Bloomberg News

Denmark’s New Government Boosts Investments to Fight Crisis

October 03, 2011

(Updates to add comment from Thorning-Schmidt in fifth paragraph, dropped bank tax in seventh.)

Oct. 3 (Bloomberg) -- Denmark’s new Social Democrat-led government, presented today by Prime Minister Helle Thorning- Schmidt, will boost public investments to stimulate Scandinavia’s worst-performing economy.

“We have a strong team that will steer the country through the crisis,” Thorning-Schmidt, 44, said after presenting her Cabinet to Queen Margrethe II in Copenhagen.

Bjarne Corydon, the principal architect behind the Social Democrats’ economic policy, was named finance minister. Villy Soevndal, the leader of the Socialist People’s Party, will become foreign minister. Margrethe Vestager, the leader of the Social Liberals, was named economy and home affairs minister.

The three-party government will move forward 10 billion kroner ($1.8 billion) of public investments to boost the economy, according to its political platform presented today. The government will need to steer the economy through twin housing and banking crises that have suppressed consumer demand, caused deficits and kept Denmark in a low-growth trap.

“The public deficit threatens our ability to have decent welfare services,” Thorning-Schmidt said at a press conference at the prime minister’s office in Copenhagen.

No Bank Tax

Denmark’s budget deficit will reach 3.8 percent of gross domestic product this year and widen to 4.6 percent in 2012, the former government estimated in August. The economy will grow 1.4 percent this year, the Danish central bank said on Sept. 20. That compares with 4.5 percent estimated growth in neighboring Sweden, according to the Stockholm-based Riksbank.

The coalition won’t impose an extra tax on banks and on Danes earning more than 1 million kroner a year, levies which the Social Democrats and the Socialist People’s Party had proposed during the election campaign.

It will ease the previous administration’s immigration laws, removing among other things a point system used to determine foreigners’ eligibility to gain residence. A cap on unemployment benefits will also be eased. The administration plans to cut greenhouse gas emissions by 40 percent compared with the 1990 level and ensure half of the country’s electricity originates from wind power by 2020.

“We’re laying down a path that will lead us back to being proud of Denmark,” Thorning-Schmidt said.

Thorning-Schmidt became Denmark’s first female prime minister after her bloc’s victory in the Sept. 15 election ended a decade of rule by the Liberal-Conservative coalition of outgoing Prime Minister Lars Loekke Rasmussen and his parliamentary ally the Danish People’s Party.

--Editors: Jonas Bergman, Tasneem Brogger

To contact the reporters responsible for this story: Christian Wienberg at cwienberg@bloomberg.net; Peter Levring in Copenhagen at plevring1@bloomberg.net

To contact the editors responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net; Andrew Rummer at arummer@bloomberg.net


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