Norway presents new measures for industry and households

"The Government proposes to establish two new funds with a total capital of NOK 100 billion. The funds will ease the access to loans for companies and households, and contribute to stabilise the financial market", says Norwegian Prime Minister Jens Stoltenberg.

Minister of Finance Kristin Halvorsen, Prime Minister Jens Stoltenberg and Minister of Transport and Communication Liv Signe Navarsete presented new measures for industry and households today. Photo: Office of the Prime Minister.

"This is important in order to launch good industrial projects that will uphold existing jobs and create new jobs", says Minister of Finance Kristin Halvorsen.

"In order to avoid that failing access to loans leads to a situation where good industrial projects and normally profitable activities come to a halt, the Government now proposes measures that will help financial markets work better", Minister of Transport and Communication Liv Signe Navarsete says.

Finance Fund
The Government proposes to establish a Norwegian State Finance Fund with a capital of NOK 50 billion. The State Finance Fund will be a separate entity. At present, Norwegian banks are financially sound, but they need to strengthen their core capital in order to counter a weaker economy and enhance their competitiveness.

In a situation of failure in the financial markets, the Norwegian state should offer capital to strengthen the banks and improve their ability to uphold normal lending activity. A core capital of NOK 50 billion may in itself correspond to a lending capacity of NOK 400-500 billion.

"We are now making community resources available, and will therefore require that payment and profits for bank leaders be limited", Halvorsen says.

Bond Fund
The Government also proposes to establish a Norwegian State Bond Fund with a capital of NOK 50 billion. This will make it possible for industrial companies to get funding not only directly from banks, but also in a strengthened bond market. The State Bond Fund will be administered by Folketrygdfondet.

"Traditionally the bond market is an important source of funding for banks and other enterprises, but the market is now no longer functioning well. By a considerable state involvement in this market, we may contribute to improving it", Minister of Finance Kristin Halvorsen says.

Comprehensive measures against the finance crisis have been adopted
Since late 2008 insecurity and fear of new losses have dominated international finance markets. The financial crisis may lead to a profound global recession. Internationally, comprehensive measures have been introduced to improve money and credit markets and reduce the effects of the finance crisis on market economy.

"Norway has already done much to improve the situation. The measures we are now presenting come in addition to the comprehensive measures that have already been introduced. These are measures that will benefit industry and households all over the country", Minister of Transport and Communication Liv Signe Navarsete says.

• Norges Bank (Norway's central bank) has repeatedly reduced the interest rate. Since October 2008 the interest rate has in sum been reduced by 3.25 percentage points to 2.5 per cent.
• The budget policy is now being used actively in order to reduce the backlash in Norwegian economy. The measures presented to the Storting (Parliament) on 26 January and the changes made during the Storting's treatment of these measures, lead to an increase in the use of petroleum income by around NOK 45 billion from 2008 to 2009. This is equivalent to a demand impulse of 2.4 per cent of the GNP for mainland Norway. 
• On 12 October 2008 the Government presented a swap facility where banks may receive government debt in exchange for covered bonds. The legislator shortly after passed the necessary authorisation. The arrangement, with a total scope of NOK 350 billion for 2008 and 2009, has eased the possibility of banks to achieve deposits. 
• The Government has increased the capital of Kommunalbanken Norway (the local government funding agency), it has increased the scope of GIEK (the central government export credit agency) and has offered state loans to Eksportfinans Norway (the credit institution for export financing). 
• The Government has proposed to change tax regulations to improve the liquidity of industrial companies.