STOCKHOLM, Nov 6 (Reuters) - The far-right Sweden Democrats party, an ally of the right-wing caretaker government, said on Friday it was dropping demands for ministerial posts, potentially boosting Prime Minister Ulf Kristersson's chances to remain in power.
Kristersson's bloc lost its majority in a September election but was tasked this week by Sweden's parliament speaker with exploring a government formation as the centre-left election winners failed to agree on a coalition.
Sweden's Centre Party, which could hold the key to deciding whether the Nordic country gets a right-wing or a left-wing government, has ruled out supporting a cabinet that includes the Sweden Democrats, as well as one that includes the Left Party.
Sweden Democrats leader Jimmie Akesson said on Friday that, as a result of the election outcome, his party will remain outside of government in the next four years, and is prepared to "tolerate" the formation of a centre-right cabinet.
Still, the Centre Party has said it favours Social Democrats leader Magdalena Andersson as prime minister, and there is no indication so far that the Centre Party will back a Kristersson government.
The Centre Party did not have an immediate comment.
Parliament Speaker Andreas Norlen is widely expected to give the mandate back to Andersson should Kristersson fail to gain a majority.
If no solution is found, Sweden could face a new election.
(Reporting by Anna Ringstrom and Simon Johnson, editing by Terje Solsvik)