Stockholm's social affairs ministry announced it would pay up to £13,430 to each surviving victim of the 1934-76 programme.

The decision follows the report in January of an official commission set up in the wake of newspaper reports in 1997 that up to 63,000 people - 90 per cent of them women - were sterilised with state approval to improve Swedish "racial purity" as part of a policy of "ethnic hygiene". The commission has received up to 200 calls a month from victims.

Its secretary, Leif Persson, said: "They say they have been haunted by this their whole lives and that it has been a real source of shame for them."

Teenagers as young as 15 were sterilised, some without their parents' consent, for inadequacies as trivial as shortsightedness or because they allegedly lacked judgment or had "no obvious concept of ethics".

Pressure was put on orphans and children in special schools and reformatories to have the operation as a condition of release.

Pregnant women seeking abortions because their foetus was damaged were told they also had to consent to sterilisation. People could even apply to have problem neighbourhood families sterilised.

Maija Runcis, who studied several thousand sterilisation cases as part of a doctoral thesis, said: "Nowadays people are appalled, but then nobody cared about these people. This was a backyard to the nice little Swedish home. Everyone always talked about the Swedish model, how nice it is here. But no one talked about things like this."

Sweden was not the only country to practise eugenics before the second world war, but it was the first to set up a state institute for racial biology.

The institute was founded in 1921 to identify "sexually precocious or mixed-race types", and legislation was enacted in 1934. Although sterilisation operations waned in the 1960s, the law was not repealed until 1976.

The Nazis are believed to have sterilised 400,000 Germans deemed to have lives not worth living.

Other Scandinavian countries and one Swiss canton had similar policies. Norway is thought to have sterilised 40,000 people and Denmark 6,000.

Canada and 30 American states also practised sterilisation until long after the war: North Carolina alone sterilised 7,700 people in the years until 1973, two-thirds of them black.

Academics say the Swedish programme started as a large-scale experiment in racial biology but after the war aimed to weed out social problems.

As in Britain, where some of eugenics' most enthusiastic supporters were on the political left, liberals and Social Democrats backed the Swedish programme and sustained it for decades.

As recently as two years ago, the Swedish social affairs minister, Margot Wallstrom, refused an application for compensation from one victim on the grounds that the policy had been legal.