By Johan Ahlander and Simon Johnson
STOCKHOLM (Reuters) - Sweden will hold its first snap election for more than half a century in March after a far-right party helped defeat the centre-left minority government's first budget in parliament on Wednesday.
Formed after a fractured September election that handed the anti-immigration Sweden Democrats the balance of power, Prime Minister Stefan Lofven's Social Democrat-Green coalition has been widely viewed as Sweden's weakest government in decades.
Shunned by mainstream parties, the Sweden Democrats have threatened to make Sweden effectively ungovernable unless the country adopts tough immigration policies like those of nearby Denmark, including a 90 percent cut in asylum seeker numbers.
"This fundamentally redraws the political map," Lofven told a news conference, saying fresh elections would "let voters make a choice in the face of this new political landscape."
Lofven blamed the four centre-right parties which made up the previous, long-running Alliance government for giving the Sweden Democrats, who won 13 percent of the vote in September, an effective veto. "They are allowing the Sweden Democrats to dictate the terms of SWEDISH (SWMA.ES)politics," he said.
The crisis has shaken the image of a country often held up as a paragon of political and fiscal stability, in contrast to crisis-hit Europe.
The rise of the Sweden Democrats has also threatened to break a decades-old agreement across the political spectrum on an open door policy for refugees. Former Prime Minister Fredrik Reinfeldt has called Sweden a "humanitarian superpower".
Mattias Karlsson, the acting head of the Sweden Democrats, vowed his party would turn the upcoming election into "a referendum for or against increased immigration to Sweden".
Sweden was the biggest per-capita recipient of asylum seekers and refugees last year, according to the Organisation for Economic Co-operation and Development.
NEW VOTE
Analysts have warned a new vote will not necessarily produce a stable majority government of either centre-left or centre-right given the Sweden Democrats' hard-ball tactics.
Most see the only long term solution as a broad government with support from both sides of the political divide and which can ignore the Sweden Democrats.
"Maybe we need something like this snap election to break the (political) deadlock, although we could get the same result in the next vote," said Mikael Gilljam, professor of political science at Gothenburg University.
September's election reflected a split electorate, worried Sweden's cherished welfare state is failing after eight years of tax cuts under the Alliance but also unconvinced by the Social Democrats' tax and spend promises.
The election's only winners were the Sweden Democrats, who doubled their vote to become the third largest party, echoing recent poll successes for the far right across Europe.
In neighbours Denmark and Finland, anti-immigration parties are now among the three most popular in some opinion polls. In Norway, a rightist populist party is in the ruling coalition.
"The Alliance and the Social Democrats have brought this on themselves by not reaching a deal straight after the election," 75-year-old pensioner Stig-Ove said. "Now they have to find a way to bridge the political divide."
(Additional reporting by Niklas Pollard, Johan Sennero, Daniel Dickson, Anna Ringstrom and Helena Soderpalm; Writing by Simon Johnson; Editing by Catherine Evans)
