Swedish Prime Minister Fredrik Reinfeldt unveiled his minority government on Tuesday as the far-right Sweden Democrats took their seats in parliament for the first time.
His centre-right coalition lost control of the Riksdag in last month’s election.
Reinfeldt’s four-party alliance won 173 of the 349 seats in the September 19 vote.
The Red Green opposition also lost ground, which left the Sweden Democrats holding the balance of power with twenty seats.
The far-right group’s success has shocked a country that prides itself on its values of tolerance and equality.
The Sweden Democrats want to cut immigration and describe Islam as the biggest threat to the country since World War II.