Swedish Prime Minister Stefan Lofven has called off a planned snap elections after striking a deal with the mainstream opposition that would allow the minority coalition of the Social Democrats and Greens to continue in power.

Lofven's Social Democrats, junior coalition partner the Greens, and centre-right opposition parties – the Moderates, the Liberals, the Christian Democrats and the Centre Party – gave a joint news conference at 09:30 GMT, announcing the deal had been reached.

"This agreement means that Sweden can be governed even in a difficult parliamentary situation," Lofven said.

The deal will sideline the far-right Sweden Democrats who hold the balance of power in parliament.

Earlier this month, Lofven had said he planned to call a snap vote after losing a budget vote when the Sweden Democrats backed an alternative finance bill put forward by the four-party Alliance opposition.

The prime minister said that the parliamentary polls would be held on March 22, highly unusual for what is often considered one of Europe's most stable democracies.

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The anti-immigration Sweden Democrats’ vote apparently had the aim of toppling the new coalition in response to the government's pro-immigration policies.

Lofven became prime minister in October as head of a coalition with the Greens, promising to reverse many reforms by the previous centre-right government.

From the start, Lofven's minority government - which has 138 seats in parliament - was expected to struggle to push its agenda through in the 349-seat parliament.

With the support of the Left Party, which stands outside the cabinet, it controls 159 seats.

The centre-right opposition, has 141 seats, and the Sweden Democrats 49.

Source: Agencies