Sweden’s PM could yet stay put against all odds

Hej and welcome to Europe Express.

Today, we are looking at whether Stefan Lofven could remain at the head of Sweden’s government despite his resignation yesterday — and how a list of legal and political technicalities could work in his favour.

We will also unpack Brussels’ decision to allow data transfers to the UK, despite recent signals that Britain will seek to diverge on privacy rules from the EU — and what mechanisms are in place if they do.

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Swedish Houdini comeback?

Sweden likes to do things its own way, whether in handling the Covid-19 pandemic or politics, and Prime Minister Stefan Lofven proved it again yesterday, writes Richard Milne, the FT’s Nordic and Baltic correspondent.

Lofven’s centre-left government resigned because of a crisis sparked by a dispute over rent controls, but it was really about finding a way to rule despite the country’s fractured politics, with eight parties sitting in parliament.

Lofven, leader of the Social Democrats, said he did not want to call snap elections. This is thanks to a peculiarity of Sweden’s system: a national vote has to take place in September 2022, whether or not there is an election now (or in the future).

A complex coalition-building process is beginning, which could end up with Lofven pulling through — potentially overcoming naysayers a second time after he formed a government against the odds at the end of 2018.

As things stand, the speaker of Sweden’s parliament has four attempts to form a government. He may ask the main opposition leader, Ulf Kristersson, head of the centre-right Moderates, to go first.

A second Swedish peculiarity then kicks in. Any prime minister does not need to amass a majority in favour; they merely need to avoid having a majority against them. This negative parliamentarianism could help or hinder Kristersson and Lofven in finding a viable coalition.

Kristersson could try to cobble together a majority with the four parties that agreed a joint position on immigration earlier this year: his Moderates and their centre-right allies, the Christian Democrats and the Liberals, as well as, more piquantly, the nationalist Sweden Democrats.

The immigration agreement marked the populists shaking off their status as pariahs. But the four parties only have 174 votes in parliament, one short of the 175 needed for a majority.

One Centre party MP has indicated he may be prepared to jump sides and back a rightwing government, but it was unclear if any of the Liberals could go the other way, leaving any vote on a knife’s edge.

On the other side, Lofven himself could try to find a new coalition. His current minority administration with the Greens was backed not just by the Centre party but also by the Liberals, albeit after four months of negotiations in 2018. The Liberals now seem to be turning back towards the centre-right.

Lofven could theoretically reach 175 seats by including the ex-communists of the Left party, who started the whole crisis by backing a no-confidence vote against the government over their dissatisfaction with rent controls. Centre have said they would not co-operate with either the Left or the Sweden Democrats.

If either Lofven or Kristersson can somehow overcome that barrier, a path to a new government could open up. Otherwise, snap elections could still be called. A hot summer of negotiations in Sweden awaits.

Chart du jour: Europe’s rally

Line chart of Rebased indices showing European stocks keep pace with Wall Street rivals in 2021

European equities have roared to life in 2021, matching the pace of rises in the US. The healthy European stock market seems to be the result of recoveries in industries that suffered during lockdown. Consumer discretionary and tech stocks have led gains on the continent this year. (Read more here)

Deviating privacy rules

The EU has finally allowed for data to continue to flow to the UK, but the European parliament is keeping up the pressure to make London stick to the rules, writes Javier Espinoza in Brussels.

Brussels yesterday announced its widely expected decision to allow data from the continent to be transferred seamlessly to the UK, after taking the view that there were enough privacy safeguards in place. 

The so-called adequacy decision was needed as part of the UK’s complex disentangling from the EU after Brexit. For its part, the UK had already recognised EU data transfers as adequate.

Industry groups were quick to welcome the mutual recognition of privacy rules.

“Adequacy frameworks remain a pivotal personal data transfer mechanism for thousands of businesses and organizations operating in Europe,” said Thomas Boué, who runs Europe, Middle East and Africa policy for the Business Software Alliance, a large lobby group that represents companies such as IBM and Adobe.

But some MEPs were unimpressed.

Just last Friday, the chair of the European parliament’s committee on civil liberties, justice and home affairs (LIBE), Juan Fernando López Aguilar, wrote to the European Commission, warning that more guarantees from the UK were needed. 

The letter warned of the UK’s intentions of replacing the EU General Data Protection Regulation with a new framework, given that it now has total autonomy in setting up its own rules. Aguilar was particularly concerned about UK prime minister Boris Johnson seemingly backing a deviation from the EU privacy regime.

He urged the commission to withhold the adequacy decision “until UK authorities have publicly confirmed that they will not deviate from the rules . . . particularly regarding the use of automated processing”.

To appease concerns, Didier Reynders, commissioner for justice, said the commission had introduced a “sunset clause”, meaning it was possible to suspend or amend the adequacy decision “if we see a real divergence”. 

“It will be possible to react very fast,” he said.

What to watch today

  1. ECB president Christine Lagarde, Germany’s chancellor Angela Merkel and EU economy commissioner Paolo Gentiloni speak at the Brussels Economic Forum

  2. The European parliament’s environment and health committee votes on expanding the powers of the European Centre for Disease Prevention and Control

Notable, Quotable

  • Olaf Scholz, big spender: In a wide-ranging interview with the FT, Germany’s finance minister and the Social Democrat candidate for chancellor said he wanted to keep the “debt brake” suspended until 2023.

  • Fake vaccine certificates: As Russia edges towards a third wave of coronavirus and Vladimir Putin says the situation has “taken a turn for the worse”, persistent vaccine hesitancy is driving a black market for fake jab certificates.

  • Hospital hacking: Cyber crime is on the rise, but Europe’s healthcare sector is increasingly becoming the target of attacks. In one study, more than one-third of German hospitals were found to be vulnerable to cyber attacks.

  • EU cash machine: The EU has released the first round of grants for its huge Next Generation EU post-pandemic recovery plan, with €800m being disbursed to 16 member states. As the money starts flowing, it is worth remembering concerns in Brussels about the potential for fraud.

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