After a period of rapid growth and unprecedented economic prosperity during the late 1980s, by 1990 the Swedish economy overheated, and after a controversial bill freezing salaries and banning strikes failed in the Riksdag, the social democratic government led by Prime Minister Ingvar Carlsson resigned in February 1990. At this time the respected Finance Minister Kjell-Olof Feldt left the government in protest over what he saw as irresponsible economic policies. Carlsson soon formed a new government, but by the time of the general election in September 1991 the economy was in free fall, and with rapidly rising unemployment, the social democrats received the smallest share of votes in sixty years (37.7%), resulting in the loss of office to the opposition, a centre-right coalition led by Carl Bildt.
Göran Persson of the Social Democrats became Prime Minister in 1996, a post he would retain until after the 2006 elections which would allow for the return of the centre-right coalition parties to government as part of the Alliance.
The 2000s and 2010s, saw the Social Democratic party's further loss of influence, though it would return to government in 2014 under Stefan Löfven. The 2010s were politically turbulent; the European migration crisis saw the rapid rise of the right-wing populist Sweden Democrats, who would eventually become the balancing power between the two main blocs of left and right which had long been the dominant dynamic within Swedish politics. Opposition toward the Sweden Democrats from the traditional political parties caused lengthy government formation processes, especially following the 2018 general election.
The Bildt Era
In response to the perceived failure of the Social Democrats to handle the economy and in protest over what was seen as outdated socialist policies (state-run monopolies in for example television, radio, telephone services & hospital care), newly formed reformist-populist party Ny demokrati made a successful surprise push for the Riksdag in the 1991 elections, enabling a new centre-right government to be formed. Under the leadership of Carl Bildt, the new government was determined to profile itself as anti-socialist and cosmopolitan, with the aim of initiating many reforms. Blaming some of the excesses of the Nordic model for the economic crisis, it wanted to initiate reforms and started dismantling of state-run monopolies, lowering of taxes, reshaping and internationalization of higher education, and laid the foundation for Sweden's subsequent entry into the European Union.
However, the new government had inherited the most serious economic crisis seen in fifty years, which meant that instead of focusing on reforms, it had to spend almost its entire period in office (1991–1994) in crisis management mode. Consumer prices went up, house prices down and unemployment rocketed. In late 1992, under the pressure of a flurry of financial speculation that shook several European currencies at this time, the Riksbank briefly raised its target rate to 500% in an effort to defend the fixed exchange rate of the Swedish krona, but it had to be set free against other currencies, and immediately dropped about 15% against the US Dollar. During 1991 and 1992, the housing bubble that had built up during the 1980s deflated, leaving many banks nearly insolvent, leading to the Swedish banking rescue, where the government had to guarantee all deposits in the nation's 114 banks and some nationalized at a cost of 64 billion SEK.
The drain on the state treasury from 1992 and onward, was overwhelming and the current account deficit and national debt surged. To solve this, bipartisan agreements were soon reached with the Social Democrats on measures to combat the crisis, but with even these agreements, the hard conditions and deep economic recession were to last throughout the 1990s. Because of this, the Bildt Cabinet is by many regarded as largely a failure, not only because the recession meant it was unable to do the reforms it set out to do, disenfranchising its core voters, but also because it wasn't seen as handling the crisis effectively, while making some obvious mistakes (such as the costly defence of the krona), sending swing voters into the arms of the opposition.
While the lasting policy impact was limited, with notable exceptions such as the introduction of commercial TV/Radio and school vouchers, the most profound impact of the Bildt era was that most people came to associate a non-Social Democrat run country with recession and general misery (a picture also skilfully painted in the next three general elections by the Social Democrats), thereby effectively locking out the center-right parties from cabinet positions for the next twelve years. In recent years however, the Bildt government reputation has been restored to some degree, not least through the international praise given for the model way it handled the bank bailouts.
The Persson Era
The 1994 elections restored Ingvar Carlsson's Social democratic minority government. During the interregnum after the election, the car and passenger ferry MS Estonia was lost in the Baltic Sea on 28 September, killing 852 people, most of them Swedish (501 out of 852 victims), in one of the worst maritime disasters in modern history. One of the few positive events during the time was Sweden's surprise run at the 1994 FIFA World Cup, which earned Team Sweden a bronze medal. Göran Persson was appointed finance minister and saddled with the difficult task of balancing the budget by aggressively cutting social programs and benefits, something most Swedes initially intensely resented, but an achievement for which he eventually came to be respected. After Carlsson's retirement in 1996, Persson replaced him, and remained in power until he lost the 2006 elections, ending 12 years of Social Democrat rule.
