A right-wing resurgence: The end of the Swedish dream?

He looks like Iain Duncan Smith, but talks like David Cameron - and now Fredrik Reinfeldt is set to seize power in a country once hailed as a left-wing success story. Stephen Castle reports

A young, right-wing politician emerges from nowhere, captures the centre ground and ousts a discredited government after more than a decade in power. On Sunday, the dream of every conservative may be realised, not in Britain but in Sweden.

The land of Volvo, Ikea and the much-vaunted Swedish social model may be on the threshold of a political earthquake. For the past 10 years, Göran Persson has been Prime Minister, leading one of the most formidable vote-winning machines in democratic politics. But opinion polls show Sunday's election is on a knife-edge. The remodelled, centrist, Swedish conservative party, known as the Moderates, led by 41-year-old Fredrik Reinfeldt, could emerge at the head of a new coalition. And, whatever the result, the traditional dominance of Sweden's left is under threat as the country asks itself whether its famous social model is all it is cracked up to be.

Outside a wooden cabin used by Moderate party campaigners in central Stockholm, the Reinfeldt message has struck home with Kristina Isacsson, a supply teacher, as she stands in a the September sunshine. Pointing to a poster of the Moderate leader, Sweden's answer to David Cameron, she says: "He's pretty good."

Ms Isacsson is thinking of backing the Moderates because of her long struggle looking for work. She says she has just got a job but the search was frustrating. "Every time I went for interviews there were 100 or so people after the same job. There must be some changes."

Mr Reinfeldt may bear a close physical resemblance to Iain Duncan Smith, but his politics are straight from the textbook of David Cameron. His is the story of one of the most dramatic political makeovers in Swedish history.

On paper, his odds were not good. The Social Democrats have held power for all but nine years since 1932, in the process building up a generous and popular benefits system seen as a model across Europe. High taxes have funded massive investment in education, health and research and development, delivering impressive economic growth.

Many of the right's sacred cows have been unceremoniously slaughtered as Mr Reinfeldt seeks to usher in an era of caring conservatism. He knows Swedish voters expect to pay high taxes and regard their excellent welfare system, including its enviable health and child care, with pride.

But he also recognises an undercurrent of discontent. Mr Reinfeldt's deputy, Gunilla Carlsson, says: "Swedes are happy in a homogenous society where you have good chances in life even if you come from a family without much education.

"Swedes like to pay to the welfare system but it really has to be built on the fact that everyone is working. Today, we have the black market and people misusing the system."

Unemployment has emerged as a key issue in the campaign, something of a surprise in a country where economic growth stands officially at 5.5 per cent, inflation is low and the budget deficit is the envy of most European states. Unemployment is, according to the government, a respectable 6 per cent.

But the rate for those in the 18-to-24 sector is thought to be at least three times that, making it among the worst in Europe. Immigrants, who now make up one in 10 of a once-homogenous population, are badly affected. And much joblessness is hidden by the country's generous benefit system.

Sickness benefits account for no less than 16 per cent of public spending. So contentious is the system that Ms Carlsson says Eurostat, the EU's statistical body, "is not happy with the way the Swedish authorities are reporting their figures".

The Moderates, once a party which wanted to deliver 90 per cent of tax cuts to the richest 10 per cent, now want to concentrate them at the lower end of the wage scale.

But they also propose modest inroads into the welfare state. One plan is to cut the level of unemployment benefits - worth 80 per cent of workers' salaries - after they have been on the dole for 300 days.

Though the Moderates have had success in setting the policy agenda, things have not gone all their way. The campaign burst into acrimonious life when their centre-right allies, the Liberal Party, emerged at the centre of a Watergate-style computer-hacking scandal.

Its secretary, Johan Jakobsson, was forced into a dramatic resignation after Social Democrat campaigning plans fell into the hands of Per Jodenius, a youth member of the Liberals.

Mr Jakobsson accepted responsibility for failing to stop Mr Jodenius accessing the timetable and media agenda, when he found out about the spying in March this year. Mr Jodenius, who admitted accessing the network, was sacked as the Liberal Party's youth-wing press secretary in what was billed as the biggest Swedish election scandal since the 1930s.

But if that gave a fillip to Mr Persson, putting his rivals on the defensive, the Prime Minister's own personality has become an issue, too. In power for 12 years, the Swedish Premier's autocratic style (his nickname translates loosely as "He who decides") has become a growing liability.

Mr Persson was slated in the media for his administration's slow reaction to the Asian tsunami 18 months ago in which Sweden suffered heavy casualties. After so long in power, the Social Democrats look tired, and the murder of Anna Lindh, the former foreign minister, deprived the party of its only other big hitter.

The Prime Minister has added an element of uncertainty to the election by refusing to enter any formal agreement to form a coalition (if necessary) with the centre-left parties with whom he is allied. Mr Reinfeldt has a deal with the centre-right bloc with whom he is preparing to construct a government.

But Mr Persson remains a formidable campaigner, and one recent opinion poll shows the centre-left bloc of parties marginally ahead (another gives a clear lead to the right). The bigger question is whether the result really matters. Mr Reinfeldt's success is built in not challenging the basis of the welfare state but saying it could be better run.

Mats Wiklund, author of a well-received biography of Mr Reinfeldt, says: "People think that something is wrong with this country. Reinfeldt is trying to be a better social democrat than the Social Democrats."

In a country where nearly one-third of the working population is employed in the public sector, radical changes to the welfare state are inconceivable, even if it is creaking. In the centre of the city, Emanuel Noren, a salesman who supports the Christian Democrats, one of the Moderates' centre-right allies, explains why.

Mr Noren backs the Reinfeldt vision of reform, saying: "We have so many social benefits that it's sometimes easy for people to get a bit lazy. The system is very good for those who really need it but for some people it's too easy to use it." However, he does not want a change too far. "There is a social democrat in every Swede," he says. "We have had them now for 70 years. I was always a Christian Democrat but even I was fed social democracy in my breast milk."

A Scandinavian politician who saw the Third Way

Fredrik Reinfeldt may be about the same age as David Cameron but his upbringing was rather less comfortable than his Etonian counterpart. Born in the village of Osterhaninge, he was brought up in a lower middle-class apartment building in a modest suburb of Stockholm. Theatre and light entertainment were among his early interests and he was a fan of the BBC television series Not the Nine O'Clock News.

At Stockholm University, where he studied economics, he became active in politics. He was elected to the Swedish parliament in 1991, the year after his graduation.

In the Moderate Youth League, he soon showed his teeth, ousting the organisation's former chairman in a famous showdown. His battle to move the Moderates to the centre began well before Mr Cameron's election. Indeed, Mr Reinfeldt's political odyssey may owe more to Tony Blair.

Like Mr Blair, Mr Reinfeldt has renamed his party - in his case the New Moderates - to underline a break with the past. And, like the outgoing British Premier, Mr Reinfeldt has seen the need to occupy the centre ground.

He lives in Täby, a suburb north of Stockholm, with his wife Filippa (a Moderate Party councillor) and three children.