Budget restraint yields business optimism

The 2001 budget agreement engineered by the ruling Labour Party has touched off a wave of optimism among Norwegian industrial leaders and international investment banks.

Norwegian producers of metals, chemicals and pulp and paper products say the new tax system will be favourable enough to permit them to carry out investments in excess of USD 1.47 billion (NOK 14 billion) in the next few years. Key to their good mood was the government's decision to abandon a proposed new surcharge on industrial power consumption. Investment bank UBS Warburg, for its part, praised the government for having the backbone to withstand calls to spend more of the state's oil fortune - a temptation that might have raised the spectre of inflation. "By resisting the pressure to use more of the year's record large oil surplus, the government demonstrated that it will not repeat the previous government's mistake of 1997," said UBS Warburg analyst Ed Stansfield.