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Sweden faces minority government but currency gains
STOCKHOLM (Reuters) - Sweden's ruling center-right coalition faced the prospect of forming a minority government after losing its parliamentary majority in a Sunday election and seeing its overtures to the opposition Green Party rebuffed.
The anti-immigrant Sweden Democrats, which won their first parliamentary seats in the traditionally tolerant Nordic country and hold the balance of power, said other parties would now have to reckon with them.
Despite the inconclusive result, the Swedish crown rose, with investors focusing on the country's solid economic fundamentals, sound finances and the fact that Prime Minister Fredrik Reinfeldt would remain in power, even if he has to lead a minority government.
By late trade, the crown was quoted close to 9.14 to the euro, its strongest level since October 2007, and firmer than its opening level of 9.2150. The currency has gained steadily since March 2009.
SEB analyst Elisabet Kopelman said investors were looking at issues outside Sweden, such as prospects for a double dip in the economy and debt problems in other European countries.
"There is less of a reason for foreign investors to worry about their (Swedish) investments," she said.
Reinfeldt, 45, said he would form a government in time for the start of a new session of parliament on October 5.
He noted that the combined vote of the center-left opposition and the Sweden Democrats was only 7,000 more than the government parties received, and said he wanted to wait for the final result to come in, which he said would be on Wednesday.
But if the final count confirms the preliminary result, Reinfeldt will be left with a minority in parliament.
Both he and the left have said they will not work with the Sweden Democrats, which says it is seeking a more responsible immigration policy, but is denounced as racist by opponents.
Before the vote, Reinfeldt had said he would seek support from the Green Party in the event of a hung parliament, but on Monday he said no talks had taken place.
"We now have time until October 4-5 that we will use. It is good if we allow time for the election result to sink in."
The Green Party, which increased its vote during the election to 7.2 percent and became the fourth largest party, gave Reinfeldt a clear rebuff.
"It is our judgment that we ... have not received a mandate from our voters to begin any negotiations with the Alliance, neither to be part of a government nor to begin any closer cooperation," Green Party joint leader Maria Wetterstrand said.
Swedish voters were choosing between Reinfeldt's vision of a leaner welfare state, with more income tax cuts and privatizations, and a Social Democrat-led opposition platform that wanted the rich to pay more to fund schools, hospitals and care for the elderly.
The Social Democrats, who ruled for much of the last century and installed the "Swedish model" of the welfare state, had their worst election in almost 100 years.
From the preliminary count, Reinfeldt's Alliance looked set to win 172 of parliament's 349 seats, and the Social Democrat-led center-left 157 -- among them 25 Greens. The Sweden Democrats were on 20.
Swedish newspapers saw the election as a dramatic shift.
"It is Monday morning and time for Swedes to find a new self-image," wrote the daily Svenska Dagbladet. "A center-right government without a majority, a wrecked Social Democracy, and a party with roots in far-right extremism holding the balance of power."
Sweden Democrat leader Jimmie Akesson, 31, signaled a readiness to wield his party's newfound power, saying he expected to be treated as an "equal partner" by the other parties and hold talks with them.
His party has gained support by moving away from their skinhead roots, and its rise mirrors the emergence of other similar parties elsewhere in Europe, including in the Netherlands and neighboring Denmark.
Analysts say the party, which wants to curtail immigration and criticizes Muslims and Islam as un-Swedish, has found support among the growing number of unemployed. It is strongest in the south of Sweden, where the proportion of immigrants is highest.
Immigrants account for 14 percent of Sweden's population, above the 12.4 percent average for northern Europe, according to United Nations figures.
(Writing by Patrick Lannin, additional reporting by Simon Johnson, Adam Cox, Johan Ahlander, Johan Sennero, Elinor Schang, Sven Nordenstam, Bjorn Rundstrom, Rebecka Roos; Editing by Noah Barkin)
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