Norway's Centre-Left govt hurt in local polls

OSLO, Sep 11 (Reuters) Norway's leading Labour Party advanced, but its smaller Left Socialist ally suffered defeat in municipal elections which commentators said today could spell a bumpier ride for the three-party coalition government.

The municipal and county council elections on Monday were a mid-term test of support for the government of Prime Minister Jens Stoltenberg before parliamentary polls in 2009.

Labour remained the biggest bloc with 29.7 percent of the vote, up 2.2 percentage points from municipal polls four years ago, but losing 3 points from its showing in a general election in 2005, according to nearly complete returns.

But Labour's gains were more than outweighed by a halving of support for the Left Socialist (SV) party of Finance Minister Kristin Halvorsen, to 6.2 per cent, according to official results with 98.7 per cent of the vote counted.

Financial markets were unfazed, with the crown trading firmer at 7.8581 to the euro at 1125 hrs ist compared to 7.8780 at Monday's close and the nearest three-month FRA was unchanged at 5.46 per cent.

Halvorsen acknowledged the result was disappointing but vowed to remain in government. ''This is not a result we are satisfied with,'' Halvorsen said on commercial TV 2.

''We will continue in government,'' she said.

The opposition Conservatives and far-right Progress Party advanced in the nationwide elections to 430 municipal councils, and the right was headed for a majority in the capital.

Analysts and editorialists expected the coalition government to survive although the Socialists could be forced to change the cabinet line-up. Some said they could become a less cooperative ally in the run-up to 2009 general elections.

''Government weakened,'' the Labour-affiliated daily Dagsavisen declared in its editorial. ''Kristin Halvorsen cannot avoid a discussion about the SV's ministers,'' it said.

Stoltenberg said his party had done well to score gains after two years shouldering governmental responsibility.

''The Labour Party is making clear progress and we are doing that from a position of government,'' Stoltenberg told supporters at Labour's election night gathering.

Labour ended up more than 10 percentage points stronger than its next biggest rival, the Conservatives, which won 19.1 per cent of the vote, up 1.0 percentage point from 2003.

The Conservatives edged out the populist, far-right Progress Party, which gained 1.2 percentage points to 17.6 per cent.

Analysts also said that SV was likely to stay in the coalition to the 2009 general elections. ''But I don't think it will be a peaceful journey,'' commercial channel TV 2's political commentator Stein Kaare Kristiansen said.

REUTERS PJ KP1320