Foreign Minister Børge Brende is advising Norwegians “to sit still in the boat” as the storm rises around Great Britian’s pending withdrawal from the European Union (EU). Brende’s advice comes after a weekend of economic aftershocks following the so-called “Brexit” (British exit) vote.
Reaction was swift and, as one financial analyst described it, “brutal” on Friday when the results of the vote became known. Norway’s currency weakened again and remained weak on Monday. Major Norwegian companies saw their stock prices dive, with airline Norwegian Air battered the most. Norwegian Air’s founder and chief executive Bjørn Kjos lost NOK 247 million of his own fortune after his airline’s share price fell by more than 9 percent.
Norwegian seafood exporters, especially those selling cod, feared prices would dive. “Half of what we produce in the form of fish filets goes to the UK,” Frank Kristiansen, leader of cod exporters Båtsfjordbruket in Eastern Finnmark, told newspaper Dagens Næringsliv (DN). The collapse of the British pound was not good news, nor is all the economic and political gloom and uncertainty surrounding the UK after the Brexit vote.
“The British market means a lot to us,” said Kristiansen. While both the pound and the krone slumped, with one British pound still costing NOK 11.38 on Monday morning, Kristiansen worries that a weaker pound will make Norwegian fish more expensive, “and that will have great consequences for us.”
Prime Minister Erna Solberg, who had a somewhat muted and cautious response to the Brexit vote on Friday, was expressing concerns on Monday that the Brexit vote can threaten some of the recent signs that Norway’s economy is starting to recover from the shock of the oil price dive two years ago. “Uncertainty around European economic growth as a result of Brexit will affect us,” she told news bureau NTB. “Will there be less investment? Will people be more nervous? How will economic growth in Sweden and Germany be influenced by this? Our mainland economy is especially geared towards Sweden and Germany.”
Goldman Sachs, viewed as one of the world’s most influential investment banks, predicted over the weekend that Brexit will be expensive for all of Europe, not just Britain itself. Goldman Sachs slashed its economic growth prospects for the UK, from 2 percent to 1.5 percent this year and just another 0.2 percent in 2017, instead of the 2 percent predicted earlier. Eurozone counties were hit as well, while both Sweden and Norway were trimmed, with Norway’s economy expected to growh by just 0.9 percent this year (instead of 1.1 percent) and by 2.1 percent in 2017, down from 2.4 percent.
Øystein Dørum, chief economist at Norway’s largest bank DNB, said he thinks that was more dramatic than expected for Britain but not as bad for Norway. He thinks Britain’s “divorce settlement” with the EU will take two years to negotiate, with new trade deals being formed simultaneously.
Amidst all the turbulence and uncertainty, Norway’s Foreign Minister Brende thinks Norway is at least initially best-served to ride out the storm from the sidelines.
“When we see how much uncertainty Britain’s withdrawal has created, I would say that now it’s important to sit still in the boat and protect the market access Norway already has,” Brende told DN. “Nothing should be done that can create more uncertainty about the framework for Norway.”
He was referring to Norway’s 22-year-old market access deal with the EU called the EØS-avtale. Brende disagrees with Norway’s small anti-EU Center Party, for example, which has already been calling for changes in the EØS agreement, or teaming up with Britain. Brende thinks Britain needs to negotiate its own deal now with the EU, which may be a painful process that already is plagued by questions over how and when negotiations will and can be carried out.
“We have set up a working group to get an overview of the implications,” Brende said. “There are many legal questions that will come up.”
Brende is also worried about what Britian’s pending withdrawal from the EU will mean for the trade and investment plan (TTIP) that the EU and the US have been negotiating since 2013. Norway has been left out of those negotiations, because it’s not a member of the EU, and now there’s even more uncertainty over its outcome and effects. “We’re talking about the two largest markets in the world,” Brende said.
The uncertainty and chaos rose on Saturday when Great Britain’s highest-ranking bureaucrat in Brussels, Jonathan Hill, announced his immediate resignation. That puts Britain in an even more precarious position, according to several observers.
Brende wouldn’t comment on how and when the EU and Britain should tackle the job ahead. Outgoing British Prime Minister David Cameron has said his successor, who won’t be in place until October, must lead the negotiations. German Chancellor Angela Merkel doesn’t think there’s any urgency to begin the Brexit process sooner while Martin Schulz, president of the European Parliament, wants negotiations to get underway as soon as possible. Other EU leaders also seem keen to get the process going, and plan a meeting on Wednesday to discuss the issue, reportedly without Cameron being allowed to participate.