Stoltenberg braces for budget bashing
September 28, 2011
Prime Minister Jens Stoltenberg has no doubt that his government’s state budget, set to be released next week, will meet lots of opposition. He repeated earlier warnings that it will be a tight budget, allowing for far less government spending, but he insisted restraint will help Norway tackle the ill effects of a world economy in very deep trouble.
Speaking at his Labour Party’s national board meeting, Stoltenberg made it clear he expects loud complaints over the restrictive nature of the budget his government will present to the parliament on October 6.
“In many areas of the budget we’ll be proposing the use of less money than many expect or want,” Stoltenberg said in his speech to the board. “There will be protests throughout the autumn, and there will be loud demands. But we are obligated to hold back on spending out of consideration for jobs, interest rates and home loans.”
The prime minister, addressing Labour’s first national board meeting since the party was attacked by a right-wing extremist in July, clearly doesn’t expect any more political sympathy from opposition parties or the public. Debate continues to run high in Norway over how the country’s oil wealth should be used. Labour (Arbeiderpartiet) and most other parties have consistently called for restraint, while the conservative Progress Party (Fremskrittspartiet, Frp) has long wanted to invest much more of the oil wealth at home, to improve and expand rundown schools, transport systems and nursing homes, among other things.
It often seems difficult for the public to accept a lack of government funding when things go wrong, as evidenced by the continual head-shaking that goes on every time something in Norway falls apart or doesn’t function. It’s often hard to understand why one of the wealthiest countries in the world has, for example, poor road and train systems, schools that are crowded and rundown, a lack of nursing home space and hospital patients stuck in the corridors because there are no rooms available.
Stoltenberg, however, maintains that government spending must be restricted to avoid inflation, higher interest rates and an even stronger Norwegian currency, which already is causing severe competitive challenges for Norwegian industry. Now, with Europe and the US facing enormous debt challenges, the Norwegian government fears a new and long-lasting economic crisis that will hurt Norway’s economy as well, even though it has stayed strong so far. With many countries burdened by high unemployment, low growth and huge national debt, demand for Norwegian goods and services will decline.
“We must not think this won’t affect Norway,” Stoltenberg said. “We are a small country with tight economic ties to the world around us. Lower demand internationally will affect Norwegian business. A strong krone will hurt those who live off exports and put industrial jobs in danger.”
Economists generally applaud Stoltenberg’s budget strategy even though it’s not always popular. Many in recent months have argued for much less use of Norway’s oil revenues, currently limited by the so-called handlingsregelen, that restricts use to no more than 4 percent of the size of the country’s oil fund. It has lately been ranking as the largest sovereign wealth fund in the world.
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