Norway shifts tack
Norway’s centre-right swept to power last night, ousting a centre-left government that couldn’t capitalize on a solidly performing economy which escaped the world financial crisis largely unscathed (uncanny echoes of Australia’s weekend election here). The popular feeling seems to have been that a decade of strong growth was wasted and is now slowing.
Erna Solberg, Norway’s second woman premier, will have to govern with the anti-immigration, anti-tax Progress party which could be problematic. But they seem at one on the need for lower taxes at least.
Solberg also wants to revamp the $750 billion oil fund, the world’s biggest sovereign wealth fund. Changes could include breaking it up and requiring it to start investing in Norway, forbidden until now.
State-owned companies could be partly sold off but change won’t come quickly. The incoming governing parties don’t agree on precisely what they want and the budget is running huge surpluses so there’s no pressure there.
We also get Norwegian inflation data, which have generally surprised on the upside, limiting the central bank’s ability to loosen policy. In June, Norges Bank said it wouldn’t raise rates until late in 2014 and could cut before that.
The saga of Silvio Berlusconi has some way to run after a cross-party committee began meeting yesterday to decide whether he should be barred from political life because of a conviction for tax fraud. A final vote in the Senate will be required if the committee decides he should be expelled from parliament.
Day one saw Berlusconi’s centre-right PDL seeking to have the decision deferred pending his appeal to the European Court of Human Rights that the process is invalid. But the centre-left and anti-establishment 5-Star Movement rejected the call, which could delay a decision on Berlusconi’s future by months, and are expected to press on – they have the numbers on the committee to do so. That prompted a close Berlusconi ally – PDL floor leader in the Senate Renato Schifani – to repeat a threat to pull out of Prime Minister Enrico Letta’s government.
There are still good reasons to think the government will survive in some form. February’s elections show just how unpredictable Italian voters can be and the party that brings down a government tends to suffer at the subsequent polls. But it’s what analysts call a non-negligible risk and if it did happen, the euro zone’s summer holiday will be well and truly over.
Italy’s central bank governor, Ignazio Visco, will speak on exiting the euro crisis and the part to be played by banking union.
French unions take to the streets in protest against a reform of the country’s indebted pension system, but with the proposals from French President Francois Hollande so modest – containing only small increases to the size and duration of pension contributions and leaving retirement benefits untouched – this is unlikely to blow up.
The noises from Brussels are ones of disappointment that the Elysee has not grasped the nettle and even within France there is recognition that this is only a first move. Something more radical will be required in the end.
French Finance Minister Pierre Moscovici speaks in Paris with IMF chief Christine Lagarde on “budget federalism” and France’s lower house of parliament reconvenes after its summer break.
Spain, having slashed spending, is promising tax reforms to increase revenues although Prime Minister Mariano Rajoy’s government is also talking of tax cuts before 2015 elections so the waters are somewhat muddy. For various reason, it will hard be for the government to increase the tax take without whacking up headline rates. Spanish Economy Minister Luis de Guindos speaks in parliament this afternoon.
Britain’s stellar summer performance continues, although it must surely dim at some point. A survey by the Royal Institution of Chartered Surveyors, out overnight, showed house prices rose at their fastest pace in almost seven years in August and sales also jumped.
Policymakers are playing down the threat but some economists fear ultra-low interest rates tallied with a government “help to buy” scheme could be sowing the seeds of a new housing bubble, in London and its surroundings at least.
Stocks are on the up and government bonds down as the prospect of early military action in Syria is receding fast and after Chinese industrial growth beat forecasts in August, as did retail sales. Inflation and trade data in recent days have also suggested the world’s second biggest economy is picking up again with exports rising more than expected. British and Dutch government bond auctions bear watching given that backdrop.