Sweden is navigating an international identity crisis
According to many criteria, Sweden is jealous of Europe. It has enormous soft power to wield when it takes on the rotating presidency of the EU’s Council of Ministers. But a recent visit to Stockholm made me think that Swedes feel just as disoriented by a rapidly changing world as anyone else.
One reason is domestic malaise. An epidemic of shootings – 60 gun murders across Sweden last year, compared to 9 in London – undoubtedly drove the right-wing nationalist Sweden Democrats’ electoral success last September. The party, previously rejected, enjoys a formal agreement on parliamentary support for the new centre-right coalition government.
But just as significant is the external identity crisis in a country that has long been committed to neutrality, free trade, market liberalism and multilateralism. Instead, war, political division and a renaissance of state economic activism are the cards dealt to Stockholm as it presides over its EU peers for the next six months.
Some of the changes suit the three-month-old government. As Foreign Minister Tobias Billström pointed out to me, his moderate party has long been in favor of joining NATO, which the Swedes are now doing. The biggest hurdle is Turkey’s ratification of their accession. “We fulfill to the letter” the conditions agreed with Turkey last year, says Billström. The message from both Sweden and fellow candidate Finland is clear that they have done enough, and the majority of the alliance seems to agree. To this observer, it looks like Ankara has extracted the maximum it can.
Adapting liberal economic traditions to a more hostile world is more difficult. Stockholm is also traditionally skeptical of more power or money for Brussels, against current cries for both. Billström points out that it has always been for “a strong EU in certain sectors” such as trade and the rule of law. And if Sweden gets its way, it will lift what many there call the positive trade agenda, and bring the EU’s many ongoing trade agreements closer to completion.
But currently the defensive trade agenda gets the most EU airtime. It was reinforced by the US Inflation Reduction Act, which belatedly aims to kick-start a green US industry but discriminates against European exporters. “A gigantic headache” for Swedish preferences, says an insider. But after Britain left the EU, Stockholm is often forced to nuance its free trade instincts in order to remain relevant in the debate.
“Yes to strategic autonomy,” says Billström, referring to French President Emmanuel Macron’s phrase for a more activist economic and foreign policy, “as long as there is nothing that limits the possibility of exports and imports.” When asked about demands for a European countermeasure to the US IRA, Billström insists on avoiding trade disputes and subsidy races. While it is “crucial” for the US to mitigate negative impacts for Europe, he says we should welcome Washington’s commitment to emissions reductions.
Yet the best can be the enemy of the good. Both political and economic logic points towards subsidizing the technologies that facilitate the carbon transition. If that logic wins, the choice will not be for or against subsidies, but between joint EU subsidies or national ones. And a subsidy race within Europe can do much more damage than a subsidy race between the EU and the US.
In this turbulence, corporate and political Sweden sees the competition agenda as the place to land. A review is expected from Brussels shortly. Given how divided opinion is, it will inevitably bring political battles to a boil before any decision by the leaders. If Sweden can secure a focus on long-term productivity and not protectionism, it will safeguard Europe’s economic prospects as well as its own free trade spirit.
There is a tradition that Sweden is successfully doubling down on. Its commitment to a rules-based order has only been strengthened by Russia’s attack on Ukraine. As the NATO decision shows, in the choice between neutrality and a world governed by rules, neutrality must disappear.
Billström therefore sees no other solution than “Ukraine winning the war on the battlefield” – and that means all of Ukraine. “Restoring Ukraine’s territorial integrity is what this war is ultimately about.” Ukraine, he says, “must win for the rest of us to be sure that this is not 1815, the time of the Congress of Vienna”. He promises more support for Ukraine and hopes for a tenth Russian sanctions package on Stockholm’s watch.
The Congress of Vienna naturally marked the twilight of Sweden as a European great power. The country’s contribution to the position of other small states in a world of rules is a prouder legacy.