Sweden's new prime minister Stefan Loefven has said the country would recognise Palestine, underlining his support for a two-state solution to the Israeli-Palestinian conflict.

"A two-state solution requires mutual recognition and the will to co-exist peacefully," Mr Loefven said in his inaugural address to parliament.

That should take place with respect for the "legitimate demands of the Palestinians and the Israelis as regards their right to self-determination and security", he added.

Mr Loefven's Social Democratic-Green Party coalition, which formed a minority government today, is more supportive of demands for a Palestinian state than the previous centre-right administration.

Both the Greens and the Social Democrats opposed a decision by former foreign minister Carl Bildt to not give Swedish support to a UN vote recognising Palestine.

The Social Democrats, the largest party in the Swedish parliament, wrote in their election manifesto that "Israel's war crimes must be investigated and the occupation of Gaza lifted".

The party added that "Sweden and the rest of the world must actively support its (Palestine's) work towards reconciliation".

The prime minister did not specify whether the policy would be submitted to a vote in parliament.

The United States has said it would be "premature" to recognise a new Palestinian state, saying that while they "support Palestinian statehood... it can only come through a negotiated outcome, a resolution of final status issues and mutual recognitions by both parties."

Senior Palestinian negotiator Saeb Erakat has hailed Sweden's decision as "courageous", calling on other EU states to follow suit.

Mr Erakat, speaking from Ramallah, said, "We salute the announcement by the Swedish prime minister."

"We hope that all countries of the European Union will take the same courageous and remarkable decision... as there is no reason not to recognise the Palestinian state."

A spokesman for Palestinian president Mahmud Abbas said "the time has come for the entire world to recognise the Palestinian state."

Palestinian foreign minister Riyad al-Malki also welcomed what he called Sweden's "historic" commitment to freedom, dignity and human rights.

