Sweden's new ambassador to Iceland has sparked a major controversy after warning that Sweden is "in the process of dismantling democracy" and could be on a slippery slope towards technocracy or a dictatorship.

Håkan Juholt, a former leader of the centre-left Social Democrat party and ambassador to Iceland since September, made the comments in an interview with the Svenska Dagbladet newspaper.

"How old is your son? Four?" he asks the reporter.

"When he is old he won't be living in a democracy but in a technocracy, or a dictatorship. It's sad as hell. I am sorry to say it, but I am 100 percent sure. We are in the process of dismantling democracy."

Later in the interview, he says:

"I don't think the threat is a dictatorship with tanks rolling on Sergel's Square (a well-known square in central Stockholm), but an expert rule where we do not let the citizens' values govern the country. Democracy is slipping through our fingers. Fewer people want to be elected, the parties are toning down their ideology.