OSLO (Reuters) - Conservative Erna Solberg seems likely to emerge as prime minister from Monday's Norwegian elections on promises to cut taxes, improve health care and sell off some oil assets, but may be forced into a tricky alliance with a populist anti-immigration party.
Prime Minister Jens Stoltenberg guided Norway through a global downturn with little more than a scratch. But growth is slowing, his record on health care is mixed and critics accuse him of squandering the oil revenues that have shielded Norway.
Opinion polls suggest Conservative leader Erna Solberg, an admirer of German Chancellor Angela Merkel, would need the support of smaller parties, raising the prospect that the populist Progress Party, which wants to restrict immigration, could hold the balance of power.
While Progress may get fewer votes than four years ago, it will likely enter government for the first time, marking another big step for populist anti-immigration parties after gains in Sweden, Finland and Denmark. Progress itself however has moderated its tone and could make more concessions to enter government.
"I don't think the government is the reason everything went so well for Norway through Europe's crisis," Daniel Sundkvist, a nurse from Oslo said.
"I'm not sure things will improve when others are in charge, but I am convinced that we have to get rid of the government," Sundkvist, 36, added. "I've seen what they did to health care over the past eight years and they've made it worse, both for the patients and also for those who work in it."
Polls give Stoltenberg's Labour around 30 percent, making it the biggest single party. But opposition parties, all of whom campaign on unseating the government, are on course for at least a 10-seat majority in parliament.
"The government has been in majority for eight years; the cost of rule is taking its toll and people want change," Sveinung Arnesen, a political analyst at the UNI Rokkan Centre for Social Research said.
The biggest risk to a centre-right coalition is the Progress Party, which was seen by some as too radical for government and once had among its members Anders Behring Breivik, who killed 77 people in 2011 in a gun and bomb attack targeting Labour.
The party has toned down its image. But some of its more radical stances on immigration and spending may be too much to swallow for the small Christian Democrats and Liberals, whose vote may be needed for a majority.
"They are not a far-right party. They are a populist right party and with some similarities with other populist and populist radical parties in Europe," Elisabeth Ivarsflaten, a political scientist at the University of Bergen said.
"But they seem really intent on joining the government so they'll probably compromise on a lot of issues," she added.
Working with Progress on immigration could be hard after the party unveiled plans to cut immigration from outside the EU by half and reduce the number of asylum seekers it accepts.
Although net immigration is high, swelling Norway's population by 1 percent each year, unemployment is below 3 percent and companies desperately need fresh workers.
Bringing all four disparate opposition parties into a coalition may be too hard, raising the prospect that Solberg would rule in a minority government - not unusual in Norway due in part to laws that do not allow for early elections.
Solberg, 52, nicknamed "Iron Erna" for her tough stances when she served in cabinet between 2001 and 2005, will rely on her skill to keep Progress in check, yielding on a few issues like tax cuts and infrastructure spending and perhaps making a symbolic gesture on immigration.
Solberg seems set to become prime minister on her third attempt after steering her party closer to the centre.
Breaking with Conservative tradition, she did not focus her campaign on issues like tax cuts and easing regulation, instead making health care, road building and education her primary topics.
"We have not used the best time we have experienced in the economy in Norway's history to invest in the future," she said. "Our economy stands on one leg, the oil sector. What happens if oil prices fall? What will happen after the oil age is over?"
Although Norway has outperformed Europe for the past several years, its economy is slowing and Stoltenberg, seen as a top economic manager, disturbed international investors this year when he unveiled Norway's first oil tax hike in decades.
Solberg has promised to cut taxes, sell down stakes in firms like Telenor and Statoil, reduce the size of government and ease business regulation. She campaigns on boosting health and infrastructure spending without inflating the budget.
Fiscal responsibility may be her biggest issue. The Progress Party is seen as a keen spender, hoping to invest some of the $750 billion, or $150,000 per man, woman and child that Norway has saved up from oil revenues on infrastructure.
Solberg may give the party the finance ministry, forcing it to hold back on spending or risk looking irresponsible.
"Progress is really keen on getting into power, they've been preparing for a long time for this so they really want to look responsible," Arnesen said.
(Additional reporting by Joachim Dagenborg and Gwladys Fouche; editing by Ralph Boulton)