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Thursday, May 23, 2024

Brexit fallout set to keep swirling

Markets were showing signs of recovery on Wednesday after the shock of Britian’s exit from the European Union began to ease, but Norwegian analysts think the turbulence is far from over. Prime Minister Erna Solberg returned from a quick trip to Brussels, meanwhile, with little faith in any near-term solutions to either the financial or political chaos and uncertainty. 

The EU and British flags may no longer fly side-by-side. PHOTO: Europabevegelse
Uncertainty over Britain’s future relationship with the EU continues to plague markets and politics, also in Norway, although there have been some signs of recovery. PHOTO: Europabevegelse

While shares in Norwegian companies reversed some of their heavy losses on the Oslo Stock Exchange, and even Norway’s krone regained some strength, Solberg continued to downplay the possibility that Great Britain will join the European Economic Area (EEA/EØS) and strike the kind of deal Norway and its two fellow EEA/EØS members Iceland and Liechtenstein have.

“It would amaze me if that’s what they want,” Solberg told newspaper Dagens Næringsliv (DN). She stressed that saying “yes” to continued free movement of people and products and abiding by EU rules without “sitting around the table” and being part of deciding on those rules “would be rather demanding.” It would go against the grain of why a majority of British voters wanted to leave the  EU, Solberg noted.

Solberg, head of Norway’s Conservative Party, was in Brussels to attend a meeting of conservative leaders in Europe, who make up the largest group in the European Parliament. She said she fielded lots of questions about Norway’s view on the Brexit vote and its relation to the EU through its own agreement known as the EØS avtale.

Disagreement over Britain joining EEA/EØS
Several politicians and EU experts, both in Norway, Britain and the EU, have speculated that Britain will seek an agreement with the EU similar to what Norway has. Richard Ashworth, a member of the British Conservative Party who’s also still a member of the EU Parliament, is among them. He told DN that “I can see us joining up with Norway. I’m absolutely sure the relation Great Britain has with (the EU’s) inner market two years from now will be nearly identical to what we have today. It will include free movement of labour, that we must respect EU regulations, and that we must contribute economically.”

Solberg can’t seem to understand such thinking, since British voters clearly want to avoid EU rules and mandates, stop sending so much money to the EU and go their own way in the future. She disagrees with Ashworth’s prediction that in the end, Britain will be willing to “pay the price” Norway has paid to remain outside the EU. It’s high, given its similarity to taxation without representation. While Norwegians have accepted it, Solberg still doesn’t think the British will.

She conceded, though, that “it’s difficult to believe they (the British) will get everything they want, because it would be unfair if companies within the EU and with strong social regulation would have to compete with companies from a country that won’t have the same social obligations.” She believes tough negotiations lie ahead, that they will take time and that no one should “whip up” the already highly charged atmosphere.

Some Norwegian politicans think Prime Minister Erna Solberg should use her relations with outgoing British Prime Minister David Cameron and his successor to get Britain into the EEA/EØS fold. Solberg doesn't want to do anything that might put Norway's own EØS agreement with the EU into play. PHOTO: Statsministerens kontor
Some Norwegian politicans think Prime Minister Erna Solberg should use her relations with outgoing British Prime Minister David Cameron and his successor to get Britain into the EEA/EØS fold. Solberg doesn’t want to do anything that might put Norway’s own EØS agreement with the EU into play. PHOTO: Statsministerens kontor

“The challenge is that right now, there’s no leadership in Great Britain” that’s capable of resolving the chaos, Solberg said. “There is no one in Britain who has a plan after the “Leave” decision.” She also called the “Leave” movement “fragmented,” adding that ” there had been “no great discussion” around the alternatives to leaving the EU before the Brexit vote. She doesn’t think there will be any new referendum on EU membership, however.

“I have difficulties to see any new vote (on Britain’s EU membership),” she told DN, adding that if there is one, it may result in an even bigger margin in favour of leaving the EU: “Folks would view it as an attempt to defy the will of the public.”

Solberg herself doesn’t appear willing to take any initiatives towards Britain, or urge Britain to join Norway, Iceland and Liechtenstein in the EEA/EØS. She doesn’t want to put Norway’s own EØS agreement with the EU into play, and thus risk changing or jeopardizing it. Her foreign minister, Børge Brende, has also advised that Norway is best served by “sitting still in the boat” and giving both Britain and the EU time to set their own course.

Norway should ‘play a key role’ in Brexit aftermath
Knut Arild Hareide, leader of Norway’s Christian Democrats party that supports Solberg’s minority government coalition, thinks she should “play a key role” in making Britain part of the EEA/EØS and its agreement with the EU. “The EØS agreement that many thought would be temporary has proven to be a lasting and good solution for Norway,” Hareide told DN. He thinks it offers an opportunity to solve the problems that have arisen after the Brexit vote.

“Norway’s Prime Minister Erna Solberg has good contact with Prime Minister David Cameron and surely will with the next prime minister,” Hareide said. “It’s important that she presents the EØS agreement as a good solution.”

He also thinks that Norway, as the biggest of the three EEA/EØS countries, can “absolutely” play a major role, but Solberg thinks the British “now must discuss this all themselves. They’re well aware of the EØS agreement,” Solberg said. “Now it’s most important that we don’t put it into play because it safeguards Norway’s interests.”

Those interests took a pounding in the days following the Brexit vote, with Norwegian share prices diving on the Oslo Stock Exchange and the krone weakening further. At one point on Tuesday it cost around NOK 8.60 to buy one US dollar, up from less than NOK 8.20 before the Brexit vote. On Wednesday a dollar cost around NOK 8.40.

Markets ‘will keep swinging’
Norwegian share prices have started to recover, with all of the five most heavily traded showing gains on Wednesday morning and the Oslo Stock Exchange’s index up 1.45 percent after steep drops Friday and Monday. Stock in Norwegian Air, which was hit the hardest of Norwegian shares, was back up 6.4 percent on Tuesday and was trading up around 1 percent Wednesday morning, with Statoil, Marine Harvest, DNB and Telenor all logging morning gains of more than 2 percent.

Analysts weren’t entirely relieved, however. “The problem is that no one knows what’s going to happen with Great Britain and the EU,” Leif-Rune Rein, chief strategist at Nordic bank Nordea told DN. “The uncertainty around that will continue to plague the markets, and I doubt the market turbulence is over.”

Jan Petter Sissener, one of Norway’s best-known fund managers, agreed. “The Brexit worries are far from being over,” he told DN. He thinks it will take a long time before the consequences of the Brexit vote are clear, “and I have no faith in any quick recovery” of the markets. They’ll keep swinging, Sissener said, “until we get some kind of clarification.” Berglund



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