Sweden's voters veered sharply left in Sept. 18 elections, toppling the center-right coalition of market reformer Carl Bildt. But the new Prime Minister, Social Democrat Ingvar Carlsson, takes office in a weak position. He doesn't control enough votes for an outright majority in Parliament, so he'll need the support of groups he dislikes--the leftist Green Party or the former Communist Party, now called the Left Party--which want to restore social spending. The result could be months of turmoil. "It's the worst possible outcome," says one investment banker. Carlsson will be further inhibited by the upcoming Nov. 13 referendum on joining the European Union.

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