Can we get some more background? She tried to make a deal with the right-wing and it backfired?
it actually started earlier. The party is a coalition between conservatives and liberals (in the European interpretation of that term, similar to American libertarians). Under the previous leader, FR, which led the party into power for eight years, they broke a lot with the conservative traditions. This allowed to unite against the social Democrats with purely liberal centre-right parties. They were very open to immigration and cut defense spending by a lot. This was unpopular among the conservative wing of the party but tolerated as long as they won.
Then they lost the 2014 election. A lot of their more conservative voters left for the xenophobic Sweden Democrats. AKB became the de facto party leader in the vacuum left by the FR before he formally resigned before she officially became the party leader. She was from his liberal wing of the party and would probably have preferred to keep moving in that direction.
All since the 2010 election there had been an awkward parliamentary reality: neither the left-wing parties or the center-right alliance had a majority. In 20102014, the right-wing government kept the power anyway, because the Sweden Democrats (who had the balance of power) wanted voted with the alliance 90+ percent of the time. The alliance had more seats in Parliament than the left-wing parties and would win any vote as long as the left-wing opposition didn't actively vote together with the Sweden Democrats, which happened only a few times. But the previous Moderate leader didn't want to stay in power after 2014, when the alliance had fewer votes than the left-wing side (and neither side had a majority of its own). Now resigning leader AKB agreed with this stance and the Alliance let the Social Democrats form a government.
This government
hit a snag early when they couldn't pass their first budget as the Sweden Democrats chose to support the Alliance budget over their own SD budget. At this time, every reasonable person in Swedish politics realized there was a dilemma. From now on, the racist Swedish Democrats could stop any government they disliked. And you needed a way to deal with it. There were three main paths forward:
- Collaboration between centre-left and centre-right. This was the Social Democrat prime minister's preferred solution. Dividing the centre-right by collaborating with different parts of it have served the Social Democrats well for a long time, and prevented the centre-right from uniting against them (until this happened in 2006 by the formation of the Alliance)
- Technical solution where each side agreed to let the other side pass their budgets in order to keep the racist party from influence. This was favoured by the liberal parties, and the liberal wings of the Moderate and Christian Democrat parties.
- Collaboration between right-wing and Sweden Democrats. Favoured by the conservative wings of the Moderate and Christian Democrat parties.
In the end, a deal was reached for option 2. This would allow the Social Democrat government to pass their budgets for now, and if the Alliance did better in 2018, the Social Democrats would return the favor and allow them to pass their budgets. The racists would be kept out of power. This deal didn't last for even a year. The conservative wings of the Moderate and Christian Democrats hated it. The Christian Democrats got a new conservative leader who allowed the deal to fall in their party convent. AKB could have still kept to the deal, but allowed herself to be pushed by the conservative wing of her party to drop it as well. This was the beginning of the end for her.
The conservative wing of the Moderates had hoped that the resignation of FR would allow them to move back right, which would help them win votes back from the Sweden Democrats. After the technical deal with the Social Democrats fell they felt emboldened and continued to push the leadership right-wards. Which lead to the announcement at the start of this year where the Moderates would start working more actively with the racist party. This was a huge miscalculation. The ratings of the Moderates plummeted as most of the country wants to keep the racists from influence. The Moderates didn't win voters back from the Sweden Democrats. Instead they started leaking in the other direction as well, to the purely liberal centre-right parties.
So now they got rid of the leader that the conservative wing never liked. But what caused the huge drop was her moving in a more conservative direction. So if they choose a new conservative leader, who wants to continue to talk with the racists, that won't help them. If they choose a new liberal leader, what's to stop the conservative wing from sabotaging the new leader as well?