDP Greens Centre Liberals Moderates Christdem : Per cent and seats Left SDP Greens Centre Liberals Moderates Christdem4.1 14
A LEFTIST ELECTION? The non-socialists have 11 more seats than before The left bloc has 9 less The move from SDP to the Left: Maybe the voters stood still, while both parties moved to the right? Easier to jump from SDP to the Left because the communist stamp is gone Personality issues: Ms Schyman attracts more (female) voters than Mr Persson Conclusion: A protest vote rather than a left vote!
NONETHELESS The Left party is stronger now As are the non-socialists Increased polarisation! SDP + Left: 174 seats, 1 short of a majority Four non-socialist parties: 157 seats - stronger than the SDP Three non-socialist parties: 141 seats - also stronger Means the Left has more clout
WHAT NEXT? Opening of parliament Oct 5 Government declaration Oct 6 Budget proposal Oct 13 To form a government, Persson must not face a hostile majority Support from Left and Greens is necessary Also in getting the budget through parliament Conclusion: Negotiations necessary!
WHAT THE LEFT WANT - AND WHAT THEY WILL GET Close Barseback More money/jobs to local gov:t Laws agains sex discrimination Reduction of work time Referendum on EMU Tax hikes Easier monetary policy Slower amortisation of debt Referendum on EU Free daycare centres Yes Yes, but… Yes No and yes No
THE BUDGET First important test for new budget process Time is on Åsbrinks side: Most is already settled Targets will hold Expenditure ceilings will hold But reshuffling below ceilings No hurryfor the Left since they have a four-year co-operation
MONETARY POLICY Left on Riksbank board That seat will be used as a platform for agitation Still: No change of monetary policy But not possible to take decisions unanimously in the future No Left representation in new policy group Hypothetical compromise: New (lower) inflation target and secondary employment ambitions
WHAT WILL NOT COME The MoF s hidden agenda will be postponed No structural reform of labour market No wealth tax cut No tax cuts on dividends No reform of social welfare systems The budget will not be less cyclically sensitive Means worsening business climate
STRAINS Globalisation will put pressure on taxes Risks of companies moving out EMU will make Sweden marginalised Rigid labour market will make lower unemployment difficult to achieve How to close nuclear plants without costs? Slippages in the budget? Internal strains inside the SDP Internal strains inside the Left
CONCLUSION: CHANGE OF HORSES SDP must move to the right But difficult to change horses - the non-socialists will grow together And tactical difficulties when the SDP want to move - how to avoid losses to the Left? A dramatic trigger needed? –EMU referendum? –Crisis? –Snap election? It will take some time…
MARKET REACTIONS Political risk has increased But markets have not reacted too violently –Some was discounted –Most believe budget targets and monetary policy hold Political uncertainty will prevail at least until Oct 13 Then maybe some uncertainty will dissipate But it will return as strains build Markets may not dislike a snap election….