Denmark’s right-leaning government is seeking to create jobs through pension reforms and tax cuts to entice people to work more, but it might prove difficult to persuade the powerful ally Danish People’s Party (DF) of the new plan presented on Tuesday.
Denmark’s economic recovery is gathering pace, but companies face labour shortages, prompting the government to focus on jobs.
The government envisages average Danish GDP growth at 2 percent per year until 2025, up from a current projection of around 1.5 percent.
Denmark’s economic growth has lagged that of Sweden, Germany and Britain since the 2008 financial crisis, although on Tuesday the government raised its economic growth forecast for this year to 1.7 percent from a previous forecast of 1.5 percent.
A key part of the government’s new plan is to increase the workforce by up to 60,000 by 2025 by getting more people off social benefits, incentivising people to postpone retirement, increasing average workhours and recruiting people from abroad.
Unemployment stands at 3.4 percent of the workforce, but still almost 800,000 people between 15 and 64 years old receive some sort of public support, a high number for a population of less than 6 million.
The government’s welfare spending corresponded to almost 30 percent of the Danish gross domestic product last year, including generous public student grants and free healthcare.
DF support needed
The main question now is whether the government will be able gain support for its reform proposals from DF, which only a week ago forced the government to drop a proposal to increase the retirement age by six months.
It cannot pass the reforms without DF support.
Party leader Kristian Thulesen Dahl said he would look positively at the proposed incentives to make people voluntarily stay in the job market for longer, and the party was not against tax cuts if they are only for those with low incomes.
However, the DF is generally supportive of the country’s generous welfare model and has said it does not support tax cuts for higher earners.
If the proposed reforms are not passed, it could be necessary to attract more foreign workers to Denmark, economy minister Simon Emil Ammitzboll said, something the anti-immigrant DF has historically opposed.
The three-party government holds 53 of the 179 seats in the Danish parliament and is dependent on the DF’s 37 seats to secure a majority for its proposals.
DF has improved relations with the main opposition party Social Democrats in a bid to increase political leverage over Prime Minister Lars Lokke Rasmussen by highlighting that it has other options should he prove unwilling to cooperate sufficiently.