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Norway’s government up against election ‘oil wealth curse’

Published on 14/09/2009

Oslo — Norway’s left-wing coalition is fighting for survival in Monday’s general election, hoping to beat the "oil wealth curse" that has doomed sitting governments in every vote the past decade.

Since the wealthy Scandinavian country started putting its oil revenues aside in a state pension fund in 1996, no government has ever won re-election.

Opinion polls have suggested a close race between the left-wing government — made up of the Labour Party and their junior partners the Socialist Left and Centrists — and four right-wing opposition parties who want to oust the left but have yet to agree on an alliance to take over.

"It’s impossible to say what the result of the election will be. The two blocs are so close that either side could win a parliamentary majority," Oslo University political scientist Hanne Marthe Narud said.

Labour Prime Minister Jens Stoltenberg, in power since 2005, has campaigned on his success at steering Norway through the global economic crisis with little harm done to the economy thanks to the massive state pension fund.

The oil fund, invested in international stocks and bonds and designed to finance the needs of the generous social welfare state the day the wells run dry, is worth 277 billion euros (395 billion dollars).

Norway suffered only a brief recession during the crisis and now boasts the lowest unemployment rate in Europe at 3.0 percent.

"Good governance rather than economic experiments. The social welfare state rather than tax cuts. That’s what’s at stake in this election," says Stoltenberg, 50, who has made employment and social justice his main priorities.

Picking up on the popularity of US President Barack Obama’s election campaign slogan, Stoltenberg supporters have been seen wearing T-shirts reading "Jens Vi Kaen" ("Jens We Can") in the run-up to the vote.

About half of voters are however hoping for a change of power, polls indicate.

Torn between budget moderation and the electorate’s growing demands to benefit from the oil wealth, successive governments have since 1996 been hit by the "oil wealth curse," the expression used by political scientist Frank Aarebrot.

In normal times, the government is only allowed to use a maximum of four percent of the fund’s value to balance its budget.

Despite their high standard of living, Norwegians are frustrated over the welfare state’s shortcomings — long health care queues, not enough rooms in retirement homes, poor road quality — at a time when the government is sitting on a stash worth hundreds of billions of dollars.

"Why don’t we live better in a country where we live so well?" reads one opposition campaign poster.

The right-wing populist Progress Party, which is credited with up to 25 percent of voter sympathies, has capitalised on the discontent and pledged to use more oil money to finance tax cuts and public investments.

"The critical factor is not only how much money we spend but also how we spend it. Investing in infrastructures is not spending money, it’s investing in future GDP (gross domestic product)," says Progress Party leader Siv Jensen, a fan of former British prime minister Margaret Thatcher.

The 40-year-old party leader has also criticised what she calls the "sneak Islamisation" of Norwegian society.

For the first time, the Conservative Party, led by Erna Solberg, 48, has said that it would be willing to govern in a coalition with the Progress Party.

The party is hovering around 15 percent in the polls and is also keenly in favour of tax cuts.

But two smaller centre-right parties have refused to collaborate with the populists because of their anti-immigration stance.

"We want to lead the country in two different directions," Christian Democratic Party leader Dagfinn Hoeybraaten said.

If the four parties were to win a majority on Monday, the divisions could complicate the right-wing’s efforts to form a government.

Minority governments are not uncommon in Norway.