Norway ruling Labour Party wins reelection while populists score gains

By Terje Solsvik, Nora Buli and Nerijus Adomaitis

OSLO, Sept 8 (Reuters) - Norway's minority Labour Party government won a second term in power on Monday while the populist right achieved its best-ever election result, official results showed, in a ballot dominated by concerns over rising living costs and wars in Ukraine and Gaza.

Incumbent Prime Minister Jonas Gahr Stoere's Labour and four smaller, left-leaning parties won 87 seats, above the 85 needed for a majority, with 99% of ballots counted.

Stoere, 65, will remain heavily reliant on his smaller allies, however, to pass major legislation such as fiscal budgets. To get their backing, he will likely face tough discussions over issues such as tax hikes for the wealthy, future oil exploration, and divestments by Norway's $2 trillion sovereign wealth fund from Israeli companies.

"Stoere will continue as prime minister, but with a much more difficult parliamentary situation, in which he is dependent on five parties to govern," Jonas Stein, an associate professor in political science at the University of Tromsoe, told Reuters.

Despite the left's victory, Monday's ballot showed a shift further to the right among conservative voters, with the populist, anti-immigration Progress Party of Sylvi Listhaug, 47, making its best-ever showing in an election.

Progress secured 48 seats in the 169-seat parliament, more than double its allocation from four years ago, as the party's promise of large tax cuts appeared to have resonated with many voters.

Listhaug, a onetime firebrand who cites Ronald Reagan and Margaret Thatcher as her role models, campaigned on what she said was wasteful public spending on areas such as international aid and subsidies to green energy.

"Young people today are much more right-wing than earlier. I think the Progress Party has won a huge part of the youth vote, especially among young men," said Eirik Loekke, a fellow at Civitas, an Oslo-based liberal think-tank.

None of the right-wing parties that won seats, including former Prime Minister Erna Solberg's Conservatives, have sought the backing of U.S. President Donald Trump, unlike some of their counterparts elsewhere in Europe.

SAFE HANDS

Stoere welcomed the results, playing down any shift to the right. "This is a signal to outside Norway that social democracy can also win despite a right-wing wave," he told a jubilant crowd of Labour supporters chanting "four more years".

Voter concerns over the conflict in Ukraine and an aggressive Russia, which shares a border with Norway in the Arctic, have given a boost to the left in recent months after former NATO Secretary-General Jens Stoltenberg, 66, joined Stoere's cabinet.

Many Norwegians saw the decision as a safeguard in case of a new armed conflict, given Stoltenberg's decade-long tenure - until October of last year - as head of the western military alliance.

Some 59% of Norwegians believe a new war in Europe is likely within the next decade, up from 55% last year, according to a survey by the Peace Research Institute Oslo.

Also looming large in the final weeks of the election was the war in Gaza, with Stoere's smaller allies calling for Norway's $2 trillion sovereign fund, the world's largest and a major source of the country's wealth, to divest further from Israeli companies.

Since June 30, the fund has divested from more than two dozen Israeli companies, following media reports that it had built a stake in a jet engine company that provides maintenance for Israeli fighter jets.

Some parties on the left have questioned whether the country is in effect contributing to violations of international law by investing in companies active in the occupied Palestinian territories. Israel denies contravening international rules.

Also at stake in the election is the future path of the oil industry in Norway, which replaced Gazprom as Europe's top gas supplier after Russia's 2022 invasion of Ukraine.

Norway's role is set to grow further as the European Union plans to phase out the use of Russian gas by 2027, but some of Stoere's junior allies want to gradually phase out oil exploration, which could limit new gas fields.