Efforts to weaken Norway’s currency may be futile as the crisis in Europe adds to the krone’s haven appeal, said Erna Solberg, the leader of the Conservative Party that polls suggest may win this year’s general election.
“It’s difficult to steer the krone exchange rate, the way Europe looks right now,” she said today in an interview in Oslo. “We have a robust economy, which makes people feel it’s safe to place money in Norwegian kroner.”
Limiting currency gains has become a priority for politicians and policy makers in Europe’s second-richest nation per capita after the krone emerged as a haven from the debt-burdened euro area. Western Europe’s largest oil exporter steered clear of Europe’s crisis thanks to its $710 billion sovereign-wealth fund. Currency appreciation, which is hurting exporters, prompted Norges Bank to cut interest rates to near-record lows last year. The bank signaled last week it’s ready to cut its main rate again in 2013.
Prime Minister Jens Stoltenberg, who is trailing Solberg in most polls, pledged spending restraint last week to avoid fueling further krone appreciation.
“The question is whether the fiscal policy hasn’t given more stimulus than the krone tolerates,” Solberg said. “We used almost a billion kroner less in our alternative budget but we don’t claim that would necessarily have made a large difference.”
The Conservatives will seek to improve the competitiveness of Norway’s non-oil businesses by cutting “ownership taxes,” improving infrastructure and encouraging investments, she said.
Polls show that Solberg may oust Stoltenberg in September’s elections, crushing his bid for an unprecedented third consecutive term. A survey by conducted by Norstat for broadcaster NRK published on March 13 showed the two largest opposition parties, the Conservatives and the Progress Party, would win 102 seats in parliament, compared with 53 for the ruling three-party coalition.
The currency hit a record on a trade-weighted basis last month and is 34 percent overvalued versus the dollar this year, topping 12 major currencies, according to calculations from the Organization for Economic Cooperation and Development.
“Large parts of the export-oriented sector are better prepared in the short-term because of the crash they experienced in 2002, 2003 when the krone was very strong,” Solberg said. “They understand that they have an exchange rate risk.”