Sweden’s new government sparks political realignment

Subject Sweden's new government. Significance On January 16, Sweden’s Social Democrats formed a minority coalition with the Green Party, with support from the centre-right Liberal and Centre parties. It also has reluctant support from the Left party, which may not play any role in policy. The agreement marks the end of four months of cross-party negotiations after September’s general election delivered a hung parliament. The left-right alliance attempts to prevent the populist and anti-immigrant Sweden Democrats, which won 17.5% in the election, from entering government. The coalition parties could eventually face a no-confidence vote tabled by the Left party over their support for centre-right policies, while a failure to tackle crime and immigration will serve to strengthen the Sweden Democrats' profile in opposition. Impacts The fragile nature of the government could be a deterrent for future investors in the Swedish economy. The UK departure from the EU and the perceived strengthening of the German-Franco alliance may increase support for Sweden’s own EU exit. Sweden will stop selling weapons to 'undemocratic countries' -- a reference to Saudi Arabia.

Significance Johnson's cabinet overhaul is the largest in decades, replacing 17 cabinet ministers from the previous government mostly with individuals who support Johnson’s hard-line stance on Brexit. Impacts Brussels could offer London a ‘Northern Ireland only’ backstop, but this will be rejected by the UK government. The government will likely pass legislation to protect EU citizens’ rights in the United Kingdom if there is a no-deal Brexit. The EU will only grant another extension if a deal is almost agreed, or if there is a UK general election or second Brexit referendum.


Significance This is a lower forecast than the 170,000 the agency predicted in October, before Sweden reimposed controls at its border with Denmark. The immigration issue is causing strains within the minority two-party coalition government. The junior Green Party has lost several key battles in the last couple of months and is said to be questioning its participation in the government. Some scepticism has crept into the ranks of the Social Democrats as well, with several senior members encouraging the leadership to form a new government with the Moderate Party. Impacts With so many asylum seekers already in the country, Sweden's infrastructure will be pushed to the limit. Every misstep will cause further problems for the government. The Greens will either be allowed to push their own agenda within the government, or will break away. With polls showing a clear majority for the opposition, the temptation to bring down the government may prove too hard to resist. If the opposition joins forces to submit a budget proposal in the autumn, the current minority government must resign.


Subject Denmark's immigration impact. Significance Denmark's opposition Social Democrat party has adopted a hardened stance on immigration, reflected by its support for several populist policies implemented by the government. The party will use its toughening position on immigration as a campaign strategy ahead of Denmark's general election in 2019. Impacts Increased competition over the leadership of the incumbent Venstre party could undermine its chances of retaining power. A Social Democrat government backed by the DPP would mark an unprecedented political realignment. A government involving the DPP would be marked by popular protests and political instability.


Significance The minority Socialist Party (PSOE) - Unidas Podemos (UP) government needed the support of several left-wing and pro-independence parties to get the budget through. Its approval makes early elections unlikely and gives the government a better chance to shape the COVID-19 economic recovery and implement some of its 2019 electoral pledges. Impacts Spain’s poor record in absorbing EU funds suggests it will struggle to make the most of the EU recovery fund. The weakening of the UK currency will hurt Spanish exports to the United Kingdom, especially with fewer UK tourists coming to Spain. Greater political stability will enable Spain to pursue a more assertive foreign policy.


Significance The forces of the internationally-recognised government, backed by a Saudi-led coalition, in 2015 routed Huthi rebels from Aden and the southern coast, and also made progress in the central Marib province. However, their advance faltered in early 2016 as it approached the densely-populated highlands, where the rebels have a natural support base. It had appeared that this deadlock might allow a negotiated solution, but the UN-mediated talks failed. In 2017, the government has begun a new advance up the west coast. Impacts The humanitarian situation will worsen; famine is probable. The EU might consider an embargo on arms sales to Saudi Arabia. Without the stability of a negotiated peace, it is unlikely that much of Yemen’s oil and gas output will come back on stream. The Yemen conflict will further undermine regional relations, despite recent Iranian efforts to reconcile with the Gulf Arab states.


Significance Although former Prime Minister Matteo Renzi is confident of winning, the PD, condemned after the 2013 general election to govern Italy without a majority, has faced growing problems of cohesion and electoral credibility since last December’s referendum defeat. Impacts Local elections in June will indicate electoral sentiment towards the PD and M5S ahead of the general election in early 2018. Continued weak economic performance is fuelling populist sentiment and tying government hands. Tensions with the EU could increase when the government presents its 2018 budget later this year.


Subject How the UK business community views the UK-EU relationship. Significance Many believe that the intervention of the business community was important in shaping the outcome of the Scottish independence referendum. However, this diverse group remains divided in its attitude towards EU membership and is likely to maintain a 'wait and see' approach until after the general election. Impacts Those in the business community that favour staying in the EU still argue that the UK-EU relationship should be reformed. Despite the wishes of some politicians, it is highly unlikely that business will stay silent on the question of a referendum. Nevertheless, they will most likely wait to ramp up their lobbying until after the May 2015 general election.


Significance The government had hoped to use executive powers known as the royal prerogative to begin the two-year process of withdrawing from the EU. Instead the court ruled -- by a majority of eight to three -- that the UK Parliament must be consulted and allowed to vote on the issue. Impacts The government is expected to introduce a bill on Article 50 tomorrow. It may face increasing pressure to publish a white paper outlining its Brexit strategy. Support for Scottish independence may rise as the negative economic effects of a ‘hard’ Brexit become more apparent.


Significance With the 2014 Scottish independence referendum and 2015 UK general election behind them, parties in Scotland are starting to focus on the May 2016 Scottish Parliament elections. Impacts The Conservatives' Scottish Parliament vote share is likely to rise at Labour's expense, through an appeal to hardcore unionists. In the UK EU membership referendum, the SNP will run its own campaign against leaving the EU ('Brexit'). A UK vote for Brexit, with Scotland voting for continued EU membership, would trigger a second independence referendum. The likely renewal of the Scotland-based UK Trident nuclear system, which the SNP opposes, could also be a pretext for a second referendum. Given the 2014 'no' vote, a second Scottish referendum could be more constitutionally controversial than the first.


Subject Germany’s relations with Russia. Significance The contrast between the commercial imperative of stability and the current levels of political volatility and unpredictability is clear in the tensions associated with relations between Germany and Russia. The interdependence of the two economies has led to a pragmatic and pacific approach on the part of successive German administrations. Impacts Despite scepticism in some countries, the EU is likely to renew sanctions against Russia in July. Any Russian attempts to influence the general election in September through 'fake news' or cyberattacks would increase tensions. A left-wing coalition involving the SPD, the Left Party and the Greens after the next election would soften Germany’s stance towards Russia.


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