Instant View: Swedish centre-right wins vote but lacks majority

STOCKHOLM (Reuters) - Sweden's center-right coalition won a general election but fell short of a majority in parliament after a far-right party won seats for the first time, official preliminary results showed on Sunday.

Prime Minister Fredrik Reinfeldt's four-party alliance won 173 seats in parliament, while the Social Democrat-led opposition won 156 seats, the results showed.

The anti-immigrant Sweden Democrats, riding on a wave of voter frustration that echoed similar trends in other European countries, will have 20 seats, according to the results.

A hung parliament has been seen as the worst potential outcome for the Swedish crown and local debt markets.

KEY POINTS:

- The ruling coalition had 49.3 percent of the votes after 98 percent of districts had been counted, versus 43.6 percent for the center-left.

- Reinfeldt will be the first center-right sitting prime minister to be re-elected. He repeated a campaign pledge not to work with the Sweden Democrats and said he would contact the Green Party (part of the center-left bloc).

- Social Democrat leader Mona Sahlin conceded defeat, saying it was up to Reinfeldt to build a majority.;

- Some political analysts have speculated that a minority government would be vulnerable to a vote of no-confidence.

- The crown at 2202 GMT was modestly weaker at 9.2435/65 per euro versus 9.2230/2330 before the results.

COMMENT:

JOHAN JAVEUS, SEB

"The result we're seeing now is nothing that will cause any dramatic effects for the crown. We're talking about 3-5 ore (hundredths of a crown) against the euro."

ROBERT BERGQVIST, SEB

"I think that the reaction tomorrow will be somewhat negative as there is uncertainty about the situation in parliament, which will have a negative effect on the crown and yields."

"I think there will be an acceptance of the fact that the Alliance could chose to rule as a minority government and take it step-by-step. But if they get too many setbacks, then I think there will be a bigger effect on markets."

"What will also have an influence is ... what's happening globally. If it looks like we are going to see another wave of global economic uncertainty or financial turbulence, then we really need a strong government which can make decisions quickly on the tough questions."

JAN HAGGSTROM, HANDELSBANKEN

"The government is in a strong position in terms of the budget. I think that is the most important thing when it comes to the reaction in the markets."

"I don't think we will see anything dramatic, even if the Sweden Democrats do get in, given that a sitting government is in a strong position, even if it is a minority administration, on budget questions. The opposition has to put forward a common budget proposal. I think it is very unlikely that the Red-Greens and the Sweden Democrats would do that."

"In the short term, I think we will see very small effects if the figures so far turn out to be right. You also have to keep in mind that what's happening in other parts of Europe is more dramatic. We have such strong public finances in Sweden, that it would take something really spectacular for people to start worrying ... and start selling Swedish government paper. In fact, when worries are rising elsewhere, you can easily imagine that even if we have a minority government, people will chose to buy Swedish government paper instead of southern Europe or Ireland."

ANNIKA WINSTH, NORDEA

"It is still very uncertain. If we assume we get the result we have seen in most of the election polls, it means that we will get a minority government and that the Sweden Democrats are in."

"A minority government from a financial markets' perspective is negative... The markets will probably put a risk premium on that. The impact will be a weaker crown, but probably long-term rates may also rise a bit."

"A minority government is a risk, and that is, quite simply, the price that we will pay."

ANDERS WESTHOLM, PROFESSOR AT UPPSALA UNIVERSITY

"At a guess, I would say that if there is a minority Alliance government, they will try to get their individual bills supported by one of the red-green parties in order to avoid discussions with the Sweden Democrats."

MICHAEL BOSTROM, DANSKE BANK

"If the situation is even, with the Sweden Democrats holding the balance of power, then there will be a very difficult situation. If there is no clear majority then we will see a weaker crown and higher rates. The budget process will also be difficult."

BJORN SODER, SWEDEN DEMOCRAT PARTY SECRATARY

"This sends a positive signal that the years of extremely liberal immigration policy, setting Sweden apart from the rest of Europe, are over. Now the Swedish people are demanding a more restrictive immigration policy and a more responsible integration policy, just like in the rest of Europe."

ULF BJERELD, POLITICAL SCIENTIST, GOTHENBURG UNIVERSITY

"If this outcome stands we will have a scenario that most Swedish voters wanted to avoid, that is that we have a xenophobic party holding the balance of power."

"This is what all except the Sweden Democrats have tried to avoid, but failed to do."

"It is conceivable that Fredrik Reinfeldt will hold talks, mainly with the Green party. I don't think he will offer them a seat in government, but he may try to convince them that some form of co-operation will give them a certain influence on policy in return for backing the government on some issues."

KNUT HALLBERG, SWEDBANK

"On the one hand it is a relief that the Alliance is clearly bigger than the red-greens. But on the other hand, there will be uncertainty about the forming of government and there will be drawn-out negotiations when the Alliance tries to secure a majority, presumably with the Green party."