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History of Sweden (1991–present)

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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In response to the perceived failure of the Social Democrats to handle the economy and in protest over what was seen as outdated socialist policies (state-run monopolies in for example television, radio, telephone services & hospital care), newly formed reformist-populist party Ny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.

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