Bloomberg News

Norway Open to Euro Bailout Fund as EU Debates Outside Help

November 02, 2011

(Updates with bond strategist comment in ninth paragraph.)

Oct. 24 (Bloomberg) -- Norway is open to approaches from the euro area seeking external investment to help ease the region’s debt crisis, Finance Minister Sigbjoern Johnsen said.

“If we get an approach, we always deal with this in a very serious and thorough manner,” Johnsen said in an interview in Oslo today. The country, which places its oil wealth into a $530 billion sovereign-wealth fund, so far hasn’t been contacted by anyone in the euro area on the subject, he said.

Alongside proposals to increase the scope of the 440 billion-euro ($610 billion) European Financial Stability Facility by offering insurance against first losses, euro area leaders are looking into creating a special purpose vehicle to tempt investors outside the region to buy its troubled bonds. Norway’s oil fund in February said it is “positive” on EFSF bonds, thanks to the securities’ AAA grade.

The purchase of EFSF notes remains “within the overall guidelines given by the ministry to the Norges Bank Investment Management,” which oversees the oil fund, Johnsen said. “I do not have any actual plans to alter, or to make alterations, in the overall strategy of the fund.”

Euro area leaders ended weekend crisis talks in Brussels with an outline of how to help the region’s banks and ruled out tapping the European Central Bank to stem the debt crisis. A new set of talks due to start Oct. 26 will seek to clarify crisis- fighting measures.

Norway, China

The special purpose investment vehicle discussed over the weekend would buy bonds in the primary and secondary markets, a person familiar with the matter said. The purpose would be to attract outside investors and sovereign wealth funds, tapping reserves built up by countries like China.

“We will, of course, consider any concrete proposal we may get on this type of investment,” Bunny Nooryani, a spokeswoman at the Oslo-based oil fund, said in an e-mailed reply to questions. “Any investment on our part would be subject to the same profitability and risk requirements as the fund’s other investments.”

The fund gets its investment guidelines from the government and is managed by Norges Bank Investment Management, the investment arm of the central bank.

“Norway doesn’t have any obligations to secure the eurozone, but would certainly benefit from the crisis not getting out of control,” said Everett Brown, European bond strategist at IDEAglobal in London. “A moderate contribution could be justified, but ultimately would depend on the terms and political calculations that only the government can make.”

‘Huge Assets’

Swedish Prime Minister Fredrik Reinfeldt said Norway’s sovereign wealth fund and China have the necessary resources to help ease Europe’s debt crisis, Norwegian media reported today.

“It is a fact of life that Norway,” which isn’t a member of the European Union, “has huge assets,” Johnsen said. “These assets that are materializing in the oil fund already are being heavily invested in Europe and as a matter of fact we are overweight when you look at the distribution of the different markets in Europe.”

While Johnsen said he is unlikely to allow a change of strategy at the fund, he added that “of course the NBIM has very ample room to maneuver within the overall guidelines.”

The Government Pension Fund Global, Europe’s largest equity investor, in August reported its smallest quarterly gain in a year, returning 0.3 percent as its stocks fell 0.7 percent in the second quarter.

The fund is built from taxes on oil and gas, ownership of petroleum fields and dividends from its stake in Statoil ASA. It got its first capital infusion in 1996. The fund is limited to investing in listed stocks and fixed-income securities and also added real estate this year. It’s not allowed to invest in private equity.

--With assistance from Patrick Henry in Brussels. Editors: Tasneem Brogger, Jonas Bergman.

To contact the reporter on this story: Josiane Kremer in Oslo at jkremer4@bloomberg.net

To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net


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