Norway's opposition set for sweeping election victory

OSLO Mon Sep 9, 2013 6:04am EDT

Norway's Prime Minister Jens Stoltenberg (R) and main opposition leader Erna Solberg leave a building after an appeareance on a television show in Oslo, September 8, 2013. REUTERS/Fredrik Varfjell/NTB Scanpix

Norway's Prime Minister Jens Stoltenberg (R) and main opposition leader Erna Solberg leave a building after an appeareance on a television show in Oslo, September 8, 2013.

Credit: Reuters/Fredrik Varfjell/NTB Scanpix

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OSLO (Reuters) - Norway's center-right opposition, pledging privatization, tax cuts and smaller government, was set for a sweeping election win on Monday but faces difficult coalition talks since a populist anti-immigration party will hold the balance of power.

Norway has enjoyed rare economic success, thanks to its flourishing offshore oil sector boosting per capita GDP to $100,000. But growth is slowing and voters are ready to punish Labour Prime Minister Jens Stoltenberg, accusing him of wasting a once-in-a-lifetime economic boom.

"To me, this vote is about using our fortunes better," Oslo voter Geir Henriksen, 36, said. "Public service, like health and elderly care, is not getting any better even as the government spends more and more. We need to rebalance government."

Labour could still end up as the biggest party with 30 percent, opinion polls show, but that will not be enough. The four center-right parties, led by likely future prime minister Erna Solberg's Conservatives, are on course for around 100 seats in parliament, 15 more than needed for a majority.

"We need more legs to stand on in the economy, not just oil," said Solberg, nicknamed "Iron Erna" for her tough stances when she served in cabinet between 2001 and 2005.

"We are a liberal-conservative party, we do not make revolutions ... This will be a road of small steps."

MINORITY GOVERNMENT

The trickiest task for Solberg is likely to be talks with the populist, anti-immigration and anti-tax Progress Party, which is set to finish second among the opposition groups.

Although Progress has toned down its rhetoric, it is seen by some as too radical to enter government and once had among its members Anders Behring Breivik, who killed 77 people in 2011 in a gun and bomb attack targeting Labour.

The small Christian Democrats and Liberals, whose votes may also be needed for a majority, are not keen on teaming up with Progress, objecting to its policies on immigration and spending, raising the prospect that Solberg may lead a minority cabinet.

"A majority government isn't necessarily the norm in Norway and it's slightly more likely we'll get a minority," said Elisabeth Ivarsflaten, a political science professor at the University of Bergen. "Norway has had many minority governments and they tend to work."

Bringing Progress into government could force Solberg to make concessions on spending, taxes and perhaps even a symbolic gesture on immigration. But any shift is likely to be mild.

"We expect a moderate increase in public spending combined with a reduction in taxes," Danske Bank said. "We expect the magnitude of the changes in aggregate to be marginal in the short run, as the market impact is likely to be."

The incoming government has immediate spending leeway since Stoltenberg's administration has spent less oil revenue than the cap set by parliament of 4 percent of the country's $750 billion oil fund.

"We can expect revisions to the budget put forward by the current government of the order of 5 billion to 15 billion crowns ($0.8-$2.5 billion), which is 0.22-0.66 percent of mainland GDP," Danske said.

With a budget surplus of 12 percent of GDP this year and the sovereign wealth fund worth $750 billion, Norway can afford just about any spending. But economists argue the state is already big, crowding out the private sector.

Voting will end at 1900 GMT, when several exit polls - which have proved accurate in the past - will be published. Indicative results are expected around 2200 GMT. Coalition negotiations are not expected until next week.

(Additional reporting by Alister Doyle; Editing by Robin Pomeroy and Paul Taylor)

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