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Norway's Labour PM Jens Stoltenberg claims victory

world Updated: Sep 15, 2009 07:38 IST

Prime Minister Jens Stoltenberg's centre-left coalition was set to retain power on Tuesday after a hard-fought election showed voters credited his government with steering oil-rich Norway through the global downturn.

After nearly all votes had been counted, Stoltenberg's coalition was on course to keep a slim majority in parliament over the centre-right, which had tried to woo voters with promises of tax cuts and less state involvement in the economy.

Stoltenberg's coalition had 86 seats in the 169-seat parliament, with 99 percent of votes counted from Monday's poll, putting it in line to be the first sitting government to be re-elected in 16 years.

While striking a cautious note about the results as there remained a faint possibility of some seats turning on a handful of votes, Stoltenberg said on television: "We have campaigned and we have won the election.

"It looks like the red-green government can stay in power."

The government is set to decide whether the North Sea country opens new Arctic areas for oil and gas exploration, whether it taps its $400 billion offshore wealth fund and possibly whether it opens a fresh debate on joining the EU.

Norway has survived the global downturn better than its Nordic peers.

Stoltenberg has injected more oil money into the economy and offered relief to banks. With unemployment at 3 percent and the economy set to resume growth in 2010, many see the Labour Party leader's coalition as a safe pair of hands.

He is set to lead his third government this decade. No government has been voted back in since 1993, not long before the country set up the wealth fund to invest oil and gas revenues abroad, instead of pumping them into the local economy.

The fund, worth $80,000 per citizen, stokes expectations for quick improvements in the standard and scope of public services, which in turn has led to a series of one-term cabinets.

At a rally jubilant Stoltenberg supporters shouted "Four more years" as he thanked them for helping Labour to its best result in 16 years.

Labour success

Labour was backed by more than 35 percent of voters and increased its ballot for a second successive election. This marked the first time in more than 50 years it had done this.

The result paves the way for more major government initiatives and relative restraint in using the country's vast oil windfall to plug budget holes.

The centre-left has dug into Norway's $400 billion oil fund to cushion the blow of global recession but has promised to return to strict spending curbs once the crisis fades.

It opposes the tax cuts and privatisation proposals made by centre-right parties, saying they would eat away at spending on healthcare, education and care for the elderly.

Most Norwegian parties cling close to the centre, but the right-wing Progress Party has made strong gains by calling for hefty tax cuts, de-regulation and tougher immigration policies.

"I'm very happy, we're headed for the best result ever for the Progress Party," said leader Siv Jensen, who counts former British Prime Minister Margaret Thatcher as a role model.

Progress won nearly a quarter of the votes and remains the second biggest party after Labour.

The centre-right Conservatives want a new debate over European Union accession after Norway rejected membership twice, in 1972 and in 1994.

Analysts have said a win for either the centre-left or centre-right was unlikely to affect Norwegian markets much.

Erik Bruce, chief analyst at Nordea in Oslo, said the Norwegian crown could benefit slightly from political clarity.

"I don't expect any major effect," he said.