STOCKHOLM — For years, Sweden has combined prosperity with an extensive social welfare system. But today the Swedish model seems destined for change. At home, the economy is in trouble. Taxes are high, inflation is rampant, the work ethic lax. Abroad, the demise of communism in Eastern Europe has challenged the concept of a cradle-to-grave social safety net. A long debate is just beginning. THE ``Swedish model'' - an advanced market economy combined with a far-reaching social welfare system - is being questioned here as never before.
With signs of a deteriorating work ethic, decreasing voter participation, and an ever rising cost of living, Sweden is searching for a new plan.
This search has been given further impetus by the collapse of communism in Eastern Europe and the end of the cold war. With possible new security arrangements in Europe and with the approach of a truly common European market in 1992, Swedes say their country must change to keep up with the times.
``There is a confidence crisis among Swedes as to the Swedish model,'' says economist Lillemor Thalin at Svenska Handelsbanken, a leading Swedish bank.
The crisis is two-fold. It is economic, because of high inflation, rising labor costs, and low productivity. But it is also involves a loss of confidence in Swedish society and how it functions.
``The Swedish model is being eroded slowly but surely,'' says Carl Bildt, chairman of the conservative opposition Moderate Party.
For more than 50 years, with the exception of a six-year interruption in the 1970s, one party - the Social Democratic Party - has run Sweden. Under social democracy, adherence to parliamentary rule and belief in the free-market economy are combined with a strong state that takes care of its citizens in need.
Social Democrats outside the government acknowledge that Sweden faces a crisis.
The nation's policy of operating by consensus is in trouble, says P-O Edin, chief economist at the Swedish Trade Union Confederation. The central wage-bargaining system has broken down, and in the meantime the joint power of the Social Democratic Party and the trade unions have been substantially weakened.
``The events in Eastern Europe have been very damaging to the collective methods used for so long in Sweden to solve our problems,'' says Mr. Edin, a Social Democrat. ``We need to rethink our positions.''
The leading opposition parties and Swedish industry are pushing for Sweden to join the European Community.
But if Sweden decides to do so, something it has always said it could not do because of its policy of neutrality, entrenched market and labor practices would be threated.
For example, Sweden has long prided itself on its low unemployment rate - today less than 2 percent. Should the nation join the Community, it would probably have to cool off its overheated labor market and accept a rate closer to that of the Community, which is between 6 and 8 percent.
Key Social Democrats in the government deny there is a crisis, though they admit there are problems.
Finance Minister Allan Larsson says that the Swedish model is always changing. ``It is alive and we'll make it more vital,'' he states.
But Immigration Minister Maj-Lis Loow is worried that in the ``strong conservative winds'' now blowing in Sweden, the continued expansion of the welfare system will not occur.
``The government's political task is more difficult today, because a Swedish government has never before in peacetime faced so many big issues, which have to be solved in a short time,'' adds Foreign Minister Sten Andersson, a veteran Social Democrat who has held a number of high posts in the party and government.
``Before, we could say: Vote for us and your lives will improve. Now, we have to say: Vote with us so that you can help those who have difficulties making it. That makes our political task more difficult,'' he says.
The Social Democrats, in fact, are at their lowest standing in the opinion polls since World War II. According to one poll, only 33 percent of Swedish voters would vote for them in the next election, down from 44 percent in October 1988.
If the poll is any indication, Sweden will find itself with a new government after elections next year.
Meanwhile, today's working Swedes find it is very difficult to make ends meet.
``I have to watch every krona I spend,'' says a public relations director, who still finds it hard to make ends meet on her salary combined with that of her insurance-executive husband.
There is no shortage of goods in the food markets at Hotorget and Ostermalmshallen in Stockholm. But the prices are high - twice as high as those in the rest of Europe. Steaks cost $10 to $15 a pound; peppers, $2.50 a pound; an artichoke, $1; apples and tomatoes almost $2 a pound. Only potatoes seem cheap, at $1.20 for two pounds.
It has become so difficult for a married couple to live on only one salary that 84 percent of Swedish women now work outside of their homes.
``Everyone works, but it's hellish for the families with kids to make it,'' says Ms. Thalin, the economist.
Still, some things in Sweden are inexpensive. Rents are often low. A one-bedroom apartment in downtown Stockholm is around $400 a month. Health care, childbirth, and education do not cost much. Unemployment benefits are generous. Swedes get at least five weeks' paid vacation every year. The average Swede also takes 25 sick days, with full pay, each year - the highest amount of sick leave in any West European country. This means that he or she is absent from work an average of 50 days a year.
Most Swedes realize this cannot go on. But the changes, bound to come, will not be easy.
``It seems that we are heading towards a long period of very weak leadership during which the necessary decisions will not be made,'' says Svante Nycaner, editorial page editor of the leading Swedish daily Dagens Nyheter.