Swedish centre-right ousts Social Democrats

STOCKHOLM, Sep 18: A centre-right alliance headed by Moderate Party leader Fredrik Reinfeldt was due to start talks on forming a new government for Sweden today after ending 12 years of Social Democrat rule.

Reinfeldt, 41, will be the next prime minister. He beat Social Democrat Prime Minister Goran Persson, one of Europe's longest-serving leaders after 10 years in office, with vows to cut taxes and trim back the welfare state to boost jobs.

''Tomorrow we will wake up to a new Sweden,'' Reinfeldt said after what he called an historic victory in yesterday election.

''Tomorrow is when the work begins.'' The four-party opposition bloc won 48.1 percent of votes compared to 46.2 percent for Persson and his allies, according to almost complete results from Sweden's Election Commission.

This gave Reinfeldt and his partners in the Folk Liberal Party, the Centre Party and the Christian Democrats 178 seats in the 349-seat parliament, a slim majority of 7 seats.

''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,'' Reinfeldt told supporters.

The coalition was set today to start discussing the distribution of seats in the government, although the cabinet will not be presented to parliament until October 6.

The result was a victory for the alliance's pledges to stimulate job growth by fine-tuning, but not dismantling, the social welfare system brought in by the Social Democrats who have governed Sweden for six of the last seven decades.

Swedes pay high taxes but the welfare state gives them generous benefits. Reinfeldt says the downside is the Swedish will to work has been sapped by excessive benefits.

Change Despite Sweden's strong economy, opinion polls suggested many people wanted change in the country of just over 9 million people, were tired of Persson and wanted new ideas. The election was closely watched by other European Union governments facing the need for welfare reform because of ageing populations and creaking pension and healthcare systems.

It was first the time in 25 years that the centre-right had won a majority and the best performance by Reinfeldt's party since 1928.

But it was the end of an era for Persson, 57. Clutching a bunch of red roses, Persson vowed his party would fight back, though without him as he would step down for a new generation.

Swedish newspapers portrayed an historic political shift.

''The alliance has redrawn the map,'' said the liberal daily Dagens Nyheter. ''Sweden is today waking up to a new political landscape,'' said Aftonbladet, the biggest selling daily.

In Asian trading, the Swedish crown firmed against the euro.

Economists expect the new government, with tax cuts and privatisation plans, to boost Sweden's financial markets.

Reinfeldt has boosted his party by shifting it towards the centre and paring down earlier tax and benefit cut promises.

He said Sweden's real unemployment rate was about 20 percent, almost four times the official level, and that the welfare system required changes to preserve it for the future, a theme of reform across Europe.

German Chancellor Angela Merkel and her conservative-Social Democrat coalition have been trying to fix a troubled healthcare system, cut corporate taxes and tweak jobless benefits.

In Britain, Prime Minister Tony Blair has reformed the pension system, while Denmark has cut taxes and launched more flexible labour market rules.

Reinfeldt intends to sell off some 200 billion Swedish crowns (.6 billion) worth of state-owned shares over four years. His privatisation push could include government holdings in Nordea bank, telecoms company TeliaSonera and airline SAS.

Reinfeldt favours Sweden joining NATO if there is broad agreement on the issue. He wants Sweden more involved in the EU but has no plans to hold a referendum on the euro currency in the next four years. Swedes rejected adopting the euro in 2003.

REUTERS