Norway's victorious Red-Green alliance to up welfare

OSLO - A Norwegian "Red-Green" alliance that wants to spend more of the nation's oil bonanza on welfare has beaten the centre-right government in an election but faces weeks of wrangling to hammer out common policies.

Prime Minister Kjell Magne Bondevik said he would inform King Harald on Tuesday of his defeat in Monday's vote -- assuming the final count confirmed the result -- by an alliance led by former Labour Prime Minister Jens Stoltenberg, 46.

Bondevik said he would stay on as a caretaker until parliament opens in mid-October. His four-year-old alliance comprises his Christian People's Party, the Conservatives and Liberals.

"We don't have a good answer," Bondevik, 58, said when asked why voters had ditched his tax-cutting government even though UN surveys have rated Norway as the best place in the world to live every year since he took power in 2001.

"Norway can do better," Stoltenberg said of Bondevik's defeat, saying that tax cuts had betrayed Nordic traditions of equality despite UN plaudits and an oil-backed economic boom.

"Many people agree with us that we have fantastic possibilities and that we could use our money better," he said.

With 98.3 percent of the votes counted, Stoltenberg's alliance had a majority with 88 seats in the 169-seat parliament. Bondevik's minority coalition and its informal ally, the anti-immigrant Progress Party, had 81 seats.

Far-right Progress, sometimes likened to France's National Front or Austria's Freedom Party, became the second biggest party with 37 seats behind Labour's 62.

Norway is overflowing with cash as the world's biggest oil exporter behind Saudi Arabia and Russia. A fund saving surplus money for future generations recently reached $190 billion, or about $41,000 for each of Norway's 4.6 million citizens.

Stoltenberg, an economist who was prime minister from 2000-01, advocates more spending on jobs, education and care for the elderly.

First, however, he will have to work out a joint platform with his partners, the Socialist Left and the Centre Party. Many financial analysts fear that a shift to higher public spending could stoke greater pressures for interest rate rises.

Stoltenberg says Labour will raise taxes slightly, back to 2004 levels, and will not go on a spending spree of oil cash that could derail the economy.

"In the next few days we will start negotiations ... we will have some tough rounds," Stoltenberg said. He declined to discuss what might happen if talks on a common platform failed. Norway's constitution limits elections to one every four years.

The dominant force in Norwegian politics since the 1930s, Labour has not ruled in partnership with other parties since just after World War Two. And the Socialists have never been in power.

The Socialists favour a six-hour working day, want to build hundreds of kindergartens and favour buying back shares in part-privatised former state monopolies like Statoil. And their programme denounces the United States as "the biggest threat to world peace".

"We must have a negotiated result that all three parties can be happy with," Socialist leader Kristin Halvorsen said. It is unclear how far her demands, or high spending promises by the Centre Party, will be met by Labour.

Labour's very success in building one of the world's most generous states has all but eliminated its traditional working class base, forcing it to seek partners in a bid to win power.

Still, Monday's election was a rebound from a long slide, with Labour winning 62 seats in parliament against 43 in 2001. The Socialists lost eight seats to 15, sapped by Labour, while the Centre Party gained one to 11.

Labour wants to take Norway into the European Union, but is unlikely to raise the issue soon as most Norwegians oppose membership.

- REUTERS