The Norwegians should stop whining

Polite opinion was pleased by the SNB’s decision last week to hold down the Swiss franc against the euro. One group, however, was not: Norwegians. They think the Swiss move will put pressure on the krone to appreciate against the euro, according to a report in Friday’s Wall Street Journal:

Norwegian central bank Gov. Oystein Olsen warned investors that a strengthening krone would stifle Norway’s economy by hurting exports. A swift policy response—likely lower interest rates—is in the offing if the krone keeps rising, Mr. Olsen said.

The Federation of Norwegian Industries said Thursday that the krone’s strength was putting pressure on Norway’s companies. “It’s a serious issue when the Norwegian krone is so strong,” Knut Sunde, an executive of the federation said. “We hope that the Swiss effect will fade, but we are not sure,” Mr. Sunde said.

The Norwegians really should be careful, or they might draw the wrong kind of attention to themselves. Norway’s trade surplus, in absolute terms, is more than three times larger than Switzerland’s, despite the fact that Norway is a much smaller country, according to the IMF. Its combined trade surplus with Germany, France, Italy, and the Netherlands is larger than Switzerland’s trade surplus with the entire world. In fact, net exports contribute a staggering 23% to Norway’s GDP!

Meanwhile, this is how the krone has been trading against the euro, scaled to make it easier to see changes in percentage terms:

What makes them think their currency is overvalued, again?


About Matthew C. Klein
I write about the economy and financial markets for Bloomberg View. Before that I wrote for The Economist on a fellowship provided by the Marjorie Deane Financial Journalism Foundation. I have worked at the world's largest hedge fund and read every FOMC transcript since May, 1987.

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