NORWAY - Norway's coalition government has agreed a compromise over pension reforms that will restore tax breaks on investment in individual pension plans.

In a statement given after the deal had been reached with opposition parties, prime minister Jens Stoltenberg said he had opted for compromise to ensure "the system would survive future changes".

However, Christian Fotland, managing director of Oslo-based consultancy Gabler & Partners, said the government was avoiding long-term decisions.

"The government doesn't want to underwrite lifetime policies for citizens," he said. "It sounds like an insurance company, not like a supposedly socialist government. It's stingy."

Despite having oil-generated assets of €220bn, the OECD claims Norway's pension fund is under pressure from sickness and disability payments well above the OECD average.

Private-sector employment has not grown in Norway for 15 years. In contrast, the public sector accounts for around half of the workforce.

It is not clear whether pension reform will include the public sector. "They have huge liabilities but it just hasn't been dealt with," said Fotland. "My guess is that they'll just take it from the private sector - from the rich guys."

The only credible obstacle to reform would have come from trade union confederation LO-Norway, which a year ago forced the government to back down over planned reform of sickness benefits. 

However, the resignation earlier this month of LO leader Gerd-Liv Valla - over a scandal involving alleged bullying of a pregnant employee - seriously damaged its political clout.

"A few months ago Valla was the most powerful person in Norway," said Fotland. "She's gone from grace to nothing within three months."