Norway's Progress Party seeks big changes in new government

Reuters News
Posted: Aug 15, 2013 11:31 AM

By Gwladys Fouche and Balazs Koranyi

OSLO (Reuters) - Siv Jensen narrowly missed becoming Norway's prime minister four years ago. Now another chance of entering government appears within her grasp, as her opposition Progress Party looks set to become the kingmaker after elections on September 9.

Progress is on course to finish third behind the Conservatives and the ruling Labor party - and without Progress, the center-right opposition has little chance of forming a majority government.

Talks between Jensen and Conservative leader Erna Solberg, likely to be the next prime minister, will be fraught.

Jensen's populist party will probably have to drop its most controversial demands on immigration and how to spend the country's huge accumulated wealth from oil riches, as the price of a share of power.

But in coalition talks it might get some of its way on its goals of cutting Norway's high corporate tax burden, reducing the size of the government, privatizing state firms and reshaping the nation's $760-billion sovereign wealth fund.

"We have been fighting against socialism for 40 years," said Jensen, 44, referring to the Labor party, which has led most governments since World War II. "We are fighting for change."

Jensen is considered by analysts the likely finance minister in a center-right coalition.

Progress is polling around 14-15 percent, putting it on course to collect 26 seats in the 169-seat parliament. The Conservatives have around 32 percent and Labor 29 percent.

Potential allies will be nervous of joining forces with Progress. The party's members once briefly included Anders Behring Breivik, who went on to become a mass murderer, and its anti-immigration policies are considered extreme in Norway.

Progress has little chance of achieving the crackdown it wants on immigration, running at about 40,000 newcomers a year in a country of 5 million, especially as unemployment remains below 3 percent.

As well as radical tax cuts, it calls for the easing of protectionist trade policies that insulate the economy.

It also wants to axe a rule that limits how much oil money the government can spend and allow the oil fund to invest at home, a move which critics say would distort the economy.

"It's good to have money saved up but it's also good to have a well-functioning infrastructure and a society that works," said Jensen.

"We need to reduce some of the surplus every year so we can invest more in infrastructure and in repairing buildings and all that, because we really need that."

The Conservatives, however, firmly support the fiscal rule that limits spending to 4 percent of the oil fund and guarantees massive budget surpluses. They also oppose bringing oil fund investments home and radically reducing immigration, on the grounds it risks choking the private sector.

Progress would use the oil fund for much of its infrastructure spending, and break off smaller funds to invest in renewable energy and for foreign aid in poor countries.

"For a rough estimate, if the fund is worth 4,500 billion crowns ($765 billion), the main fund would be worth 4,000 billion crowns and the remaining 500 billion crowns would be divided between three smaller funds," said Ketil Solvik-Olsen, the Progress Party's Finance Spokesman.


A new government might sell down in such industry majors as Telenor, Statoil and Norsk Hydro.

Progress, like the Conservatives, wants to reduce the stakes the state holds in several other firms too.

"The companies at the forefront of this debate are of course SAS and Cermaq," said Solvik-Olsen, referring to the troubled Nordic airline and the Norwegian fish farmer.

But he added: "I don't expect many transactions to start with.

"Where will be different from the current government is that, if there are business proposals coming up, we will be more willing to see the state's ownership share being diluted through purchases, mergers or any other kind of transactions."

On the surface Norway's finances are the envy of the world. It has a budget surplus of 12 percent of GDP and has no net debt, but the figures are skewed by the massive oil sector. Excluding petroleum revenues, the structural deficit is rising and government spending is crowding out the private sector.

In the end, Progress is expected to compromise on the most contentious issues to secure a place in government but the Conservatives will have to yield in at least a few areas to make the coalition workable.

"You negotiate inside a room, not in public," Jensen said, refusing to name any area that could be off limits in talks.

"We'll sit in that room ...(and) we'll need to clarify our differences."

To keep Progress in check, the Conservatives are also expected to bring smaller parties into government.

"The Conservative Party is a firm believer in the (4 percent) spending rule and will most likely not give in to the Progress Party on this question," Nordea economist Erik Bruce said.

"Add to this that the Progress Party does not want to be regarded as irresponsible."

(Editing by Andrew Roche)