By Alistair Scrutton and Simon Johnson
STOCKHOLM (Reuters) - Europe's failure to deliver economic growth and jobs has frayed public trust in democracy and fostered a nationalist climate that could reward anti-immigration, Eurosceptical parties in May's EU elections, Sweden's prime minister said on Thursday.
Fredrik Reinfeldt also saw nationalism shaping Russia's actions in Ukraine, which he said was creating "instability", but despite such concerns he said Sweden was unlikely to abandon its formal neutrality and join NATO any time soon.
"(The economic crisis) has weakened the forces of integration or standing up for this European ideal," he said in an interview in which he also invoked the destructive nationalism that tore Europe apart 100 years ago this summer with the outbreak of World War One.
"The kind of (nationalist) thinking behind that, which has been a problem in Europe for hundreds of years ... is very much the same kind of thinking you see Russia now doing in Ukraine or you will see in many forces throughout Europe," Reinfeldt said.
Citizens in the 28 European Union countries vote on May 22-25 for 751 members of the European Parliament. Opinion polls suggest an influx of between 150 to 200 Eurosceptical politicians bent on reversing decades of EU integration.
Parties campaigning to limit immigration are expected to do well in France, Britain and elsewhere. At the national level, rightist, populist parties are now some of the biggest political forces in the traditionally liberal, tolerant Nordic region.
"In Sweden there is a still a sense of trust between politicians and people. In many other countries there is a clear distrust," said Reinfeldt, head of Sweden's centre-right Moderates who have been in power for eight years.
"That is very easily replaced by a call for the strong man or for someone to take decisions," he said, adding that the best antidote was for politicians to embrace reforms aimed at making their economies globally competitive.
Reinfeldt has pushed through market reforms in Sweden during his two terms in power, cutting income taxes and trimming one of Europe's most extensive welfare states, though his party is tipped to lose power to the centre-left in this year's election.
Reinfeldt's time in government has also seen the rise of the anti-immigrant Sweden Democrats party, which could hold the balance of power after the September election, polls suggest.
Reinfeldt said Russia's behavior in the Ukraine crisis would damage Moscow most, leaving it internationally isolated.
"It creates instability, insecurity ... So what will be the reaction? Increased defense spending, increased awareness and nervousness towards the acts of Russia, a more politically isolated Russia, possibly more economically isolated."
While Sweden has talked of a "doctrinal shift" in defense policy and both the government and the leading opposition party have pledged to increase defense spending, Reinfeldt said the political obstacles to Sweden's NATO entry were too large to surmount, despite his own party's wish to join.
Polls show a clear majority of Swedes oppose joining NATO.
On the economy, Reinfeldt said the era of tax cuts was over.
"We are very competitive, very effective now ... What now lies ahead is bringing back the public finances to a surplus and that is not possible to combine with hugely costly reforms."
The government has already outlined a limited increase in taxes if it wins re-election and Reinfeldt would not rule out further rises in some duties.
"It might be necessary, I'm not saying absolutely no to that," he said.
Asked about the opposition Social Democrats' lead in opinion polls of 10 to 15 percentage points, Reinfeldt said: "We are clearly behind, it will be tough."
(Additional reporting by Johan Sennero; Editing by Gareth Jones)