“A greater uncertainty reigns than ever before over the extent to which the (eurozone) countries will manage to handle the sovereign debt crisis,” Prime Minister Jens Stoltenberg wrote in a full page address to national business daily Dagens Næringsliv.
Italy’s debt, he warned, was larger than Spain's, Portugal's and Greece’s combined and surpasses the European Financial Stability Facility, the fund set up to counter all of Europe’s sovereign borrowing woes. Stoltenberg warned that although more money would be funnelled into the Facility, the money was for the first time not backed by the stability of Europe’s states.
He appeared to prepare Norwegian businesses for the possibility of Norway stepping in to help Europe with the sovereign Oil Fund, the Government Pension Fund Global, or a crimping of hitherto easy lines of credit for big-stakes business.
As if on cue, the country’s largest bank declared it was “effectively closed to corporate customers”, with new rules expected shortly on how much cash banks were to have behind each kroner they were lending.
“We’re caring for our existing customers, and we are in principle not open to new customers,” said Leif Teksum, managing director of newly re-branded DNB, Norway’s largest commercial bank (the former Dnb NOR).
Government financiers in Norges Bank stepped in to top up Norwegian banks when the 2008 credit crunch unfolded. While they would likely do so again, Stoltenberg warned that Europe’s banks did not have that luxury, and the bankrupt states were one-by-one making it clear they could not service their national debts.
“It’s the domino effect I had feared,” Stoltenberg wrote.
The drying up of credit in Europe was already affecting Norwegian banks, Teksum said. European banks’ purchases of their own countries’ debts have meant Norwegian bank notes have not been bought.
The resulting need to lengthen bond terms has made short-term lending costlier for big customers with banks still lending to them.