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Political Brief Sweden March 2020

Global Coronavirus Unrest

Rud Pedersen Public Affairs regularly assists customers and contacts with analyses of the Swedish and international political situation, as well as market specific political analyses. Due to the present Coronavirus crisis, we would like to share a summary of our political analyses of the situation.

March takeaways

  • All politics are dominated by the Corona/COVID-19 pandemic, and will be for some time to come.

  • The primary crisis is the spread of the virus and its societal and individual health effects.

  • The secondary crisis is the economic downturn the pandemic is causing, with increased rates of unemployment and companies being put out of business.

  • The third crisis might well be political, or, if the political system manages to mitigate and manage the coronavirus crisis well, a chance to recover political confidence.

  • A key question is whether the EU Member States decide to address this crisis together, in solidarity, or as individual countries promoting individual interests.

  • The coronavirus crisis is already affecting the US presidential race, as healthcare was a key issue even before the pandemic.

Swedish politics in crisis mode

Swedish politics and public debate are now totally dominated by the coronavirus pandemic and its effects on society.

The parliament has decided to meet and vote in a reduced setting, with only 55 out of 349 members present, to make sure that parliament, in every given circumstance, can congregate and pass necessary laws and decisions.

The primary crisis Sweden and other countries are facing is the spread of the coronavirus and the COVID-19 disease. As more people are infected, the pressure on the healthcare system will grow, even if it is already considerable.

There are fears of lack of intensive care capacity and shortage of medical equipment, as well as medical and protective supplies. Other illnesses may not be treated, as the healthcare system must focus instead on COVID-19 patients.

There may also be a shortage of medical staff, since they and their families too are exposed to the virus.

The secondary crisis facing Sweden and other countries is the significant economic downturn, visible on the stock markets and by companies being forced to lay off personal. Almost overnight, many small and medium-sized companies in the services sector (such as restaurants, conference organisers, shops and theatres) lost their market due to public restrictions and general fear of the virus.

Also, large companies, such as major hotel operators and airlines, have been forced to make significant reductions in numbers of personnel. Producers of as varied products as trucks and fashion are all signalling diminished markets.

Political crises or regain of trust?

The third crisis could be political, if the coronavirus pandemic isn’t properly addressed. On the other hand, the situation presents an opportunity for the parties to regain people’s confidence by decisive action.

The Swedish parties entered the coronavirus crisis still shaken from the refugee crises of 2015 and the dramatic rise of the right-wing populist party, the Sweden Democrats. The traditionally large parties, such as the Social Democratic Party and the Moderate Party, able and willing to lead government coalitions and present broad reform programs, have not had solid ground beneath their feet for several years. Instead, the Social Democratic Party and the Moderate Party have been haunted by falling support and a very different and difficult political landscape.

Swedish politics has been turned into a triangle-drama, with the Social Democratic Party, the Moderate Party and the Sweden Democrats each defending one tip of the triangle. Naturally, this is causing political instability. Whenever two out of the three parties vote in the same way, the majority will seemingly shift.

The two traditionally major parties, the Social Democratic Party and the Moderate Party, have seen their political blocks fall apart, new cooperations being formed and a real challenge to their leading position from the Sweden Democrats. They have met this by adapting their policy on migration and putting a stronger emphasis on issues such as crime-fighting and law and order.

The challenge has been based on accusations from the Sweden Democrats that the political establishment has neglected or mishandled the migration, integration and law and order issues. A strong sense of negativism towards the future of Sweden has been a cause of, but also fostered by, the Sweden Democrats.

On top of this very unstable situation comes the coronavirus crisis.

An instinct to come together

The line of argument heard from right-wing populists is the same as during the refugee crisis. They argue that Sweden should close its borders and leave the EU, and claim that any weaknesses of the healthcare system has been caused by the established parties who allowed the capacity of intensive care, the number of beds in hospitals and the stocks of medical supplies to decrease. According to them, the established parties are thus to blame.

Short term, this doesn’t seem to stick, since there is a cemented Swedish tradition to unite and stay united during crises. The Prime Minister, Stefan Löfven, has thus far shown that his personality, calm and reasoning are well-suited for emergencies. The opposition parties have down played their criticisms and the two largest parties in parliament have – finally – found common ground and cooperation on crisis measures. This presents an opportunity for the Social Democratic Party and the Moderate Party to show what political leadership is all about. To blame others for the coronavirus won’t save any lives. Only political action supporting the crisis-handling authorities will make a difference.

The established parties have so far done well. Will it stay that way?

It seems that the primary coronavirus crisis could be longer lasting than other crises in recent memory. The spread of the virus is not yet stopped, and the health effects have not yet peaked. Thus, the most severe pressure on the healthcare system has not arrived. Should people with COVID-19 or other illnesses be denied care due to lack of capacity, the number of COVID-19-related deaths would go up significantly. Alternatively, if there are shortages of supplies in grocery stores, then we would be in a different territory.

