Sweden’s normally healthy economy slowed during the overall Great Recession, but rebounded in 2010 on strong exports and a profitable banking sector. However, the slowdown elsewhere—namely the EU, where Sweden sends most of its exports—caused its economy to drop again in 2013. And now a rejection of the government’s latest proposed budget by a minority anti-immigration party could bring turmoil to what’s normally a pretty organized government, and thus bring uncertainty to investments.
While the economy is still strong and basically stable, its unemployment rate is rising and hit 7.5% in October, up from 7.2% the month before. Sweden normally has a low average unemployment rate—it averaged 5.82% from 1980 to 2014, according to figures from Statistics Sweden—and has drawn numerous immigrants in search of jobs or asylum.
In fact, immigrants make up more than 10% of its population, and in November the Migration Board increased its estimate for 2015 of the number of asylum seekers arriving, after fleeing war zones from Iraq to Syria, at 95,000. The next highest number to arrive in a single year was 84,000 in 1992; they were seeking safety from the wars in the former Yugoslavia.
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The proposed budget from the minority Social Democrats called for higher taxes to create jobs, beef up unemployment benefits, pay for infrastructure and lower climate impact. However, the Sweden Democrats, another minority party that won 13% of the vote in September, said they would oppose anything that supported increased immigration. They called for the current government to cut immigration by 50% and refused to support the proposed budget.
None of the other parties in the government have thus far been willing to work with the Sweden Democrats, amid accusations of racism leading the drive against immigration, but the rejection of the budget could lead to snap elections—something the Sweden Democrats would welcome. The other possibility is to scrap the existing budget and come up with a new one before the end of December. This is unlikely if all the political parties continue to refuse to work together.