The past week of Swedish politics has been a mysterious case of a dog that should have barked, but then simply didn’t. In a barely covered press release, the Riksbanken — Sweden’s central bank — announced that it had lost some 44 billion kr (£3.2 billion), and needed that much money from the state in order to return to the minimal level of capitalisation stipulated by the law. For a small country such as Sweden, this is a very large sum: it represents fully half of what the state spent on defence during the 2023 fiscal year.
The reasons for this new hole in the budget aren’t particularly unique: like every other country in the West, Sweden got too used to zero-interest policies being the new normal, and only belatedly caught up with the new reality brought about by post-Covid interest hikes. The central bank thus engaged in a game of buying high and selling low: loading up on bonds at a point where interest rates were low, and then offloading them when the rates shot up and the economy began taking a turn for the worse.
If one wanted to damn the central bank with some very faint praise, one could at least say that they’re hardly alone in this predicament: the UK is suffering from very similar problems, and much of Europe is stuck in a very deep economic malaise. Yet that doesn’t really change the facts on the ground: the Swedish state, which intended to boost defence spending in order to counter the threat from Russia, now finds that it no longer has the required cash in the bank. Thus, a time of very hard choices is approaching: either the Government must abandon the idea of these defence investments (many of which are strictly necessary just to compensate for what has already been given up on behalf of Ukraine), or engage in some very painful and very unpopular austerity elsewhere.
One might think that a budgetary disaster like this would receive a lot of coverage, but that would be quite wrong. Instead, the public debate in Sweden in recent days has been consumed by a very different story, one that, when taken together with the depressing news from the Riksbanken, lends an air of growing absurdity to the state of politics in both Sweden and Europe as a whole.
At the centre of this recent drama is a controversial law intended to make it easier to change gender. In theory, this should be a boringly familiar culture-war story, a tale of woke politics squaring off against supposedly narrow-minded conservatives. But reality is sometimes much stranger than fiction: Sweden today is governed by the Right, not the Left, and it is the Moderate party that is implicated in pushing this law through. The prime minister of Sweden — Ulf Kristersson — is thus leading the effort to lower the age at which one can change one’s legal gender from 18 to 16, even as a massive supermajority of his own voting base are against this change. To further inflame things, his parliamentary group is also opposed to it, although it is being whipped to vote in favour. And to top it all off, some of the law’s fiercer criticism is coming from the Left, where there are deep concerns about its promises to make it easier to access irreversible surgery.
The Swedish Right, in other words, is busy instituting a Left-leaning reform that some significant parts of the Left do not want, over the stringent objections of many politicians on the Right, and in total contravention of the desires of voters on the Right. Confusion thus abounds: why would the Moderates spend all this energy on an issue that only promises to make their own voters feel dismayed?
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