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Norway's right-wing government wins re-election fought on oil, tax
September 10, 2017 / 11:22 AM / 2 months ago

Norway's right-wing government wins re-election fought on oil, tax

OSLO (Reuters) - Norway’s tax-cutting Conservative Prime Minister Erna Solberg declared victory on Tuesday after a parliamentary election, narrowly defeating a Labour-led opposition with her promises of steady management of the oil-dependent economy.

The win is historic for Solberg, whose supporters compare her firm management style to that of German Chancellor Angela Merkel, because no Conservative-led government has retained power in an election in Norway since 1985.

Election graphic tmsnrt.rs/2wYkVIO

“It looks like a clear victory,” for the centre-right, a beaming Solberg told cheering supporters in Oslo just after midnight (2200 GMT), following Monday’s voting.

“Our solutions have worked. We have created jobs,” she said, but warned, “We have some challenges ahead. ... Oil revenues are going to be lower. We all must take responsibility.”

The ruling minority coalition of her Conservatives and the populist Progress Party, together with two small centre-right allies, was set to win a slim majority with 89 seats in the 169-seat parliament, according to an official projection with 95 percent of the votes counted.

“It’s a big disappointment,” opposition Labour leader Jonas Gahr Stoere said, conceding defeat for his party that has been a dominant force in Norwegian politics for a century.

Solberg, 56, plans more tax cuts as a way to stimulate growth for Europe’s top oil and gas producer. Stoere had argued for tax increases to improve public services such as education and healthcare for Norway’s 5 million citizens.

The oil industry could be affected by the vote, because Solberg will need support from two green-minded, centre-right allies to ensure a majority to pass legislation in parliament.

One of the two parties, the Liberals, wants strict limits on oil and gas exploration in Arctic waters.

Solberg’s Conservative Party was set to lose three seats to 45 in parliament, making her more dependent on outsiders’ help and perhaps heralding a less stable government.

And the head of the other small party, the Christian Democrats, warned Solberg he would not automatically back every government decision. “We will not give a guarantee for the next four years,” party leader Knut Arild Hareide said.

“They (The Liberals and the Christian Democrats) will support Solberg as prime minister, but the question is whether they get a firm agreement or if there is cooperation on a case-by-case basis,” said Elisabeth Ivarsflaten, a professor in comparative politics at the University of Bergen.

“Then it may be a weaker government,” she told Reuters.

Norway's Prime Minister Erna Solberg during a news conference in Oslo, Norway September 12, 2017. NTB Scanpix/Hakon Mosvold Larsen/via REUTERS

The Norwegian currency, the crown EURNOK=, strengthened slightly following the first projections after falling sharply earlier in the day on weaker-than-expected inflation data.

For much of the year, Labour and its allies were favoured by pollsters to win a clear victory, but support for the government has risen as the economy gradually recovered from a slump in the price of crude oil, Norway’s top export.

Unemployment, which a year ago hit a 20-year high of 5 percent, has since declined to 4.3 percent, while consumer confidence is at a 10-year high.

Solberg has won credit for the upturn with a no-nonsense style of management. Norway’s economy also has the cushion of a sovereign wealth fund worth almost $1 trillion, the world’s biggest, built on income from offshore oil and gas.

“Regardless of which government we get, the challenge will be to use less oil money,” said Erik Bruce, chief analyst at Nordea Markets. “There is broad consensus about the outlook for the sovereign wealth fund and the Norwegian economy, which means a tighter fiscal policy.”

Slideshow (21 Images)

The sovereign wealth fund has wanted to invest in unlisted infrastructure to boost its return on investment. Finance Minister Siv Jensen has twice said no to the request over the past two years, citing political risk.

That stance is unlikely to change now that the government has been re-elected.

LABOUR

Labour was set to remain the biggest party in Norway, with 49 seats, just ahead of the Conservatives.

Stoere, who sometimes compares himself with French President Emmanuel Macron, took over the leadership of the Labour Party from Jens Stoltenberg, who left Norwegian politics to become NATO’s secretary-general.

Solberg’s coalition partner, the populist Progress Party, has sharply limited immigration to Norway in what Stoere said is a betrayal of Norwegian values.

“We have done our share of the job. We have delivered,” Finance Minister Siv Jensen, leader of the Progress Party, told party supporters as they chanted “four more years”.

Norway’s problems are small by the standards of most nations.

Apart from its sovereign wealth fund, Norway tops U.N. lists of the best country in which to live, based on issues such as per capita gross domestic product, education and life expectancy.

It even rose to first, from fourth, in a 2017 survey that ranked nations by happiness.

Additional reporting by Terje Solsvik, Camilla Knudsen, Alister Doyle, Nerijus Adomaitis, Lefteris Karagiannopoulos and Gwladys Fouche; Writing by Terje Solsvik and Alister Doyle; Editing by Larry King, Jonathan Oatis and Lisa Shumaker

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