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The insider's guide to ... Swedish politics

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(CNN) -- So, there's been an election in Sweden?

There has indeed. The Scandinavian country -- an EU member and proud possessor of one of the world's most advanced welfare systems -- went to the polls on Sunday. While numerous parties contested the election, the key battle was between the incumbent center-left Social Democrat party, headed by Goran Persson -- who has been Prime Minister since March 1996 -- and a center-right coalition, the Alliance for Sweden, headed by Frederick Reinfeldt, leader of the Moderate Party.

And?

Although a few votes remain to be counted, with 99.7 percent of results in victory has gone to Reinfeldt's coalition.

Apparently it was a close result.

Extremely. In the final days of campaigning Persson had acknowledged that it was a neck and neck race between his Social Democrats and Reinfeldt's coalition. "If you want to use swimming terminology, we are going to be the ones who touch the finish a few hundredths of a second before the opposition," Persson told a campaign rally on Saturday. In fact, it is Reinfeldt who has scraped to victory by a wafer-thin margin, winning 48.1 percent of the vote compared with 46.2 for the Social Democrats. In terms of seats in the Riksdag -- Sweden's parliament -- the result gives Reinfeldt's coalition 178 seats out of 349.

So what's so significant about that?

The result represents a seismic shift in Sweden's political landscape, which has been dominated for the last 12 years by the Social Democrats (the latter have governed Sweden for 65 of the last 74 years). It is also likely to herald a significant shake-up in Sweden's much vaunted welfare system.

What were the main issues in the election?

Although there were many points of contention between the leading parties -- including privatization of state-owned companies, relations with America, Sweden's role in NATO and the country's long-standing policy of military neutrality -- the main battleground was over the aforementioned welfare system, the latter paid for by some of the highest income tax rates in Europe. While insisting that he has no intention of dismantling the system, which is something of a sacred cow in Sweden, Reinfeldt has argued that, if the country is to compete economically, urgent reforms are needed.

What sort of reforms?

Reinfeldt has proposed a raft of measures aimed at reducing the tax burden, stimulating employment, encouraging business and making the "social model" more efficient. Among other changes he is advocating tax-cuts of 45 billion Swedish Kroner ($6.2 billion) over the next two years; a reduction in unemployment benefit from 80 percent of previous income to 65 percent; the removal of employer social charges for companies in the service sector; and a reform of tax rules for small companies. "We want to show that we like the Sweden we have," Reinfeldt told The Associated Press, "But also signal a will to change things through safe steps."

Who is Fredrik Reinfeldt?

Born in 1965, Reinfeldt has been a member of the Riksdag -- the Swedish parliament -- since 1991, and leader of the center-right Moderate Party since 2003. Following the party's crushing election loss in 2002 Reinfeldt has worked to soften its image and move it more into the center. His 1993 book "The Sleeping Nation" offered an extended critique of Sweden's welfare model.

Who else is in Reinfeldt's coalition?

As well as Reinfeldt's Moderate Party, the coalition comprises three other center-right parties: The Christian Democrats, the Folk Liberal Party and the Center Party.

What happens now?

Reinfeldt's coalition is expected to take office in early October when the Riksdag reconvenes after summer recess. Goran Persson, who was the second longest-serving leader in the European Union behind Luxembourg's Jean-Claude Juncker, has announced he will resign of leader of the Social Democrats in March 2007. "We are aiming for a comeback," he told supporters, "But it is not a comeback I will lead."

Which Abba songs best sum up the election?

For Fredrik Reinfeldt, obviously, "The Winner Takes it All." For Goran Persson and the Social Democrats, a choice between "So Long, Move On" and "Disillusion."


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