Norway on a ‘Knife’s Edge’ as Krone Climbs, Biggest Union Warnsby
The strengthening krone is becoming a risk again for Norwegian businesses and jobs just as the richest Nordic economy looks poised to exit the worst oil industry downturn in a generation, according to the president of the Norwegian Trade Union Confederation.
The labor group is sounding the warning after the trade-weighted krone has climbed 8 percent from a low last year, recovering as the price of oil doubled.
Norwegian businesses “are balancing on a knife’s edge,” Gerd Kristiansen, 61, leader of LO, the biggest trade union, said in an interview on Wednesday at her office in Oslo. “While there are some companies that are doing very well, exports will weaken if the krone appreciates the way it’s now doing. But I think that both the central bank and the economic community are on their toes and keeping an eye.”
Norway’s central bank has sought to steer the krone since as far back as 2012, pressing it down to support exporters in western Europe’s biggest oil producer. The currency is now gaining after the bank in December signaled it could be done with easing amid growing concerns over imbalances building up in the nation’s red-hot housing market.
The union leader also slammed the Conservative-led minority government’s handling of the economy, saying it has largely failed in generating the jobs needed to replace the 50,000 estimated to have been lost in the oil industry. Norway is heading for an election in September and LO is aligned with the opposition Labor Party.
“The biggest challenge right now is that the government has used so much money on tax cuts for those that run Norwegian businesses and expected a growth in jobs, but that hasn’t happened,” she said. “So we are lagging far behind in job creation.”
While the unemployment rate has fallen after hitting a 20-year high during the summer, the decline is largely a result of people leaving the labor force. The number of employed has slid almost 30,000 since the start of last year and is only marginally higher since Prime Minister Erna Solberg took over in 2013, data from Statistics Norway showed this week.
With only eight months until the election, Solberg is running out of time to deliver on her pledge to reduce Norway’s dependence on oil. The economy has been held up by record public spending and a booming housing market. Solberg last year dipped into the nation’s sovereign wealth fund for the first time and is accelerating withdrawals this year.
Planned oil spending in 2017 amounts to 226 billion kroner ($27 billion), or almost 8 percent of the economy.
There’s very little "room for maneuver" in terms of adding more fiscal stimulus for the next government, Kristiansen said.
The union will now start asserting itself at the wage bargaining table after accepting next to nothing in wage growth during the crisis to boost competitiveness. Estimates from the Norwegian statistics bureau show that real wage growth was negative in 2016, a level not seen since the boom-and-bust of the 1980s.
"There will be demands for an increase in the coming settlement negotiations, an evenly distributed increase,” she said. “There’s no doubt.”