Lofven Survives PM Vote, Breaks Political Gridlock - What’s Next?

2019-01-21 05:30:00

Dimitri Zabelin, Analyst

TALKING POINTS – STFEFAN LOFVEN, RIKSDAG, SEK

Sweden ends political gridlock with Lofven as Prime Minister
Nationalist Sweden Democrats left in the cold after the vote
Looking ahead, Sweden still faces slow growth, EU turmoil

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On Friday January 18, the Swedish parliament voted on Stefan Lofven as PM, and effectively put an end to the country’s longest political gridlock. The leader of the Social Democrats was able to secure the vote by negotiating – an albeit unstable – informal coalition between the Left, Center and Liberal parties.

The vote in favor of Lofven was 153-115 with 77 key abstentions he was able to secure. The Prime Minister will reveal his new government and its new platform on Monday, following a series of compromises that made the center-left wing bloc edge to the right. One of the first issues the new government will tackle is revising the center-right budget that was passed while he was serving as the interim PM.

While this victory offers some respite, looking ahead, Sweden will be facing major headwinds in 2019 from domestic and European political economy risks. The Riksbank – Sweden’s central bank – explained in greater detail some of the risks policymakers will be watching closely throughout the year.

The Swedish Krona (SEK) will not likely fare well against the backdrop of risks 2019 has in store. The currency has already fallen 15 percent against the US Dollar since the start of 2018. USD/SEK unexpectedly did not react as strongly as anticipated to the news of the end of the political gridlock. However, it is now trading above a key support level that is not likely be broken anytime soon.

USD/SEK – Daily Chart