The once-dominant Norwegian Labour Party has spent most of the last decade out of power after successive general election defeats in 1997 and 2001. In September 2005 it has returned to office and given Norway its first majority government in years. The result, however, is not unalloyed “good news” either for Labour or the health of Norwegian democracy.

Labour received only 32.7% of the popular vote, a historically low figure (though an increase from 24.7% in 2001). It fought the campaign – for the first time in its history – as leader of a coalition of "red-green" parties, and the total coalition vote of 48% seems enough for it to govern after negotiating the division of ministerial posts in the Storting (parliament).

The influence of Labour’s coalition partners – the Socialist Left Party and the Centre Party – is weakened by their poor electoral showing but strengthened by the fact that together they give the alliance a slim parliamentary majority. There is also a not-so-silent fourth partner in this jockeying for policymaking power: Landsorganisasjonen i Norge (LO), the umbrella organisation of Norwegian trade unions. It campaigned wholeheartedly for Labour in return for unprecedented seats on the party's executive board and as-yet-unstated policies from a new Labour-led government. The result of hard bargaining by Gerd-Liv Valla, LO president, is that Labour and the unions have a closer marriage of purpose than at any time since the post-1945 reconstruction period.

In part, the election result represents a reaction to a centre-right government that was widely viewed as far too willing (internationally) to climb into bed with the Bush administration in Iraq and (domestically) to abandon honoured Norwegian social values.

The signs of change are already visible: when George W Bush telephoned Labour leader Jens Stoltenberg to congratulate him on the election result, the prime-minister-elect responded by announcing his decision to withdraw the country's remaining military personnel from Iraq, thus carrying out one of his campaign promises and pleasing his left-leaning coalition partners.

In the domestic sphere, election arguments focused on spending and taxation, especially how much of the country's gigantic "oil fund" will be used by this – rather than by later – generations. Stoltenberg's campaign litany was that the left does not support increased state spending but would instead establish new priorities. He attacked the centre-right over their tax-cutting, deregulation, privatisation, and cost-effectiveness measures: a regimen that produced a rebounding economy combined with job losses in both the public and the private sectors, to the benefit (claimed Stoltenberg) of the wealthy and a stockholding elite alone.

He has promised that a new government under his leadership would prioritise social spending (in a country with already generous social provisions), with the added pledge of more favourable treatment of Norway’s disadvantaged people and fewer unfunded impositions on local government.

Stoltenberg is also toying with a revision of the centre-right's pension reform plan, which would please his LO allies. A further proposal for more substantial, structural reform comes from the Socialist Left; its leader Kristin Halvorsen recommends a strategy to diversify the Norwegian economy that maintains a commitment to social equity and environmental protection while tying state spending to infrastructural improvements (in schools and universities, for example).

Meanwhile, the Centre leader Åslaug Haga will use her influence to keep the money flowing for pork-barrel projects in Norway's remote provinces. The basic problem facing the new government, however, will remain: with so much of the budget already earmarked, can funds for new initiatives be found without inviting the OECD’s ire by drawing more from the “oil fund”?

But if a “red-green” coalition does form the new government, arguably the election’s biggest winner was the far-right (and thus ineptly-named) Progress Party, which (with 22% of the vote, up from 14.7% in 2001) emerged as the second largest party overall – despite its pariah status among Norway’s political class.

The Progress leader, Carl Hagen, seems to have captured a mood of popular discontent among many less well-educated Norwegians who are unhappy with the country's rapid internationalisation and globalisation. But the party’s xenophobic, anti-environmentalist and anti-tax policies have also helped it siphon off middle-class votes that once went to the left and moderate right.

The party’s electoral campaign contained a clever double appeal: manipulating the widespread dislike of immigrants in Norway and promising a cut in murderously high excise-tax rates.

"King Carl’s" stealthy electoral revolution has placed Progress in a powerful negotiating position. The aftermath of the 2005 election may yet not be his moment, but the success of the party is a warning sign to Norwegian democracy, and an indication that the pressures of globalisation on national politics impact on what may appear the most comfortable and prosperous of societies.