The big question: Is Europe turning away from the social democrat model?

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The Independent Online

Why are we asking?

Because Sweden's voters have thrown out their Social Democratic government after 12 years in office, striking a blow to one of the most successful political parties in Europe. Sunday's elections ended the 10-year premiership of Göran Persson and ushered in a new coalition of centre-right parties led by Fredrik Reinfeldt. The scale of Mr Reinfeldt's achievement should not be underestimated; the Social Democrats have been in power for all but nine years since 1932 and created a welfare state which is the envy of much of Europe.

Does Sweden matter?

With sluggish economic growth in France and Germany in recent years, EU policymakers have increasingly looked to the Nordic nations for inspiration. Under the Swedish social model voters pay some of the highest taxes in the world but get high-quality hospitals, schools and childcare. The government invests heavily in research and development to help innovation and boost economic growth.

On paper the results are impressive in Sweden; economic growth of more than 5 per cent, low inflation and enviable budget deficit figures. Consequently some recent studies have suggested that the rest of Europe should borrow from Nordic nations rather than adopt the (now discredited) Franco-German "Rhineland" model, or Britain's free-market approach.

So what went wrong?

The main issue in the election was unemployment. Officially joblessness in Sweden is a respectable 6 per cent. But rates among young people are thought to be at least three times that level. Newly qualified graduates struggle to get jobs despite having good qualifications.

Meanwhile the depth of the employment problem is hidden by the country's generous welfare system. No less than 16 per cent of public spending goes on sick pay, a staggering figure in a country whose population certainly appears as healthy as its neighbours.

Mr Reinfeldt claimed that one in five Swedes is not working if you count people on sickness leave or government training schemes. This is important because the basis of the Swedish model is the assumption that everyone works to fund the generous welfare benefits enjoyed by all. If joblessness is high that social contract comes under strain.

Is a dose of Thatcherism what Europeans want?

Not exactly. In the previous elections Mr Reinfeldt's party, known as the Moderates, proposed radical reforms and big tax cuts. As a result the Moderates won just 15 per cent of the vote. All that has been ditched in favour of tax cuts targeted at the lowest earners. The Swedish conservatives want a reduction in payroll taxes and a new working tax credit. Both ideas are designed to boost job creation. Unemployment benefit would be trimmed from 80 per cent of previous income to 65 per cent after 300 days. There is also plan to sell off some national assets. But it hardly constitutes a dose of hardline Thatcherism.

What lesson will European politicians draw?

Like David Cameron in Britain, Mr Reinfeldt decided that the only way to win was to move his party to the centre ground. In Sweden that means not challenging the basis of the welfare state but promising to run it better. If transported to a British political system most right-wing Swedes would find themselves comfortable inside the Labour Party. Indeed Mr Reinfeldt's biographer, Mats Wiklund, says Mr Reinfeldt's appeal to the man in the street in Sweden is that he would be "a better social democrat than the Social Democrats".

Though Mr Reinfeldt and David Cameron are political allies, the Swedish leader seems to have borrowed more from Tony Blair in his determination to park on the centre ground. Like New Labour, the Moderates were re-branded as "new" Moderates. In his victory speech Mr Reinfeldt said: "We campaigned as the New Moderates, we won as the New Moderates and together with our alliance partners we will rule Sweden as the New Moderates."

Substitute the word "Moderates" for "Labour" and it sounds rather similar to something Mr Blair said in 1997.

Is this the end of the Nordic social model?

No. Swedes value public services too much, and are used to an egalitarian society. Too many are employed by the public sector to allow any real dismemberment of it. Meanwhile other Nordic countries are committed to their own social models, often with very good results. Denmark, for example, has pioneered the idea of "flexicurity". This means workers paying high taxes and accepting the fact that they can be laid off abruptly by employers. The quid pro quo is generous unemployment benefit and help in retraining. That means they can be pretty sure that they will get another job soon. Overall the Nordic economies are performing well and delivering a good standard of living.

And a crippling blow to the left in Europe?

Sweden's vote is a jolt to the parties of the left. They felt the tide was turning in their favour in the mid-1990s after the Swedish Social Democrats' victory of 1994 was followed up by a second presidential victory for the Democrats in the US, a landslide for Tony Blair in Britain and the election of Gerhard Schröder as Germany's Chancellor and Lionel Jospin as France's Prime Minister. Encouraged by the trend, Mr Blair masterminded a series of "third way" summits for progressive European left-wingers.

During this decade the picture across the continent has been more mixed. Spain and Italy have moved to the left, but Germany and Poland have shifted to the right. The most striking aspect of recent contests is that the voters seem almost split down the middle in most countries. When it comes to election time they seem to find it increasingly difficult to choose between political opponents.

Has the Nordic way come to the end of its road?

Yes...

* The Social Democrats who pioneered the Swedish social model recorded their worst vote since 1914

* The system covers up unemployment by putting people on sickness benefits and training schemes

* Globalisation means countries cannot insulate themselves from market forces

No...

* The centre-right winner of the Swedish elections will only fine-tune the welfare state, not dismantle it

* Economic growth and living standards in Nordic nations remain well above that in most European countries

* The welfare state remains very popular in countries such as Denmark and Sweden

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