Denmark’s government might collapse in autumn

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Danish prime minister Helle Thorning-Schmidt might have to call an election later this year as her centre-left government has lost support from the Red-Green Alliance, whose votes are needed to keep her in power.

Ever since she took office as Denmark's first female prime minister in October last year, Thorning-Schimidt had to deal with plunging opinion polls' ratings. 

An opinion poll currently gives her Social Democrats their lowest rating in history, at 16.9%, down from the 24.8% they took at the election. The biggest opposition party the Liberals, led by the former prime minister Lars Løkke Rasmussen, is now bigger than the three parties forming the government combined.

Voters are fleeing Thorning-Schmidt’s party, saying she has not lived up to the promises she made during the election campaign. They are disappointed by her government, which includes also the Socialist People’s Party and the Social Liberals. They say she has taken on a right-wing political approach reforming unemployment benefits, the retirement age and national pension to cut Denmark’s budget deficit to 1.8% of GDP.

This despite the fact that the Danish economy is faring well compared to the rest of the EU with an unemployment rate of 6.2%, against a eurozone average of 11.1%. The economy grew 0.4% in the first quarter of 2012, and foreign investors are buying Danish crowns with negative yields, in effect paying Denmark to take their money as the country is seen as a safe haven.

However, due to future demographic changes Thorning-Schmidt and the opposition agreed that reforms are necessary now to save the welfare state in the long term.

In June, the government agreed on a tax package with the centre-right. After having spent a month negotiating with the Red-Green Alliance, Finance Minister Bjarne Corydon decided to strike a last-minute deal with the opposition. The deal will among other things increase tax credits for those with jobs and be paid for by reducing unemployment benefits.

The Red-Green Alliance promptly denounced the government. ”The Red-Green Alliance’s faith in the government is non-existing. We no longer support the government. We are opposition,” MP Johanne Schmidt-Nielsen said in a TV interview.

If Thorning-Schmidt expects leftist party’s votes in the coming 2013 budget talks, she will have to come up with some rewards as the other opposition parties have no plans of keeping the government in power.

“The Red-Green Alliance is an extreme, leftist party that wants a class-less, communist society. We can not get all of our politics through with them because they won’t sign as soon as things start to hurt a little. And this is the problem:  you can’t run the Danish society on fantasy billions. Then we would rather lose power,” said MP from the Social Democrats Henrik Sass Larsen in an interview with the daily Politiken on Monday.

Vulnerable chief

Thorning-Schmidt’s personal popularity among the Danes is also falling. Two out of three Danes said in an opinion poll in June that they think the prime minister is doing a bad job. In a business analysis of the 100 most powerful decision makers in Denmark made by the newspaper Berlingske Tidende, Thorning-Schmidt only came in second behind the Social Liberal’s leader and Minister of the Economic Affairs and the Interior, Margrethe Vestager.

Political commentator from the same newspaper Thomas Larsen called it “an obvious sign of weakness”, saying that the prime minister always has to come on top of the list.

”It is especially a problem that the government’s chief is so vulnerable. The prime minister should be the leader who has authority to lead the whole team internally and to set the agenda externally. But for Thorning-Schmidt it’s getting ever more difficult,” Larsen said, adding that the balance within the government is problematic.

The Social Liberals which can be compared to the Liberal Democrats in the UK have historically also been able to form governments with right-wing parties which means that it’s crucial for Thorning-Schmidt to keep Vestager and her party as part of the government.

Thorning-Schmidt’s potential game changer

Despite Thorning-Schmidt’s problems convincing the Danes, she’s doing a good job as prime minister, an escalating political scandal coming from within the biggest opposition party the Liberals might save her government’s life.

During the closely thought Danish election campaign in September 2011, Thorning-Schmidt and her husband’s confidential tax records were published by Danish press, showing that Thorning-Schmidt had not paid enough tax in 2000-2005 because she declared deductions she was not entitled to.

The tax records were supposedly leaked by the then Liberal tax minister’s spin doctor to try to influence the outcome of the election, and a commission of inquiry has been established in order to determine the actual course of events.

In what has become a famous TV interview in Denmark, former prime minister Rasmussen said he had not been involved in any “case-handling” about Thorning-Schmidt’s tax records, but he refused to answer a question about whether he had taken part as prime minister in any meetings concerning her taxes.

The commission of inquiry, questioning several prominent politicians from the Liberals, including Rasmussen, spin doctors and media people, will start hearings in August and continue until March 2013, and will be broadcast on Danish TV.

If the commission of inquiry concludes that abuse of power was taking place within the Liberal party and that Rasmussen was involved in it, the leak scandal could severely hurt the opposition, boost the government’s opinion polls, and thereby give Thorning-Schmidt a stronger mandate ahead of the vital budget negotiations.

The Danish centre-left government, consisting of the Social Democrats, the Social Liberals and the Socialist People's party formed a government in October 2011 after winning the election on 15 September 2011.

The government is a minority government, but with the support of the Red-Green Alliance, the centre-left parties have 89 seats out of 175 seats in parliament.

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