A far-right party entered the Swedish Parliament for the first time in elections Sunday, spoiling the center-right government's victory and majority, and plunging the country into political disarray, preliminary results showed.
Prime Minister Fredrik Reinfeldt was seeking to become the first center-right leader to win re-election after serving a full term in a Scandinavian welfare nation dominated for decades by the left-wing Social Democrats.
But the Islam-bashing Sweden Democrats held the balance of power after winning 5.7 percent of the votes for 20 seats in the 349-seat legislature, according to results.
Final official results are expected later this week.
Reinfeldt's four-party coalition won 172 seats, three short of a majority, while the left-wing opposition got 157 seats.
His coalition has been boosted by popular tax cuts and healthy public finances that stand out in debt-ridden Europe.
The 45-year-old prime minister said his government would stay in office and seek support from the small opposition Green Party, to avoid having to rely on the Sweden Democrats.
"I have been clear on how we will handle this uncertain situation: We will not cooperate, or become dependent on, the Sweden Democrats," Reinfeldt said.
Green Party leader Maria Wetterstrand, who campaigned with the Social Democrats and the ex-communist Left Party, at first rejected the idea, saying she couldn't envision supporting a government "that doesn't have a climate policy."
The result suggested a hung Parliament, because both blocs have ruled out governing with the Sweden Democrats, who want sharp cuts in immigration and have called Islam Sweden's biggest foreign threat since World War II.
If Reinfeldt fails to solve the impasse he will be left with a fragile minority government that could be forced to resign if it fails to push crucial legislation through Parliament.
Sweden Democrats leader Jimmie Akesson said his party had "written political history" in the election.
"Party colleagues, we're in Parliament!" he told jubilant supporters in Stockholm.
Large waves of immigration from the Balkans, Iraq and Iran have changed the demography of the once-homogenous Scandinavian country, and one-in-seven residents are now foreign-born. The Sweden Democrats say immigration has become an economic burden that drains the welfare system.
But pre-vote surveys showed Swedish voters were more concerned about unemployment - at 8.5 percent in July - the economy and the environment than they were about immigration.
Siamak Shoukri, a 52-year-old electrical engineer who moved to Sweden from Iran, said he believes the financial crisis has helped foment hostility against immigrants.
"Always when there is a crisis, unemployment, mass unemployment ... they believe that foreigners have caused it," said Shoukri, who voted for the Left Party.
The Electoral Authority said 82 percent of 7.1 million eligible voters turned out for the election.
Reinfeldt's coalition ousted the Social Democrats in 2006 and kept its promises to lower taxes and trim welfare benefits. Sweden's export-driven economy is expected to grow by more than 4 percent this year while its 2010 budget gap is on track to be the smallest in the 27-nation European Union.
The Social Democrats fell to a record low of 30.8 percent in Sunday's vote, just marginally better than the 30 percent won by Reinfeldt's Moderate Party.
"This is an election without winners, and I'm saying that with a heavy heart," said Social Democrat leader Mona Sahlin. "It is up to Fredrik Reinfeldt now to show how he plans to run Sweden without letting the Sweden Democrats get a political influence."