Norway's Prime Minister Fears Social Unrest

Norway‘s Prime Minister Jens Stoltenberg fears that the massive build-up in sovereign debt can trigger global social unrest in with unpredictable consequences.  He points out that many countries have built up huge deficits and huge debt, and that this is not sustainable and can not continue.

“The crisis is not over. 2010 is going to be an uncertain year”

Jens Stoltenberg

(Article in English, links to sources in Norwegian)

Prime Minister of Norway Stoltenberg is worried about the massive debt accumulation in many countries, and fears it might trigger increased turbulence around the world.

“The crisis is not over,” he says in a new year interview with the Norwegian news agency Norsk Telegrambyrå (NTB),

It is the massive debt accumulation in many countries, the prime minister fears could trigger increased turbulence around the world.

He points out that many countries have built up huge deficits and huge debt. “It is not sustainable and can not continue,” he says.

“When these countries begin to tighten in order to bring down the deficits, it can lead to a decline in the global economy.”

Mr. Stoltenberg underline the fact that Greece, who is struggling with its debt obligations,  is not alone. Most European governments borrowed large sums of money for one billion to offer rescue packages for their banks and firms during the financial crisis the worst months last winter. These  countries can find themself in a serious squeeze as loans has to be repaid, according to the Norwegian Prime Minister.

Even with so much uncertainty on the horizon, Mr. Stoltenberg do not belive it’s his responsibility to ask people to build up a buffer by curbing consumption.

“But it is important to be prepared because it may be difficult times ahead,” he adds.

“Moreover, Norway’s Central Bank has warned of higher interest rates. We currently have an abnormally low interest rates, and we can not expect that it will last.”

“2010 will be an uncertain year. How this will turn out in 2011, we must  come back to. I can not be more precise, or concrete, today. A lot of depends on how the global economy evolves.”

“A Dichotomy Of The Economy”

Mr. Stoltenberg is also worried about the Norwegian labor market that currently has an unemployment rate of only 3%.

“The crisis is not over. Norway has a small, open economy. Half of what we produce, we sell abroad. When it is up to 10 percent unemployment in our neighboring countries, there is no guarantee that we can still succeed in having 3 per cent,” says the Prime Minister.

“Although the acute downturn in production might be over with, we see that unemployment is growing in all of our neighbors.”

Mr. Stoltenberg says that the strong public stimulus to the economy, through road construction, extra maintenance and construction activities, will decline as the normal growth returns.  Both he and Finance Minister Sigbjørn Johnsen has announced that the extraordinary use of petroleum revenues in 2009 and 2010 will fall back to the level of the Norwegian fiscal rule of maximum 4%.

“Anyway, we are not talking about reducing public expenditure, but less growth. Much of public spending is bound up in social security payments, so it may be necessary with stricter priorities in other areas.”

He adds, however, that the vast majority of Norwegians next year will have a secure economy and a favorable trend in purchasing power.

“It is due to the fact that Norway will continue to have low unemployment compared with other countries, and overall a strong economy.”

“But I’m afraid of a dichotomy of the economy, where those who are addicted to selling goods to foreign countries, is vulnerable to that it is not going well internationally.”

“The strength of this government is that we can handle disagreement.”

“My experience is that when we sit down and spend some time, we find good solutions. Sometimes there will be a compromise, sometimes an entirely new way to handle a case.”

Here’s a Google-translated news report on the interview by the Norwegian web site, DN.no.

Update: 1920-similarities

Related:

2010 Analysis: ECB Increase Bank Loss estimates

2010 Analysis: Warns Against Social Unrest

Central Bank of Norway raise interest rate again

2010 Analysis: Collapse of Credit

Norway: Most Banks Fail In Stresstest

Reason To Worry

Norges Bank urges banks to reduce liquidity risks

Norway’s New Bubble

“The Norwegian syndrome

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