Until last week, the government rejected demands for support measures for business for the high electricity prices, but now there are new signals. At the same time, there are warnings from economists who believe it would be very unwise to look up for the companies. – If you look at the situation in business, there are no signs that the companies are struggling, says social economist Steinar Juel in the bourgeois think tank Civita. The government and several of the parties in the Storting point out that jobs are at risk. But Juel insists that, on the contrary, the companies are struggling to get hold of people. The experienced economist Steinar Juel is worried about rising interest rates. Photo: Junge, Heiko / SCANPIX – You must spend money again that could have been used for other things, and which contributes to making demand in the economy higher. Then the risk of even higher interest rates increases, says Juel. news knows that at the weekend there was close contact between the two giants of working life ahead of Monday’s many political meetings about the electricity crisis. LO and NHO are working on concrete input which they will present to the government at the meeting with the prime minister at 10 a.m. NHO leader Ole Erik Almlid has been demanding electricity support for businesses for several months. Now Finance Minister Trygve Slagsvold Vedum (Sp) is slipping. Photo: Terje Pedersen / NTB Earlier in the day, the government and the parliamentary leaders meet. At 10.30am, the presidency of the Storting will decide on the demand from several parties for an extraordinary emergency meeting. A number of considerations and assessments must be made before new measures in the billions range can be rolled out. The government’s electricity dilemma Since the winter, LO associations and the Norwegian Confederation of Business and Industry (NHO) have asked the government to help companies with their electricity bills. But the government has resisted – precisely because such support can create more headaches than it solves, several sources tell news. Among other things, these arguments have been weighed against: The companies can get the money back: Unlike people, the companies have an opportunity to shift part of the electricity bill to the customers by raising the prices. The companies could “insure” themselves: The companies that use the most electricity and are vulnerable to price fluctuations have had the opportunity to arrange a fixed price for electricity. Legal trouble: A form of state support for companies can be difficult to get approved by the EU, which must ensure that companies do not get unfair advantages in competition with others. But the rules were softened in March and extended this summer as a result of the war, according to the European Commission. The consumption of electricity may increase: The companies may abandon reducing the use of electricity if the government takes part of the bill, so that the water reservoirs are drained more. The disadvantage has also been pointed out by Prime Minister Jonas Gahr Støre as an argument against maximum electricity prices. The interest rate can sting worse: If the companies get billions in electricity aid, Norges Bank can choose to raise the interest rate even faster because the companies get more money to spend than they would otherwise have had. It will also give the companies another expense. Warns During the corona pandemic, politicians spent billions to help everything from artists to rental investors. The online newspaper E24 has revealed that the scheme was so generous that half of the companies could repay the money without going into the red. In addition, the number of bankruptcies has since fallen to a lower level than before the pandemic, according to Statistics Norway. Steinar Juel, who was previously chief economist at Nordea and before that had experience both as an adviser to the Minister of Finance and as an employee of the Ministry of Finance and Norges Bank, believes that this time the companies must foot the bill themselves. – I think electricity support is a very bad idea. The business world has become accustomed to being able to get support and it is an unfortunate effect of the fact that we had these support measures during the corona, he says. Economics professor Magne Mogstad at the University of Chicago also believes that the state must avoid sponsoring the companies. Temporary loans rather than monetary support for companies, suggests economics professor Magne Mogstad. Photo: Chicago University – The state must insure workers, not companies. A common counterargument is that some small and medium-sized companies do not have access to capital markets, and thus are unable to bear such costs in the short term even if they are profitable in the longer term. In that case, it can be considered that the state gives the companies temporary loans while we have very high electricity prices, he says. – Must cut When the pandemic got out of hand, the economy picked up speed again. In large parts of the world, the economy is doing so well that companies are struggling to get hold of people, and prices are rising quickly. In the past year, Norges Bank has stepped up interest rates in order to cool down the economy and gain control over rising prices. But at the latest this spring, the government chose to spend an extra 30 billion from the Oil Fund. Juel has estimated in DN that Norges Bank will have to raise the interest rate by 0.5 percentage points more than if the government had restrained spending. Chief economist Kjersti Haugland at DNB says the government must increase taxes or tighten the same amount elsewhere in the city budget, to avoid the electricity aid giving a higher interest rate. The money used for electricity subsidies must be raised elsewhere, points out Kjersti Haugland in DNB. Photo: Thomas Wi – In order to avoid a further cold shower for the economy, they have to get the support elsewhere in the budget, she says. Head of allocation and global interest at Storebrand, Olav Chen, believes for his part that it may be right to support companies when people get help with their electricity bills. But only if the companies use the support not to set retail prices for goods and services that are resold. According to Chen, this will be able to mitigate Norges Bank’s concerns about strong price growth. – But the support scheme needs to be monitored somewhat better, he says, and continues: – The interest rate will rise whether you like it or not. It must rise until inflation goes down. In any case, this will contribute marginally in relation to what the interest rate will rise by. Will avoid interest rate pressure In July, the price of electricity in southern Norway was 138 times higher than in northern Norway, according to NordPool. In recent weeks, the government has been slipping due to increasing pressure from LO, NHO and the grassroots in Sp and Ap. Low reservoirs contribute to record electricity prices in southern Norway. Labor mayor Jan Oddvar Skisland in Kristiansand demands urgent measures. Photo: Mathias Hamre – Measures are needed. We see almost no other possibilities than that there needs to be an electricity support scheme for businesses during this period, said Kristiansand mayor Jan Oddvar Skisland (Ap) this week. The EU has also softened the rules to help businesses as a result of the Ukraine war. A week ago, the European Commission gave the green light to the Italian crisis package of 30 billion. On Wednesday, Prime Minister Jonas Gahr Støre said that the government is working on a solution. Now the work will be about finding an arrangement with the least possible disadvantages. Many dilemmas for Prime Minister Jonas Gahr Støre (Ap) in the meeting with high electricity prices. Photo: Mathias Moene Rød / news – The most important thing now is that we do not introduce measures that have the opposite effect of what we want, measures that contribute to intensifying inflation and increasing interest rates. It will greatly affect our companies, says Industry Minister Jan-Christian Vestre (Ap) to news. Not an insurance fund At the same time as promises of financial aid, the Minister of Business and Industry points the finger at companies: – They have a responsibility to operate at their own expense and risk. Prices fluctuate and it cannot be the case that the community and taxpayers are the insurance fund for the companies, says Vestre. The community is not an insurance fund for companies, says the Minister of Business. Nevertheless, he warns of measures against high electricity prices. Photo: Lise Åserud / NTB LO leader Peggy Hessen Følsvik and NHO chief Ole Erik Almlid are on the same line: The emergency measures for business must not be designed in such a way that they send rent into the air. – Here we must show prudence, moderation and a sober attitude. We will not go too far, but do this in a sensible way, says Almlid. – These are arrangements that I think we will be able to limit so that it does not affect the interest rate situation, says LO leader Peggy Hessen Følsvik. The NHO boss and the LO leader are on the same track: It is possible to give companies electricity support without running the rent in the wind. Photo: Terje Pedersen / NTB She says the scheme must be well framed to avoid abuse – as has been uncovered in connection with the corona support for business. – It is our tax money that we are talking about. We must be absolutely sure that this goes to companies that need it, and that do not take advantage of this scheme, she says.
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– Very bad idea – news Norway – Overview of news from different parts of the country
