STOCKHOLM - Sweden's ruling Social Democrats claimed victory in Sunday's election, as returns showed the centre-right opposition had failed to advance despite a surge in support for a party that raised immigration issues.
The election was a tight race between left and right-wing blocs tussling over the future of one of the world's biggest public sectors and welfare states and the taxes to pay for it.
"Yes. We have won the election," Social Democrat leader and Prime Minister Goran Persson told Reuters.
Earlier Bo Lundgren, leader of the opposition Moderates, conceded defeat.
"We did not succeed, we are very disappointed," said Lundgren, whose lacklustre leadership saw his party, the biggest member of the centre-right bloc, crash to its worst result since 1973.
As vote counting continued it seemed people in the wealthy Scandinavian country had chosen to go on paying some of the world's highest taxes by voting for the left, rather than opting for tax cuts and privatisation offered by the center-right.
With nearly 95 percent of the votes counted, the Social Democrats and their ex-communist Left Party and environmentalist Green allies had 53.2 percent of the vote, while a four-party center-right bloc won 43.6 percent.
Sweden withstands right-wing tide If the final results bear out this trend, they will show that the conservative tide that has swept aside many left-wing governments in Europe in recent years has bypassed Sweden, a member of the European Union but not of the euro single currency or the West's NATO defence alliance.
That could bode well for German Chancellor Gerhard Schroeder, another Social Democrat, whose Red-Green coalition has taken a lead in polls in the last few days ahead of next week's German election.
Persson, whose Social Democrats have ruled Sweden for six of the past seven decades, said earlier he expected to carry on governing with the help of the Left Party and Greens.
But he has ruled out a formal coalition with the Left Party and Greens, as both oppose Sweden's EU membership, although the Greens say they want seats in the next government. Even without the support of the Greens, exit polls indicate the Social Democrats and Left Party would outnumber the centre-right.
If confirmed, the results are a personal triumph for the stocky bespectacled Persson, lifting the Social Democrats from their poor showing in 1998, with voters backing his steady economic management and defence of welfare.
The main surprise in the vote was the surge in support for the center-right Liberal Party after its leader Lars Leijonborg brought immigration firmly into the campaign.
Leijonborg said any foreigners who could find jobs should be welcomed to Sweden. But they would have to leave after three months if they become unemployed and anyone who wanted to acquire Swedish citizenship should learn Swedish.
But the Liberals' gains appear to have been at the expense of the Moderates.
Immigration was one of the election campaign's most hotly debated topics and besides taxation the area where the differences between left and right are clearest.
The left opposes large-scale immigration, arguing it would upset the labour market and that it is more important to first provide jobs for the unemployed.
Both blocs avoided controversial issues such as whether Sweden should join the single European currency, relations with an expanding NATO and the future of nuclear power, which produces roughly half Sweden's electricity.
The next government, due to hold office until 2006, will have to deal with these questions, which divide all parties, and cope with the European Union's forthcoming eastward enlargement.