The upcoming Swedish election (September 9) may be worth reflecting upon as the oldest and so far largest party in Sweden has been deteriorating in the polls, according to analysts at Nordea Markets.
Key Quotes
“The Social Democratic Party could be overtaken by the nationalist party Sweden Democrats (SD) as the largest party according to pollsters such as Sentio and YouGov. This remains but a tail risk as other pollsters put the Social Democrats firmly on top, but should it happen it would cause uproar. The party would get to try to form government but will likely fail, as other parties are generally expected to keep their distance.”
“There is no obvious government coalition, especially as one or two of the smaller parties (one from each bloc) may not reach the 4% threshold required to enter the parliament. There are also several potentially blocking majorities for those who attempt to form a minority government.”
“Any associated political uncertainty won’t necessarily become a problem unless other risks materialize, but what if a black or grey swan does emerge? While Swedish politics is unlikely to become a significant driver during the autumn, if it does it would be negative for the SEK.”
“Swexit extremely unlikely on current polls
An announcement by the Sweden Democrats that it will seek a referendum on the EU after the election received attention lately, prompting questions about a potential Swexit. We see this as a very minute risk: i) the general public favours EU membership with a big margin (the difference between the pro-EU and the anti-EU side is a whopping 33.6%!), ii) most other parties are resolutely against the idea of a referendum, iii) and besides, Swedish referendums aren’t binding anyway.”
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