Norway Heads Into Crisis as Support Parties End Budget Talks

Norway’s minority government lost the backing of the last of its support parties, pushing it toward a potential no-confidence vote at the start of next week.

The Christian Democrats announced on Wednesday they would join the government’s other support party, the Liberals, in breaking off budget talks amid disagreements over measures to reduce greenhouse-gas emissions.

“We don’t see a possibility of moving forward,” Christian Democrat leader Knut Arild Hareide said at a press conference in Oslo. “This is because of the government parties’ behavior in this matter.”

Norway’s Prime Minister Erna Solberg is now facing her most serious political crisis with the government so far refusing to budge on a plan that will lower fees for motorists while at the same time raising taxes on petrol. It has until Monday next week to cobble together an accord or it could be forced to call for a confidence vote.

The Christian Democrats said that it’s now time for the government parties, the Conservatives of Solberg and Finance Minister Siv Jensen’s Progress Party, to come up with a solution. The group wants a four-party solution and will even be open on Sunday to strike a deal, said Hans Olav Syversen, the Christian Democrats’ chief budget negotiator.

Solberg said at a press conference that there’s still time to find a solution ahead of Monday’s budget vote and invited her support party leaders for talks. She declined to comment on whether she would budge on the sticking point of lower fees for motorists.

To read more on Norway’s oil-fueled spending, click here

The impasse comes at a critical time for Norway. The economy of western Europe’s biggest oil exporter is showing signs of reviving after struggling through the worst crude market downturn in a generation. The recovery is due to massive fiscal stimulus from the government and record low interest rates.  

Oil Spending

In the budget that’s now stuck, the government proposed spending 225.6 billion kroner of its oil wealth next year, providing a stimulus of 0.4 percentage point. It’s cutting taxes and unleashing more measures to help the labor market.

The government in October predicted the mainland economy will grow 1.7 percent next year, up from 1 percent this year. Unemployment will fall to 4.3 percent by 2018 from 4.7 percent this year.

Norway doesn’t have snap elections, so a new government would need to be formed within the current parliamentary make up and sit for less than a year until the election in September next year. The biggest group in parliament is the opposition Labor Party.

Opinion polls show the two-party minority government would win about 37.6 percent of the votes now, compared with the 43 percent in 2013, according to an average of polls on website pollofpolls.no. The Christian Democrats and the Liberals, are also down, backed by 5.3 percent and 4.1 percent, respectively.

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