Reinfeldt, head of the Moderate Party, started off by saying that he hoped youth unemployment would be one of the central issues leading up the 2014 parliamentary elections.
"Our ambition is to sharply reduce youth unemployment," the prime minister said in the opening moments of the debate, which was televised on Sveriges Television (SVT).
But Löfven, in his first face-to-face debate against the prime minister, was quick to go on the attack.
"All I can say is that the government has completely mishandled the issue," the Social Democrat head replied.
"You said that we had mass unemployment in 2006. Now unemployment is even higher. What do we call that now?"
According to Löfven, Sweden needs more pro-active business and innovation policies, as well as more training to help the unemployed find jobs.
But Reinfeldt dismissed the Social Democrats' plan to start an innovation policy council, arguing that Löfven believed jobs will be created by having people sit down and drink coffee.
"Stefan Löfven sounds like a copy machine when he goes through his proposals," Centre Party leader Annie Lööf said, slamming the Social Democrat head for an "unbelievably weak" spring budget proposal.
Lööf charged that most of the initiatives in the Social Democrats' proposal are ones the government has already implemented or is planning to implement.
When the issue of whether Sweden should take control over public schools away from local municipalities and return it to the state, the leaders from the Sweden Democrats, Left Party, and Liberal Party (Folkpartiet) raised their hands.
The debate also heated up over the issue of Swedish weapons exports, although not between the leaders of Sweden's two largest parties, the Moderates and the Social Democrats, who seemed to agree that exports should continue but that rules should be tightened.
But Left Party leaders Jonas Sjöstedt had a different view.
"We shouldn't have any weapons exports to countries involved in armed conflicts," he said, adding he couldn't understand how trade minister Ewa Björling was promoting Swedish arms to dictatorships like Saudi Arabia.
Liberal Party leader Jan Björklund and Christian Democrat head Göran Hägglund also wanted to see tighter rules for Swedish arms exports.
However, Sweden Democrat leader Jimme Åkesson warned that Sweden could lose thousands of jobs if weapons exports were halted altogether.
Following the debate, a number of analysts characterized the duel between Reinfeldt and Löfven as a draw.
"It was an unusually tough debate; it's almost surprising that there's not an election on Sunday," political scientist Magnus Hagevi from Linnaeus University told the TT news agency.