Reinfeldt Set to Win New Term as Swedish Economy Outperforms EU

Photographer: Jock Fistick/Bloomberg

Swedish Prime Minister Fredrik Reinfeldt will this year deliver the biggest economic rebound and the smallest budget deficit in the 27-member EU. Close

Swedish Prime Minister Fredrik Reinfeldt will this year deliver the biggest economic... Read More

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Photographer: Jock Fistick/Bloomberg

Swedish Prime Minister Fredrik Reinfeldt will this year deliver the biggest economic rebound and the smallest budget deficit in the 27-member EU.

Swedish Prime Minister Fredrik Reinfeldt is likely to secure a second term this month, polls show, as voters reward his fiscal stewardship that has helped the country’s economy outperform within the European Union.

The four-party coalition was ahead of the Social Democrat- led opposition in four August surveys by Sifo, the country’s biggest pollster. That points to a government victory in the Sept. 19 election, said Soeren Holmberg, a political science professor at Gothenburg University. It may also allow Reinfeldt to rule without the support of the anti-immigration Swedish Democrats.

“The group that has been ahead in Sifo’s August polls has won the last 13 consecutive elections,” Holmberg said in a Sept. 2 interview. “The focus since May has been on taxes and the economy. White-collar workers, primarily from the big cities, have deserted the opposition for the government.”

Reinfeldt will this year deliver the biggest economic rebound and the smallest budget deficit in the 27-member EU. That is persuading voters, who backed Social-Democrat governments in 55 of the last 65 years, to stay with an administration campaigning on tax cuts. Sweden’s 2010 growth rate will be 4 1/2 times the EU average. The deficit will be 2.1 percent of output this year, compared with an average shortfall across the bloc of 7.2 percent of GDP.

That has helped strengthen the krona by 6.6 percent against the dollar since the end of June. The currency was the third- best performer behind the Australian dollar and Swiss franc of 16 major currencies tracked by Bloomberg. The yield on the 10- year government bond eased to 2.43 percent yesterday, compared with 2.26 percent for German bunds of the same maturity -- a smaller spread to German debt than any euro member.

Fiscal Story

“The fiscal story is certainly better than the rest of Europe,” said Jonathan Fayman, a fund manager at BlueBay Asset Management in London, which oversees about $38 billion, in an interview. “The krona may have room to strengthen further.”

A Sept. 7 poll by Skop showed the government will get 49.7 percent and the three-party opposition grouping 44.4 percent. The poll of 1,525 people, with a margin of error of about 3.5 points, indicates Reinfeldt, 45, may become the first Moderate Party premier to win a second term since 1908. Government backing was 48.6 percent to 51.5 percent in the August Sifo polls.

Support for the Swedish Democrats, who want to position themselves as kingmakers amid pledges to reduce immigration by as much as 90 percent, was at 4.3 percent, in the Sept. 7 Skop poll, above the 4 percent threshold needed for parliamentary representation, which would give them seats for the first time since their 1988 formation.

Dragon Tattoo

The party has broadened its appeal, said Mikael Ekman, a journalist who in 2001 co-authored “The Swedish Democrats: the national movement” with Stieg Larsson, creator of the worldwide best-seller “The Girl With The Dragon Tattoo.”

Larsson would have questioned the legitimacy parliamentary seats would give the Swedish Democrats, Ekman said.

He “used to say: ‘It walks like a duck and talks like a duck but it ain’t a duck,’ to illustrate that despite cosmetic changes they still represent a politics he thinks nothing of,” Ekman said. “They have become a professional party with a leader who’s not a skinhead and who wears a suit and it then becomes more O.K. to vote for them.”

The party’s leader, Jimmie Aakesson, said in a March 26 interview he wants to reduce immigration to generate extra revenue he says will be used to improve elderly care and cut taxes for pensioners.

Create Problems

Reinfeldt, whose coalition has 176 of 349 parliamentary seats, said in an Aug. 30 interview he doesn’t want to seek support from the Swedish Democrats. The opposition has ruled out collaborating with the party.

“It will create a lot of problems for a minority government if the Swedish Democrats become kingmakers,” said Tommy Moeller, a political science professor at Stockholm University. “A scenario where the Swedish Democrats make life sour for the government by voting for the opposition’s policies” would create “a completely chaotic situation.”

Still, the Swedish Democrats “will most likely find it difficult to make an impact since none of the other parties will cooperate with them,” he said.

Reinfeldt wooed supporters from the Social Democrats after raising growth forecasts twice since June. An Aug. 20 prediction for a 4.5 percent expansion this year was followed by plans to target 25 billion kronor more in income and pensioner tax cuts through 2014. The economy grew a revised 1.9 percent in the second quarter from the first three months of the year, Stockholm-based Statistics Sweden said today. Annual growth for the quarter was revised up to 4.6 percent from 3.7 percent.

Small Difference

The government’s focus on supporting weaker members of society makes it difficult for the opposition to present itself as the only guardian of welfare, Holmberg said.

The difference between the two groupings “is smaller now than it’s been before in the eyes of voters,” Holmberg said.

The government has cut taxes and abolished a wealth levy since 2006. The opposition wants to raise unemployment and sickness benefits and cut pensioner taxes by raising levies on income and energy. It also will re-introduce a wealth tax.

-With assistance from Adam Ewing in Stockholm. Editors: Chris Kirkham, Tasneem Brogger.

To contact the reporter on this story: Johan Carlstrom in Stockholm at jcarlstrom@bloomberg.net.

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