Sweden entered the European Union in 1995 after a consultative referendum the previous year. The entry into the EU in some ways turned a page in Swedish history and could be seen as signifying the end of Swedish exceptionality and neutrality. Twentieth century Sweden often took an insular view and kept Europe and what was going on "on the continent" at an arm's length. EU membership challenged this, but a majority of the electorate was still eurosceptic, and it is unlikely that a referendum at any other time but in conjunction with a very severe recession would have yielded a positive result. The Öresund Bridge between Malmö and Copenhagen, Denmark, opened in 2000, is sometimes seen as a symbol of Sweden's stronger ties to continental Europe.
During the late 1990s, the Swedish Armed Forces were severely downsized, with enlistment decreasing to 20% of all young men (from 90% at the height of the cold war), but remained present in UN peacekeeping forces, not least the Yugoslav wars, where former prime minister Carl Bildt was envoy for the EU, and later the UN.
In the first half of 2001, Sweden held the rotating EU Presidency, and hosted a series of high-profile meetings and workshops, culminating in June with a summit in Gothenburg visited by George W. Bush and all the major EU heads of government - this was the first visit of a sitting US President in Sweden. This summit was an important step for the eastward expansion of the EU three years later, but the event was challenged by protesting left-wing groups rioting and attacking police downtown. A referendum in 2003, after years of uneasy discussion, lead to a resounding no to the proposed adoption of the euro. The perplexing effect on the leading political strata, many business people and the media, in all of which groups the support for the adoption of the euro had been overwhelming, of this vote was increased by the bitter fact that the campaign had been disrupted four days prematurely by the assassination of Foreign Minister Anna Lindh, who, had she lived, would likely have succeeded Göran Persson within one or two years (as confirmed by the PM himself in later interviews and by her obvious standing within her party).
While the assassination of Minister for Foreign Affairs Anna Lindh in September 2003 was not connected to the campaigning on the Euro, or on EU issues in general, and while the trend toward a rejective vote was clear in polls weeks before the referendum, both the Gothenburg riots and the no to the euro showed that many Swedes, and in particular many young Swedes, felt disenfranchised by the new EU-oriented and less self-assured country they were living in.
On 26 December 2004, during a Christmas holiday and Boxing Day celebration, 543 of Swedish people in Thailand and the other parts across the region of South and Southeast Asia were among thousands of people killed by the catastrophic tsunami from the magnitude 9.0 undersea earthquake off Indonesian island's west coast of Sumatra. A memorial service was held at Storkyrkan in Stockholm in January 2005. On behalf of all Scandinavians.
The Ministry for Foreign Affairs was unmanned due to the holidays, and the lack of government action caused a political scandal which shook the confidence of Persson's cabinet, not least Swedish Foreign Minister Laila Freivalds. She resigned after another scandal, where she had been informed in advance of a Swedish Security Service shutdown of the Sweden Democrats' web site featuring the infamous Muhammad cartoons. Swedish press noted that this was the first case of Swedish government censorship due to foreign threat since World War II. Sweden is one of few western countries where these cartoons have not been published in any mainstream mass media, but was still affected though the proximity to Denmark and Norway - Norwegian-Danish-Swedish dairy producer Arla suffered from middle-eastern boycotts, and when Minister for International Development Cooperation Carin Jämtin went to Sudan to investigate the Darfur genocide, the governor of Darfur used the cartoons as a pretext not to receive her.
The Reinfeldt Era
Several new political parties - among them Feminist Initiative led by former leftist leader Gudrun Schyman, the euro-skeptical June List (originating in the 2004 European Parliament elections) and the anti-copyright Pirate Party ran for the Riksdag election of 2006 with attention from mass media, but with little success. In this election, the conservative coalition "Allians för Sverige" ("Alliance for Sweden") gained a majority in the riksdag and presented Fredrik Reinfeldt of the Moderates as their prime minister candidate. The success of the Sweden Democrats, who gained seats in several municipal councils, and got 2.9% of the Riksdag votes (though not meeting the 4% threshold), intimidated the established parties. During the first week, there was a series of scandals, where some of the cabinet ministers from the Moderate Party turned out to have dodged the television license fee, and paid maids under the table. Ministers Maria Borelius and Cecilia Stegö Chilo stepped down after only a few days in office. The cabinet was criticised for lack of gender equality and diversity because it contained only nine women (out of 22 ministers). On the other hand, defenders of the cabinet pointed out that Sweden now had their first African-born minister (Nyamko Sabuni) and their first openly homosexual minister (Andreas Carlgren) ever. Foreign minister Carl Bildt was questioned for his former directorship in Vostok Nafta, and his possible bias in the question of the planned Nord Stream 1 pipeline. The pipeline in question was intended to reach between Russia and Germany on the floor of the Baltic sea, through Swedish territorial waters.
Reinfeldt's policy was focused at lowering unemployment, by lowering taxes, as well as allowances for sick and unemployed. Until the onset of the subprime crisis employment rose, though the red-green opposition claimed that the main cause has been the current global prosperity.