Market Forces Are Stoking Norway's Comeback, Labor Leader Says

(Bloomberg) -- Seeking to head off a potential bragging point for Prime Minister Erna Solberg in next month’s election, her top challenger said market forces are the key to Norway’s economic revival.

"The most important contribution to the turnaround in Norway is a weak currency, low interest rates and moderate wage negotiations,” Labor leader Jonas Gahr Store said in an interview after a speech in Oslo on Thursday. ”This is by far the most important reason for seeing renewed optimism among Norwegian businesses.”

Gahr Store, who earlier this year looked like a clear winner in the Sept. 11 vote, is now facing a tight race to unseat Solberg’s Conservative-led coalition. Store has lost his main argument that the government has failed as an economic steward as growth strengthens and unemployment declines.

Read more on Norway’s economy here

Hit hard by the sharp drop in oil prices in 2014, the economy of western Europe’s biggest crude producer is now emerging from the industry’s worst downturn in a generation. The government slashed taxes and poured out cash from the country’s massive oil wealth to prevent a recession, while the central bank aggressively cut rates to a record low of 0.5 percent, bringing the krone down as well.  

Norway’s biggest political party, Labor, has lambasted the government for spending too much of the country’s oil wealth and is campaigning on reversing two-thirds of the tax cuts the Solberg government pushed through since taking power in 2013.

“The government has spent too much oil money, and used it in the wrong way on measures such as large tax cuts,” Gahr Store said. ”The fiscal leeway is much smaller now than before.”

The Labor party has seen its backing in the polls drop to a four-year low of about 27 percent, according to a recent poll by pollster Sentio. 

The party’s finance spokeswoman, Marianne Marthinsen, last week also made the country’s petroleum sector tremble as she floated the idea of paring back on tax breaks for exploration expenses, a key element of Norway’s oil and gas model. Gahr Store batted back that Labor would push for such a change.

”There’s no uncertainty about the petroleum tax system from the Labor party,” Gahr Store said. ”Tax refund is a fixed arrangement that should be predictable.”