11 June 2003


FAFO rebuked for role in Mid-East (Aftenposten)

The private research foundation, the Institute of Applied Social Sciences (FAFO), has been branded as the mover and shaker behind Norway’s policy on the Middle East. The FAFO is accused of playing an active role in shaping and implementing the Middle East policy pursued by successive Norwegian governments’ in the 1990s. A recently published report details the close ties between the FAFO and the Foreign Ministry’s political leadership. Terje Rød Larsen is named as a lynchpin in this relationship by researcher Ellen Rømming of the research project, Power and Democracy in Norway. “The collaboration between the Foreign Ministry and the FAFO seems to have been driven forward by a small network of people which was established in connection with the secret negotiations that led to the Oslo Accords,” said Ms Rømming. Neither the Foreign Ministry and the FAFO view the criticism levelled at them in the report as particularly serious.

Final confirmation of EEA Agreement (Dagens Næringsliv)

The Norwegian authorities yesterday confirmed the final cost of the EEA Agreement, two months after it was signed. It will cost Norway a fraction under NOK 1.8 billion every single year. After two months’ silence on the contents of the new EEA Agreement, the Foreign Ministry yesterday confirmed its main points. Each year, Norway will pay NOK 1.79 billion of the EEA countries’ total contribution of NOK 1.84 billion. This is almost ten times higher than Norway is currently paying, and Norway pays relatively speaking twice as much as Iceland and Liechtenstein. The Norwegian confirmation of the contents of the agreement came after Poland gave its formal, written acceptance on Monday morning. Poland has not won acceptance for any of its original demands. It will be several weeks before all the formalities connected with the agreement are finalized.

Times still good for those in work (Dagsavisen)

People in Norway continue to be better off. Economists expect generous pay rises, increased purchasing power, steadily falling interest rates and low inflation. And to crown it all, many people will soon benefit from a substantial cut in the fees they pay for pre-school day care. “The Norwegian Central Bank’s counter-cyclical policy will improve the situation for most people,” said senior economist Roger Hammersland of Handelsbanken. “But the losers will be those who are out of work,” he added.

Gjedrem prepares to swing the axe on interest rates (Dagbladet)

Inflation in Norway has not been this low since the war, prompting expectations of a hefty cut in interest rates. Low inflation means that Central Bank Governor Svein Gjedrem must do what he has done at every single interest rate conference since last December. He must cut interest rates even further. On 25 June he will lop one whole percentage point off the interest rate, and 13 August he will probably cut another half percentage point. Yesterday’s inflation figures made even experienced economists stop and stare. The so-called underlying rate of inflation proves to have been a measly 1.2 per cent over the past year. “I have worked it out, and am fairly sure we have to go back to 1948-49 to find similar figures,” said Nils Terje Furunes, chief economist at Gjensidige NOR.

Gjedrem wide of the mark (Dagens Næringsliv)

Svein Gjedrem, Governor of the Norwegian Central Bank, has driven inflation so far down that it is more than one percentage point lower than his inflation target. After this winter’s strong growth, lower electricity and fuel prices have prompted a drop in the ordinary rate of inflation. But economists and politicians are particularly concerned with the underlying rate of inflation, which eliminates the effects of fluctuating energy prices and changes in direct and indirect taxation. It is this measure of inflation that Mr Gjedrem is looking to when he sets interest rates. The new figures show that the underlying rate of inflation is now more than one percentage point adrift of its target. Thomas Ekeli, chief economist at Pareto Securities, points to the UK, where a discrepancy of that size would mean the governor of the Bank of England having to explain himself to the Chancellor of the Exchequer.

Bondevik seeks roots of terrorism (NTB)

Prime Minister Kjell Magne Bondevik wants to find the roots of terrorism in order to combat it. This is the starting point for the major conference he is hosting in New York on 22 September, just before the opening of the UN General Assembly. In preparation for this conference, the Norwegian Institute of International Affairs (NUPI) is organizing a conference in Oslo, where international experts will discuss all aspects of terrorism.

Bondevik’s UN policy described as embarrassing (Dagbladet)

At the same time as the Government is preparing to send soldiers to Iraq, it is cutting back on its participation in UN operations in Africa. This is both embarrassing and contrary to Norwegian policy,” said Raymond Johansen of the Norwegian Refugee Council. “The low priority given to sending Norwegian soldiers under the UN flag to where they are really needed is embarrassing. When Norway became a member of the UN Security Council, we promised to strengthen the UN’s peacekeeping efforts in Africa. Now the opposite is happening,” said Mr Johansen. He claims that there is a gap between what the Government has told the Storting are Norway’s priorities, and the real situation. Today, Norway has only five officers on secondment to the UN in Africa. They are supervising the cease-fire between Eritrea and Ethiopia. Norway has a total of just 47 people participating in peacekeeping operations under the auspices of the UN.

Norwegians gamble away record sums (Vårt Land)

In just one single year, the amount of money being fed into Norwegian slot machines shot up from NOK 9 billion to NOK 15 billion. The Storting now wants to reverse this trend, among other things by physically removing slot machines from retail outlets and shopping centres. A number of voluntary organizations face losing the substantial revenues they receive from their slot machines. “A large proportion of the increased revenues received by voluntary organizations last year, was money that came from unhappy people. It is a paradox,” said Ola T. Lanke (Chr.Dem).

