Norway's biggest headache right now is not the financial crisis. Rather, the predominantly Christian nation is plagued by a religious dilemma over the right of a Muslim woman to wear a hijab as part of her police uniform.

As the controversy has escalated, the country has seen the physical collapse of the justice minister, the public burning of a hijab, and a substantial rise in the popularity of Norway's anti-immigrant opposition party just six months before general elections.

This is odd for a country known for religious tolerance, generous international development aid, and peace efforts worldwide. But the controversy highlights the latent fears of a nonpluralistic society, where 91 percent belong to the Evangelical-Lutheran Church of Norway.

The dilemma began last fall when a Norwegian Muslim woman petitioned for permission to wear her hijab, the traditional head covering for Muslim women, as part of her police uniform. Norway's justice ministry originally decided in February to allow it, but revoked the permission a few weeks later after loud criticism from the police union, which argued it breached the neutrality of the uniform.

"A change of uniform regulations, with an allowance for covering hair, has never been a goal in itself. It has always been thought of as a possible means to increase the recruitment of police from minority groups in society," said Justice Minister Knut Storberget, in defense of his decision to revoke the initial permission.

Amid the heightened media attention and political backlash from his flip-flopping, the minister collapsed and subsequently announced a two-week sick leave, which was then extended.

The hijab debacle comes on the back of the minister's other religious-related political defeat over a now-defunct blasphemy law. Mr. Storberget initially tried to replace the law with a new paragraph that would have protected individuals from defamatory religious statements. But after much political opposition, the law was repealed and no paragraph introduced.

This has provided political fodder for the opposition Progress Party, which has stoked fears among Norwegians over "sneak Islamization." Progress Party leader Siv Jensen spoke out strongly at the party's national meeting last month against granting special permission for special groups. She pointed specifically to the case of a largely Muslim neighborhood in Malmö, which she claimed had been partly overrun by Islamic law.

A March poll by Norstat for Norway's national broadcasting station NRK showed that Progress Party soared 8.5 percentage points to 30.1 percent in the polls from a month earlier. Three government coalition partners, Labor, Socialist Left, and Center Party, all lost ground.

The center-left coalition holds 87 out of 169 parliamentary seats, while the Progress party holds 38 seats, the second largest after Labor. A continuing shift to the right could pose a threat to reelection chances in September for Jens Stoltenberg, Norway's Labor prime minister.

"If they continue to spin these irrational fears, I'm afraid it could lead to a lot of commotion," said Thorbjørn Jagland, Norway's parliamentary leader and former Labor prime minister, during a highly-attended religious debate in Oslo this week.

Some 500 people lined up around the block to hear Mr. Jagland, religious professor Torkel Brekke, the bishop of the Church of Norway, and leader of Norway's Muslim Student Society discuss why religion is suddenly a hot topic.

The panelists discussed the recent media focus surrounding the hijab debate and blasphemy paragraph, the provocation caused by the burning of a hijab on International Women's Day on March 8 by a Norwegian Muslim woman in protest of the garment, and fears among "religious nationalists" and "secular intellectuals" toward Norway's Muslim minority.

"We could very well live with the mosques because they stayed in them. But when this began to affect our cultural values, then it became a conflict, and then it became politicized," Jagland told the crowd. "But Islam is not a threat to Norway."

"I don't see Norway as a tolerant society at all, partly based on these debates and how they react to people coming to Norway," said Professor Brekke, from the University of Oslo. "It's tolerant in that you can practice any religion, but you have large sections of Norwegian society that react strongly to alien cultures."

Immigrants make up 9.7 percent of Norway's 4.8 million inhabitants. Norway has granted permission to about one-fourth of the 328,000 immigrants who arrived from non-Nordic countries between 1990 and 2007 to stay as refugees. The largest immigrant population is Polish, who are traditionally Catholic, followed by Pakistani. Islam accounts for 20 percent of the 9 percent of the population belonging to religious communities outside the Church of Norway.

Sweden has a more liberal policy in accepting refugees than Norway and allows hijabs in its police uniform, as does Britain. France has banned the use of hijabs and other ostensible religious items in its state schools since 2004.

The religious debate has overshadowed the economic one in Norway, which has been relatively shielded from the financial crisis thanks to its vast petroleum resources as the world's third largest gas exporter.

Norway has a large budget surplus to help fund its financial stimulus packages and relatively mild unemployment – 3 percent, compared to 8.1 percent in the US. Moreover, it has invested its oil revenues in a $329 billion Government Pension Fund.