Norway's Conservatives clinch coalition deal

Reuters

* Agree on tax cuts, immigration limits

* Promises big infrastructure fund

* Aims to diversify away from oil

By Joachim Dagenborg

SUNDVOLLEN, Norway, Oct 7 (Reuters) - Norway's centre-rightparties agreed on the terms of their coalition government onMonday, promising to lower taxes, reduce the economy's relianceon the vast oil sector, invest heavily in infrastructure andcurtail immigration.

The Conservatives, led by prime minister-designate ErnaSolberg, and their smaller ally, the populist Progress party,cleared one of the last major hurdles with the deal, paving theway for the two to take power on Oct. 18 after winning electionslast month.

"There are areas where we disagree but fewer than many wouldhave believed," Solberg, 52, told a news conference. "Eventhough Norway is a fantastic country, some people fall throughthe safety net. ... we will try to plug the holes."

Solberg's government will rule in a minority after failingto win over several small centrist parties. But minoritygovernments are common in Nordic countries and the Conservativeshave enlisted the formal outside backing of the Liberals and theChristian Democrats to ensure stability.

The deal, which did not divide up cabinet posts, also putsthe anti-immigration and anti-tax Progress Party in governmentfor the first time in its 40 years - a big shift for a partythat has spent years softening its image and was until nowconsidered too radical for government.

The new coalition is to maintain restraint in spending oilmoney, upholding the current spending cap, but officials saidthere was some leeway under the rule and it would lower taxesfor the average wage earner, gradually wind down the wealth taxand abolish the inheritance tax.

Keeping to promises of increased infrastructure investments,the coalition parties also agreed to set up an extra-budgetaryfund for projects like road and rail building to the tune of 100billion crowns ($16.75 billion) over the next five years.

In oil policy, the government promised to keep offering newareas for exploration to energy firms, a major demand from thesector, but will keep several environmentally sensitive Arcticregions closed to exploration.

Coalition parties also promised to strengthen Petoro, thestate holding firm that owns minority stakes in most oillicences, by providing it more cash, and said they wouldprioritise enhanced recovery as Norwegian fields mature.

In immigration, the parties agreed to tighten asylum rules,limit the appeals process and make it easier to deport asylumseekers.

Although both parties said they would consider breaking upNorway's $790 billion oil fund, the world's biggest sovereignwealth fund, their platform stopped short of such a move andinstead promised a review.

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