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Monday, 30 July 2012

Prime minister Stoltenberg on Norwegian oil and financial crisis

Jens Stoltenberg, the Norwegian prime minister, is yet again warning the people of Norway that its oil reserves are no guarantee against a potential financial crisis not affecting Norway according to Dagens Naeringsliv (a Norwegian financial news paper). Stoltenberg says in an interview with VG:

"I sleep well at night, because we have taken care of the opportunities we had. We have demonstrated responsible use of money in good times and set aside money for hard times. That is what is the problem for many countries in Europe now. They have spent too much money and now have no money to put in when problems arise".

Why is he again issuing such a warning to the people of Norway (he has done it many times before)? There are obviously some reasonable explanations to this such as keeping expectations down in order for the unions to demand lower rates of wage increases and for people in general to borrow less (he is probably afraid of earnings in the private sector increasing significantly which will affect the unions' demands next time around). We think though that this is more about him trying to save his own skin, the Norwegian Labour Party and his coalition government when the financial crisis hits Norway. He can then state "I told you so". The truth is the Norwegian government has not "demonstrated responsible use of money in good times..." as the government has in fact greatly expanded central government expenditures from an already high base in recent years (see the series of articles titled "A Financial Analysis of Norway" on the EcPoFi website) and used funds generated from oil and gas to make up for huge central government deficits from mainland Norway (an average of NOK 94.064 billion a year for the last three years, NOK 282.191 billion in total). Neither has he "taken care of the opportunities we had" as Norway has little to show for outside its oil and gas activities and, adjusted for oil and gas, Norway is a bigger net importer of goods and services today than ever before (see here). Again he seems to imply that Norway is much more fiscally conservative, prudent and run the country better than many European countries. But the reason Norway is so much better off financially than most countries is simply because the country makes an absolute fortune from its oil and gas exploration. If Greece had the same natural resources, they would also be in great shape now (it would simply be difficult to spend it all, even for seasoned bureaucrats!). It's therefore not because Stoltenberg is governing better than the leaders of struggling EU countries that Norway is in good financial health. In fact, he is just as useless and needs to stop taking credit for Norway being blessed with massive oil and gas resources and say the truth. If not, he should say nothing.

Here is the full article from Dagens Naeringsliv (in Norwegian).