Swedish government postpones unemployment agency reform to defuse crisis

STOCKHOLM (Reuters) - The Swedish government and the centre-right parties backing it in parliament said on Monday they would postpone labor reforms, potentially defusing a row that had threatened the policy deal that keeps Prime Minister Stefan Lofven in power.

The governing Social Democrats and Greens, along with the centre-right Liberal and Centre parties that support it, said the reform of the country’s unemployment agency would be postponed by one year and would be based on a different legal framework.

The move is in line with demands made by the opposition Moderates and Christian Democrats who had threatened to join forces with the Sweden Democrats and Left Party in a vote of no confidence in Labour Market Minister Eva Nordmark.

The ultimatum, which had some leading Social Democrats raising the risk of the government resigning, was awkward for Lofven as it hit at a reform agreed by him and his centre-right supporters in what is called the January Agreement that ended months of deadlock in forming a government after inconclusive 2018 elections.

“The January agreement stands firm,” Lofven and leaders of the Greens, Liberals and Centre wrote in a signed article in Swedish daily Aftonbladet.

“The reform of the unemployment agency is a big and important reform that requires the support of parliament. In order to make that possible, we have agreed to the changes we are now presenting,” they added.