Sweden's centre-left victory paves way for vote on euro

Sweden's centre-left government was preparing to return to office yesterday after an election victory that paves the way for a referendum next year on Swedish membership of the euro.

Göran Persson's Social Democrats won the biggest share of the vote and saw off a challenge from a group of opposition parties, ending a run of centre-right victories in other European elections.

Mr Persson, Swedish Prime Minister since 1996, did not campaign on the issue of the European single currency but has made no secret of his desire that Stockholm should sign up. Opinion polls show a majority backs membership and Mr Persson's success provides the "yes" supporters with a powerful new platform. A referendum is expected by next autumn.

The Social Democrats are drawing up plans to form a minority government relying on the support for the former-Communist left and Greens. Mr Persson indicated there would not be a full coalition with the two other parties, although there might be closer links. "I do not seek a mandate for anything else than a Social Democratic government," he said. "But the forms of co-operation can, of course, be developed and widened."

Sunday's elections gave a larger-than-expected victory to the Social Democrats, who campaigned against tax cuts and in defence of Sweden's legendarily generous social welfare system, clinching 40 per cent of the vote compared with a record low of 36.4 per cent in 1998 elections.

With the other two left- leaning parties they took 191 parliamentary seats, compared with 158 for the four centre-right opposition parties, led by the conservative Moderate Party. The other big surprise was the success of the opposition Liberals who emerged from obscurity to become the third-biggest party in parliament with 48 seats.

Their controversial call for language tests for immigrants who apply for Swedish citizenship captured the agenda, although the party insisted that it wanted to increase immigration quotas to plug labour market shortages. The fringe, far-right Sweden Democrats made gains in local elections in the south, but scored below the 4 per cent needed to enter parliament.

Mr Persson said the left's rally sent a signal to Germany, which holds its federal election on Sunday. "We broke the trend," he said. "Next week our German comrades can follow us." Gerhard Schröder, the Social Democrat Chancellor, congratulated the Swedish premier on his "convincing victory".