Swedish government teeters as far-right party says will block budget

Prime Minister Stefan Lofven has said he could resign if parliament does not approve the budget which it is due to vote on Wednesday, although he could also look to rework the tax and spending plan to win support from the centre-right.

Lofven was due to hold a news conference later on Tuesday.

The anti-immigration Sweden Democrats, which announced it would vote against the budget, is shunned by all the other parties but has held the balance of power since a September election produced a minority Social Democrat-Green coalition that is the weakest government in decades.

Lofven could send the budget back to committee for amendments to win backing from the centre-right.

He could also resign and try to build a new government with enough backing to pass a budget. However, the four centre-right parties rebuffed Lofven's post-election overtures.

All the parties have ruled out working with the Sweden Democrats.

A last resort would be to call a snap election - something that has not happened since 1958 - risking a period of political and market uncertainty.

(Reporting by Johan Sennero and Daniel Dickson; Writing by Simon Johnson; Editing by Niklas Pollard and Robin Pomeroy)