The voters' rejection of the Social Democrats, who have ruled for six of the last seven decades, means Sahlin faces an uphill struggle to restore their fortunes and a tough decision on whether to follow the electorate towards the right.

Giving her first speech as party leader, she put the environment top of her agenda, saying the battle against global warming was "as important as the class struggle 100 years ago".

She did not promise to reverse the Moderate Party-led alliance's unemployment benefit cuts and tougher demands on the jobless, but said Sweden could not afford to turn its back on those who did not have a job.

The first woman leader in the Social Democrats' 118-year history, Sahlin also called for an end to wage discrimination.

Despite Sweden's reputation as one of the most egalitarian societies in the world, women earn only 92 percent of men's salaries for the same jobs.

Women should have "half the power, full salaries and the right to full-time jobs," Sahlin said.

She said the party needed to be self-critical after the election loss and that she would broaden its leadership -- a veiled criticism of her predecessor Goran Persson who was widely blamed for the election loss.

She echoed Persson in saying that the three-party ruling alliance's policies were destroying Sweden's much-vaunted, cradle-to-grave welfare state, but took a much harder line than her predecessor on Iraq.

Where Persson and current Prime Minister Fredrik Reinfeldt have been muted in their criticism of the US-led war in Iraq, Sahlin said the United States "must leave Iraq in a manner that the United Nations approves".

An internet poll by the daily Svenska Dagbladet after the speech showed that just 22.5 percent of its readers thought Sahlin would recapture power for the Social Democrats. Dagens Nyheter's poll had just 12 percent impressed by her speech.