STOCKHOLM (Reuters) - Sweden's minority government looks certain to lose a budget vote on Wednesday, less than two months after taking office, possibly forcing Prime Minister Stefan Lofven to call a snap election for early next year.
The crisis has been sparked by the anti-immigration Sweden Democrats, who have held the balance of power in parliament since September's election and plan to back the main opposition bloc on the budget, effectively dooming the government's bill.
"Doomsday - the government faces an historic defeat," said daily Dagens Nyheter on its online front page.
Business daily Dagens Industri, drawing a sporting analogy, said Lofven had been "sent off".
Lofven has limited options after late-night crisis talks with the four-party, centre-right opposition Alliance failed to deliver a compromise solution to avert a government defeat in the budget vote, which is due around 1500 GMT.
"We may call snap elections later, when the constitution allows. We could also resign and there are other alternatives," Lofven told reporters after the crisis talks late on Tuesday.
His coalition of Social Democrats and Greens could send their bill back to committee and avoid a vote, hoping to forge a compromise that would win Alliance support. However, Alliance leaders have said they will not save the government.
If he resigns, Lofven could still be asked by the speaker of parliament to form a new government, but it is unclear whether he could build a stable administration.
"This isn't just about the budget. This is about belief in the Social Democrats as a party that is able to govern," Tommy Moller, political science professor at Stockholm University, said in business newspaper Dagens Industri.
GOVERNMENT HELD HOSTAGE
The most likely result is a snap election, which Lofven cannot call before Dec. 29 and which must take place within three months.
September's vote revealed a split electorate, worried that Sweden's cherished welfare state is failing after eight years of tax cuts under the previous centre-right government but also unconvinced by the Social Democrats' tax and spend promises.
The only winner was the Sweden Democrats, who have been able to hold the government to ransom over the budget and who want to force a change in Sweden's generous immigration policies. They have been shunned by the mainstream parties.
"Racism has taken Sweden hostage," Dagens Nyheter said in a headline.
However, political analysts caution that a fresh election would not necessarily produce a stable majority government of either the centre-left or centre-right.
(Reporting by Simon Johnson; Editing by Gareth Jones)