Norway’s Conservatives will now need to unite the split opposition bloc that ousted the Labor-led coalition yesterday on promises to cut taxes and loosen the state’s hold on Scandinavia’s richest economy.
The Conservatives, the Progress Party, the Liberal Party and the Christian Democrats got 96 seats of the 169 in parliament, with 99.9 percent of the votes counted. Labor Prime Minister Jens Stoltenberg’s three-party coalition won 72 seats. Labor prevailed as the biggest party with 55 seats, while the Conservatives jumped to 48 seats.
Conservative leader Erna Solberg, 52, will need to cobble together a coalition among her opposition partners, which are split on how much of the nation’s oil wealth to spend, on immigration policies and on whether to open up new areas for exploration in western Europe’s largest oil producer. Solberg, a native of Bergen in western Norway, is set to be the first Conservative premier since 1990.
“They have some huge challenges in terms of agreeing on policy,” said Johannes Bergh, an election researcher at the Institute for Social Research in Oslo. “The desire for a new government is really strong on the center-right side so you might see people changing policy positions and really making an effort to agree and to have a new government.”
The krone, which opened little changed today, jumped 0.7 percent versus the euro to 7.9069 as of 10:19 a.m. in Oslo after a report showed inflation accelerated faster than estimated by economists. The country’s benchmark two-year yield rose three basis points to 1.74 percent.
The Conservatives, which won on pledges to cut income and wealth taxes, boost investments in infrastructure and ease mortgage lending regulations, will enter government as the country hits an economic slowdown. The party has said it will look into restructuring the nation’s $750 billion wealth fund.
Solberg said late yesterday it will take some days before government talks can start.
Progress Party leader Siv Jensen, who has called for spending more of the nation’s oil wealth, said she will be tough yet realistic in the coming talks. The election means the party may join the government for the first time since it was formed as an anti-tax movement in 1973. The party has been an outlier in Norway in part for its anti-immigration views.
“For the first time in the Progress Party’s history we shall now sit down and negotiate a government platform,” Jensen said at an election-night rally. “We have said throughout the entire election campaign that it’s important for us to set a real mark on that platform.”
According to SEB AB, “concerns of ‘run-away’ fiscal spending are overdone,” the bank said in a note to clients today.
“The Conservatives will be the dominant partner in the new government and have made it pretty clear that the fiscal policy rule will remain in place,” SEB said. “That said, the use of the oil revenue to cover the non-oil budget deficit is likely to be higher in 2014 as measured against the fiscal policy rule than according to the budget proposal the present government will put forward Oct. 14.”
The power shift ends eight years with Stoltenberg at the helm of the Labor-led government. The 54-year-old steered Norway through the financial crisis and the 2011 terrorist attacks by right-wing extremist Anders Behring Breivik.
The Conservatives won 48 seats, up from 30 in 2009, according to the projections. The Progress Party won 29 seats, down from 41. The Christian Democrats won 10 seats, unchanged from 2009 and the Liberal Party got 9, up from 2 in the last general election.
Once a haven from Europe’s debt turmoil, the $500 billion economy is now struggling to spur demand just as the rest of Europe surfaces from half a decade of economic pain. While growth will still outpace Europe, DNB ASA (DNB), Norway’s largest bank, predicts the country will be the only European nation of the 15 it tracks whose expansion won’t accelerate next year.
Norway’s mainland economy, which excludes oil and gas output, will grow 2 percent next year, unchanged from this year. That will beat the 0.7 percent estimate for the euro area, according to DNB forecasts.
Labor, which promised to expand Norway’s welfare system, lost nine seats to 55. The party told voters it would keep government spending within a self-imposed oil spending cap to avoid overheating the economy.
Stoltenberg said he will resign after the budget is presented in October, according to parliamentary process.
Labor’s allies, the Center Party, got 10 seats and the Socialist Left Party won 7, according to the partial count. Both had 11 before the election. The Green Party looks set to join parliament for the first time with one seat.
Labor, which will set the framework for the Conservatives’ first year in power, this year proposed spending 3.3 percent of the oil fund to plug budget deficits, staying within the 4 percent rule for a fourth year. Still, with the fund quadrupling in size since the middle of the previous decade, even sticking to the 4 percent rule results in faster spending growth. The government estimates the fund will grow 50 percent by 2020.
Conservative finance spokesman Jan Tore Sanner said yesterday in an interview that the party won’t imperil the nation’s financial stability.
“We will have a responsible economic policy, we will stick to the fiscal rule,” he said. “We will manage very well.”
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