The same goes for the economy, the secondary crisis. If we are experiencing a serious but short-term downturn, then the economy, not least many small and medium-sized services companies, could persevere with assistance from government programs. Longer-lasting public restrictions and general fear preventing people from demanding services will be much more difficult for those companies to handle.

As of now, people are looking for political leadership and political crisis mitigating measures.

Longer-term challenges

In a little while, people will start to look for answers and the long-term strengthening of the healthcare system and society’s crisis preparedness. They will also ask for economic policy measures to fight unemployment and a general lack of demand in the economy. Looking at the two major parties in parliament, the Social Democratic Party could benefit from a discussion on how to strengthen healthcare. The Moderate Party could benefit from a discussion on economic policy being high on the agenda.

We might be pushed by the coronavirus pandemic into a global recession. Sweden’s public finances are in good shape, with public debt very low. Sweden has the possibility of protecting people economically, and to protect companies from demand-shocks and to generally stimulate the economy.

But, this is not the case looking at Europe generally or the US. Some of the countries most severely hurt by the coronavirus pandemic are heavily in debt and struggled significantly during the financial crises of 2008. Should Italy or Spain falter, that would be a much more difficult problem for the EU to handle than the Greece debt-crisis was approximately 10 years ago.

European solidarity needed

A key to handling the crisis, both the primary health crisis and the secondary economic crisis, will be cooperation and coordination within the Nordic region and EU context. Should that falter, then we are in unchartered waters, with far reaching future consequences. Should it hold, however, that could mean a necessary new beginning for European cooperation.

Disintegration of international cooperation could, together with an illustrated risk of international dependencies and global value chains, lead to more protectionism and economic nationalism. Demonstrated shared values when meeting the crisis would, on the contrary, illustrate the necessity and value of open markets and mutual dependencies.

The virus does, no matter what, know no borders. Therefore, neither the primary nor secondary crises the virus presently is causing can be met unilaterally. To avoid a third, more political crisis, Europe must come together.

Swedish public opinion in March

Public opinion is virtually unchanged since February. The only visible changes are that the Sweden Democrats decreased 1% and the Christian Democratic Party increased 0.7%.

One should not pay too much attention to present polls or numbers. The political debate has come to a standstill, due to the coronavirus and the COVID-19 disease. This is to be expected; during crises, political parties tend to unite for the good of the country and down play political differences.

One should, however, be prepared for significant shifts in public opinion due to how the public perceives the coronavirus crises to be handled by the political parties and the political system.

One should also expect other issues and a different political sentiment coming out of the present coronavirus crisis, whenever that will be.

US presidential elections

President Trump initially neglected the threat of the coronavirus. He called it a “foreign virus”, a “Chinese virus” and predicted the end of domestic spread. He’s been clearly proven wrong. Coronavirus will have significant effects on American society and the economy as well as, most likely, on the upcoming election.

The US has a world-class healthcare system, for those with full access to it. However, there are probably limitations to how able the US is to cope with coronavirus due to many people lacking comprehensive access to healthcare, which could lead to high numbers of undetected or untreated cases of COVID-19.

Healthcare was already, before coronavirus, a key political issue. Both Joe Biden and Bernie Sanders want more comprehensive healthcare systems but have different proposals on how to accomplish this.

Joe Biden wants to build on the Affordable Care Act and expand coverage to low-income Americans. He also wants to curb price increases on medication.

Biden versus Trump in November?

It seems ever more likely that Joe Biden will be the Democrat’s presidential candidate and meet Donald Trump in the 3 November presidential election. It could well be that the presidential election was determined by representative Jim Clyburn of South Carolina when he endorsed Joe Biden in the primary election. That set Biden on the path to win the state and changed the momentum of the Democrat’s primary election.

Before South Carolina, the moderate democrats were divided. After South Carolina, they started to unite behind Biden. Gallup has shown that 35 percent of the American people claim to be moderates, 24 percent are liberals and 37 percent call themselves conservatives. A majority of 53% would not vote for a socialist (Bernie Sanders).

Bernie Sanders is sometimes said to be inspired by Sweden, but his policies would be to the far left in a Swedish political context. No Swedish party calls for protectionist trade policy, healthcare without any personal contribution or a tax policy towards wealthy people that confiscates wealth.

Biden’s challenge is that he needs to continue to unite the party behind him and then to reach out to young voters and the Latino community.

Joe Biden is a multilateralist and wants America to recommit to cooperation with friends and allies. His view is that security at home and abroad are connected. He is a strong supporter of NATO, which he called: “the single most important military alliance in the history of the world.”

Interestingly, particularly at this time, his view is that “economic security is national security.”

Corona likely to impact the US election

The forthcoming presidential election has been called to be a “pro or con” Donald Trump election. Much of the Democratic discussions have been about which candidate would have the best chance of defeating him.

Trump’s re-election bid has been based on a strong economy and prosperous stock market. Clearly, that case has diminished during the last few weeks and it is likely that the administration will be held accountable for how coronavirus was and is countered. Still, American society is deeply divided and many of those not prepared to vote for Trump now, were unprepared to do so even before the pandemic.

Additionally, many Trump supporters will vote for him no matter what.