(Bloomberg) -- Norway’s Prime Minister Erna Solberg lost her majority coalition after her main ally quit the government to protest the repatriation of a woman who’d joined Islamic State.
The prime minister, who leads the Conservative Party, will continue to run a minority coalition without the anti-immigration Progress Party. Though she avoided a total government collapse, Solberg now faces a tougher future getting legislation through a more fractious parliament. Progress Party Leader Siv Jensen, who was also Norway’s finance minister, made clear she’s sick of political compromise and will now pursue a much harder line to defend her populist program.
“There have been too many gray, dull compromises,” Jensen said at a press conference in Oslo on Monday.
The Progress Party walked out after it was sidelined in a decision to bring back a Norwegian woman who had joined ISIS. The party had been willing to assist the woman’s two children, one of whom was seriously ill, but not the mother, who has been charged with joining terrorist organizations and was arrested upon her return to Norway over the weekend.
Jensen’s extreme step follows her party’s slump in the polls to just 10% support, and looks to be a bid to win back voters ahead of the next election in September 2021. The move marks a return to life in the opposition for the populist group, after more than six years spent operating from within the establishment. Jensen made history in 2013 when the Progress Party made it into a governing coalition for the first time ever.
Solberg now needs to replace the seven ministers in her cabinet who had been Progress Party members. Besides the finance ministry, the party oversaw energy inside western Europe’s biggest oil and gas producer.
Minority governments are common in Norway and the rest of the Nordic region. Solberg has been prime minister since 2013, but only managed to build a majority coalition last year, after two small centrist parties joined the government. Norway doesn’t hold snap elections, giving Solberg well over a year to prepare for the next national vote.
The Norwegian krone was little changed against the euro after the announcement.
The relationship between the four parties -- with wildly different views on issues as climate, oil and immigration -- has always been rocky. As a result, the coalition has risked dissolving on several occasions over the past years.
Solberg plans to govern as head of a coalition consisting of her Conservative Party, as well as the Liberal Party and the Christian Democrats, she said at a separate press conference that started immediately after Jensen’s. The administration will continue to base its policies on a political agreement struck with the Progress Party. Jensen appeared to question the viability of that plan, but also said she wanted Solberg to remain as prime minister.
In the coming months, the government will need to deal with issues such as a new plan for the management of Norway’s northern maritime areas, which will determine how far north oil companies can drill for new resources. Jensen has already mentioned her party’s opposition to key initiatives, such as a planned power inter-connector with the U.K. and future budget negotiations.
Solberg has in the past used oil revenue to finance measures in an effort to smooth over political differences in her coalition. She’s overseen a steady increase in expenditure, with spending hitting a record in 2019. While economists said the political turmoil should have very limited market consequences, Nordea analyst Joachim Bernhardsen said it could lead to even more fiscal stimulus.
“On the margin I would say that tilts in the direction of higher use of “oil money,” he said. “It could be harder for the prime minister to satisfy both the wishes of the opposition and those of the parties left in the government.”
(Updates with comments from finance minister, prime minister, analyst from third paragraph)
--With assistance from Love Liman and Stephen Treloar.
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