Swedish PM wins elections, but loses majority to far right part

Analysts had said before Sunday's election that a hung parliament, with Reinfeldt's centre-right Alliance coalition having no overall majority, would unsettle investors and the Swedish crown weakened in early trading this morning.

A preliminary count showed Reinfeldt's coalition winning 172 seats in the 349-member parliament and the anti-immigrant Sweden Democrats 20 seats. The Social Democrat-led centre-left opposition was set to secure 157.

Swedish newspapers this morning said the election marked a dramatic shift for a nation known for its tolerance and liberal policies.

"It is Monday morning and time for Swedes to find a new self-image," wrote daily Svenska Dagbladet.

"A centre-right government without a majority, a wreaked Social Democracy and a party with roots in far-right extremism holding the balance of power."

Daily Dagens Nyheter zeroed in on the political difficulties generated by the government falling short of a majority. "Tough situation awaits," ran a banner headline.

The Swedish crown slid to about 9.2495 against the euro from 9.2246 at the close of the Swedish market on Friday. It dipped to 7.0761 per dollar from 7.0653.

Reinfeldt, who campaigned on a promise of more tax cuts and reforms to trim the welfare state, has said he was prepared to lead a minority government but repeated on Sunday he would first approach the opposition Green Party for support.

"We have said that the biggest bloc should rule and that is the Alliance," he told supporters at an election night party, rejecting any cooperation with the far-right Sweden Democrats.

But the reception from the Green Party was cool.

"In the current situation we have continued red-green cooperation," said joint Green Party leader Maria Wetterstrand, referring to the alliance with the opposition Social Democrats.

Reinfeldt benefited from one of Europe's strongest economic recoveries to become the first sitting centre-right prime minister to win re-election in a country that was ruled for much of the last century by the Social Democrats.

In the election, voters were choosing between Reinfeldt's model of a leaner welfare state with more income tax cuts and privatisations, and an opposition platform that wanted the rich to pay more to fund schools, hospitals and care for the elderly.

The Social Democrats had their worst election in almost 100 years, with voters apparently backing the welfare reforms and tax cuts pushed through by the Alliance of Reinfeldt's Moderate Party, the Liberals, Centre and Christian Democrats.

The big news of the night was the entry into parliament of the anti-immigrant Sweden Democrats.

The rise in support for the far-right party has come after it moved away from its skinhead roots and mirrors increases in backing for similar parties elsewhere in Europe.

The Sweden Democrats deny they are racist but both main blocs have ruled out working with them.

"Today we have written political history together, I think that's fantastic," Sweden Democrat leader Jimmie Akesson told chanting supporters.

Analysts say the party has found support among the unemployed, whose numbers have risen during the global economic crisis. It has a strong base in the south of Sweden, where the number of immigrants is higher than the national average.

The Sweden Democrats have been inspired by the success of the People's Party in neighbouring Denmark that provides vital parliamentary support for the government there.

The party wants to curtail immigration and criticises Muslims and Islam as un-Swedish.

Immigrants account for 14 percent of Sweden's population, just above the 12.4 percent average for northern Europe, according to United Nations figures.