Sweden’s far right plunged the country into unprecedented political upheaval on Wednesday by forcing the government to gamble on fresh elections in the spring after the centre-left coalition failed to push through its budget.

The anti-immigrant Sweden Democrats, the country’s third largest party with 13% of the vote, portrayed the new elections in March as “a de facto referendum” on immigration, currently at near-record highs as refugees flee conflict in Syria, Iraq and Somalia.

“We will focus entirely on the issue,” said Mattias Karlsson, the Sweden Democrats’ parliamentary group leader.

The far right forced the crisis to a head when they broke with established tradition and voted with the centre-right opposition instead of abstaining after their own budget proposal had fallen, ensuring the government’s defeat on this key legislation. In bitter remarks aimed at the centre-right, who had refused to compromise, prime minister Stefan Löfven admitted the Sweden Democrats now had a veto over Swedish politics, leaving him no choice but to call elections just six months after the country went to the polls in September.

“The [centre-right] parties did not take responsibility for their promise not to give the Sweden Democrats decisive influence in Swedish politics – this is an irresponsible action of these parties and is unprecedented in our political history,” Löfven told journalists on Wednesday evening.

Green party leader Gustav Fridolin said: “We cannot let the Sweden Democrats dictate the terms of politics.”

In a challenge to the centre-right to loosen their unity as a political bloc, the Social Democrats claimed the far right would continue to use their position “to create chaos” as long as the centre refused to negotiate, calling this policy “highly unfortunate and reckless” in a statement on Wednesday.

But former foreign minister Carl Bildt tweeted that Löfven had made a “critical mistake” by abandoning previous agreements with Alliance parties and had “burned bridges”. Center party leader Annie Lööf, a key figure on the centre-right, tweeted: “Stefan Löfven has thrown the red glove. We will not hesitate to pick it up. Looking forward to meet the voters 22/3 for a better Sweden!”

It is the first time since 1958 that the country has seen fresh elections. But the political landscape is now radically different from the last century, for most of which the Social Democrats enjoyed stable government as the largest party, even if they were in a minority.

Before Wednesday’s budget vote there had been speculation that Löfven would attempt to defuse the crisis by ejecting the Greens from his government, thereby removing an obstacle to cross-bloc negotiation with centre-right parties. But instead he declared that he “liked the cooperation we have” with the Greens.

“I have felt calm in the last few days, it is a difficult situation but I know what we need to do,” he said.

The largest party in the centre-right bloc, the Moderates, is currently leaderless after it lost the September election and its then leader, outgoing prime minister Fredrik Reinfeldt, quit politics; the party is due to chose a new leader just two weeks ahead of the new elections.

Anna Kinberg Batra, the party’s spokeswoman in parliament and widely tipped to be elected to the top job in her party, defended the bloc’s firm position in the budget debate as “the only option that makes Sweden stronger”.

Adding to the uncertainty, the Sweden Democrats’ charismatic leader Jimmie Åkesson is also currently out of the picture having been diagnosed with chronic fatigue syndrome.

The ruling red green coalition that has slipped badly in opinion polls, but the Alliance also risks being seen by voters to be relying on the far right to try to undermine the government. The Sweden Democrats are treated as pariahs by the mainstream parties and the media, but they more than doubled their vote in September on the back of rising hostility to immigration.

Liberal daily Dagens Nyheter said in a leader article that the prospects for lasting and stable majorities in Sweden’s parliament appeared to be minimal: “The mainstream parties do not seem to understand each other, and hardly even themselves.”