Norway’s Weakened PM Makes Top Lieutenant Finance Minister

(Bloomberg) -- Norway’s Prime Minister Erna Solberg named one of her top lieutenants to the key position of finance minister as her new minority government prepares to navigate a hostile parliament.

Conservative Solbergreshuffled her cabinet on Friday after the populist Progress Party decided earlier this week to leave the government, robbing the coalition of its majority. Now forced to seek compromises out in the open, one challenge facing Solberg will be to keep a check on oil-money spending, which already reached records under her watch.

Education and Integration Minister Jan Tore Sanner, 54, who’s also the first deputy leader of the Conservatives, was named finance minister to replace Progress leader Siv Jensen. A member of the government since the onset in 2013 and a loyal supporter of Solberg, his appointment should be “relatively reassuring” to markets, said DNB ASA Chief Economist Kjersti Haugland.

“No one is expecting any antics,” she said in a phone interview. “He appears orderly and thorough.”

Yet it’s probable that Norway, now governed by a minority, will again loosen fiscal policy in 2021, an election year, Haugland said. After proposing for the first time to reduce spending of its oil wealth in 2020, there’s now a higher chance of a “slightly expansionary budget” next year, she said.

Solberg this week signaled few policy changes, saying her new government would continue to abide by a political platform struck in 2019 -- but Progress said it would now disregard that deal and push its own views at the expense of what Jensen called “gray, dull compromises.” The new cabinet, which also includes two smaller centrist parties, now faces a harder task governing, even though minority governments are a normal facet of Norwegian politics.

“I hope we can continue to cooperate with Progress in Parliament,” Sanner told reporters on Friday. “There will certainly be issues we will disagree on, but we should be able to find a solution.”

Solberg has overseen a steady rise in oil-wealth spending until last year to plug budget deficits and smooth over disagreements among her allies. Sanner will also oversee the country’s $1.2 trillion sovereign wealth fund, the world’s biggest, from which Solberg and Jensen made the first withdrawals ever in 2016 when they were faced with a slump in the oil industry.

“The use of oil money needs to be appropriate, it needs to be adapted to the economic situation we’re in,” Sanner said in an interview. He added that the leeway for public spending would narrow in the future as more Norwegians retire, repeating a message from his predecessor.

Different Rhetoric

Solberg also named Conservative lawmaker Tina Bru, 33, petroleum and energy minister.

The Conservative Party is a traditional ally of the oil industry, but the rhetoric emanating from the petroleum ministry may have a slightly different tone after the departure of Progress, which has sought to position itself as the industry’s staunchest defender. Bru last year said she wanted oil operations in Norway to become carbon neutral by 2035 -- a more ambitious goal than was subsequently announced by the industry itself this month.

The Liberal Party’s Iselin Nybo was made trade and industry minister, replacing Conservative Torbjorn Roe Isaksen, who will now head the ministry of labor and social affairs. Liberal Sveinung Rotevatn, currently state secretary for climate and the environment, becomes the government’s youngest minister at 32 with a promotion to the top job in the same ministry.

The appointments also marked the comeback for Knut Arild Hareide, who stepped down as Christian Democrats leader after his party joined the government last year against his wishes. He will be transport minister.

©2020 Bloomberg L.P.

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