Blunder saved dog breed from ban (Verdens Gang)

An procedural blunder resulted in the Storting refusing yesterday to ban Amstaff dogs – even though the majority of MPs wanted the breed outlawed. The reason? The Labour Party had too many representatives in the Storting’s chamber. Together with the Progress Party’s MPs, they therefore made up a majority against the ban. Labour sent three of its representatives out of the chamber when the mistake was discovered, but by then it was too late. President of the Storting, Jørgen Kosmo (Lab), refused to allow the vote to be retaken since none of the MPs had voted incorrectly. “This kind of thing creates the impression that the Storting does not know what it is doing. People become uncertain about what the Storting actually means. This is very unfortunate,” said the Socialist Left Party’s Ina Marte Thorkildsen, who had tabled the proposed ban. The reason for the confusion was a glitch in the system known as “pairing”. If an MP is prevented from taking part in a parliamentary vote, an agreement is reached with an MP from another party not to vote either. However, pairing is only allowed as long as it does not upset the balance between the parties, so that all votes accurately reflect the actual views of the parliamentary majority.

Worth Noting

  • Hours of talks on Tuesday night did not result in any agreement on pre-school day care reform. “No clarification, no breakdown. We need more time,” said Children and Family Affairs Minister Laila Dåvøy (Chr.Dem) and Oddvar Nilsen, leader of the Conservatives’ parliamentary group, after the last round of talks with Jens Stoltenberg, leader of the Labour Party’s parliamentary group, and Kristin Halvorsen, leader of the Socialist Left Party’s parliamentary group,.
  • Society saves little by axing passenger train services on unprofitable lines as long as goods traffic continues. This is the conclusion of an analysis the National Rail Administration has carried out for the Ministry of Transport. On the other hand, the National Rail Administration does believe investment is needed to improve the railway networks surrounding the country’s largest cities.
  • The Odelsting voted on Tuesday evening that a ban on forced marriage should be included as a separate statute in the Norwegian penal code.
  • At the start of the year, the inhabitants of 232 Norwegian local authorities were liable for property tax, compared with those in 214 local authorities in 1999, according to an overview provided by Statistics Norway at the behest of Nationen. Only Oslo, of the country’s four largest cities, has not introduced a property tax. Bergen, Trondheim and Stavanger raised a total of NOK 492 million in revenues from property taxes last year.
  • Cod caught off the Lofot islands of northern Norway is becoming less and less popular abroad. Exports of seafood fell by 11 per cent in May, with the biggest downturn in exports of frozen cod. Norway exported seafood to the tune of NOK 2 billion in May, a fall of 11 per cent. The drop was greatest in exports to the UK, which were halved in May.
  • Eight out of ten people living in Finnmark want greater regulation of fishing rights and fisheries policies, according to a recent survey. According to the survey, which was carried out by Omnijet, 75 per cent of Finnmark’s inhabitants say the county could not exist without the fishing industry. 84 per cent believe Finnmark should be given a larger proportion of the fish stocks.
  • The likelihood of teenagers turning into nicotine slaves is three times greater if they see film stars smoking. Norway’s Health Minister Dagfinn Høybråten now wants to get to grips with smoking on screen and stage. “We are planning a campaign, which will be shown in Norwegian cinemas, among other places. It will be a counter-offensive against the entertainment industry,” said Mr Høybråten.

Today’s comment from Dagens Næringsliv

Svein Gjedrem, Governor of the Norwegian Central Bank, has made a mistake and has shot completely wide of the inflation target it is his job to meet. His task is to keep inflation, adjusted for energy prices and tax costs, at 2.5 per cent. Figures published yesterday show that the adjusted rate of inflation in May was as low as 1.2 per cent. This is more than the one per cent margin of error he is allowed, and means Mr Gjedrem has some explaining to do. He has shot wide – and then some. He has shot wide on the wrong side. It is worse to drive the economy too far down than too high up. He shot wide because he did not see what other people saw. Mr Gjedrem was more optimistic than others in his forecasts for the Norwegian economy. He believed the economic temperature would be higher than, for example, Statistics Norway did. So he kept interest rates high. Nor was Mr Gjedrem as alarmed as he should have been when the Norwegian krone (NOK) strengthened. Instead of trying to talk the NOK down, he talked about the wonderful efficacy of a strong currency in tightening up the economy. He denied that it was possible to talk the NOK down, but managed the job perfectly when he finally made the attempt. And now he has once again shown that he really is capable of bringing the exchange rate down. Since his comments last Thursday, when he said that a double cut in interest rates could be in the offing, the NOK has lost more than four per cent in value. An inflation rate of around one per cent is not dangerous in itself, not when the most important explanation lies in low growth in the price of imports. But when it coincides with falling economic activity and rising unemployment, the situation becomes serious. All this is not Mr Gjedrem’s fault alone. This year is the first year in which we see the results of a monetary policy that demands interest rates be set on the basis of an expected inflation rate two years ahead. The verdict so far is that there is an obvious need for improvement, not least in terms of how the exchange rate is to be handled under such a regime. Even though there is no definite requirement in the currency regulations for an immediate report from the central bank governor when he makes such a large error, Mr Gjedrem should issue an explanation as soon as possible.