FES-Analyse: Schweden only 42% following the almost unanimous advice of political and business leaders. Persson lost much political authority he had gained at home, in Europe and the world, and had to postpone his handover of party leadership due to the lack of a preferred and popular successor. Sweden’s public sector rests on age-old, strict principles of division of labour. Ministers, ministries and parliament should deal only with laws, general regulation and budget priorities. Policies are implemented by over 300 autonomous authorities. Ministers are constitutionally prohibited from influencing day-to-day business in any way. The appointment of each director-general for a six-year mandate is a key tool of governance, carefully used by Persson to defend welfare institutions and sometimes reward political allies, notably from the Centre party for its cooperation with the government from 1995 to 1998. The Alliance now demanded a public process and parliamentary approval. In government they have softened their stance and say that a more‘objective’ recruitment process will be prepared. The Indian Ocean tsunami disaster of December 26, 2004 hit directly at the heart of public sector responsibility and organisation. 543 dead made Sweden the most affected country outside the tsunami zone. A government reaction perceived as slow and insensitive continues to cause political repercussions. A rescue operation to bring victims home from Thailand took days to organise, in contrast with some other European countries and – most importantly – disappointing Swedes’ high expectations of state compassion and assistance. Ensuing blame games within government made matters worse. Scandals and allegations of misconduct persisted. A former minister of housing attempted to profit from apartment privatization against which he had instated a law. Party youth leagues, important for recruitment and political education, inflated their membership figures to boost subsidies. Those to the left were worst. The social democratic opinion polling guru disclosed unsubstantiated dirt about Reinfeldt to journalists. 7 This series of events had a profound effect in a country expecting rationality and honesty from public administration. Some call it naivety, but corruption-free, no-fuss reliability has been a competitive advantage for Sweden and a precondition for its high tax social contract. The opposition Alliance managed to stay cleaner until just before Election Day. Then it emerged that the Liberal leadership had snooped on the Social Democrats’ intranet, enabling them to counter government campaign initiatives before they were launched. The powerful Liberal secretary-general, the brain behind the move to make the party more populist and dynamic, had to resign and many voters returned from the Liberals to the Moderates, reversing the 2002 election results. Given the close election result, it is very probable that the scandals decided the elections. More important, though, is their impact on social trust and political culture. The Economist Intelligence Unit democracy index places Sweden as world champion and“near perfect democracy” with a score of 9.88 out of 10. Still Swedes do not retain high regard for politicians. Party membership is falling. The lowest voter turnout for European Parliamentary Elections among EU 15 reflects disregard for the EU and the privileges of its functionaries. Some scepticism is healthy for democracy. However, if it reaches the same magnitude as in most countries, Sweden could do better without this‘modernization’. Trends are similar elsewhere in society. Business executive pay is booming and referring it to good ‘market conditions’ is not convincing. Scope for impunity has become apparent after examples of illicit corporate governance. Spectacular fraud by managers in the insurance and finance group Skandia, which lingers on in courts, exposed a crown jewel to successful hostile takeover by British-South African Old Mutual. Among the people, disloyalty to the social contract is reflected by cheating with social benefits and tolerance for certain kinds of tax fraud. According to research, at least the latter is growing. ...and a few policy issues 1. Concern about unemployment was a key to the election result and remains the‘make it or break it’ issue for the Alliance, even if unemployment is rather low and total employment very high for an OECD country. However, three years of good growth have actually seen unemployment increase