Denmark defies austerity with 2020 budget hike

Helle Thorning Schmidt small.jpg

 
The Danish centre-left government presented a national economic plan on Tuesday (8 May) that goes against the European austerity drive by raising public spending in a bid to boost job creation.

The plan seeks to raise the cap on public spending from 0.6% of GDP to 0.8% in 2014-2020. This would add 7 billion Danish crowns (€941 million) to government spending compared to business as usual and boost employment by 180,000 people, according to the plan.

The 2020 budget plan was presented by Denmark’s centre-left government which was formed in October last year. It aims at balancing the budget by the end of the decade by boosting the number of employed people against those on social benefits and pensions.

“The government’s message is that it is possible to save and develop our welfare society, but it can only happen if more Danes are able to get a job,” Prime Minister Helle Thorning-Schmidt said at a news conference.

“It’s an ambitious goal, but it’s a goal we can reach if we take responsibility now,” she added.

Overall, the government expects the Danish economy to grow by 2.25% per year by 2020, creating jobs in the private sector along the way.

“This is where we have lost jobs in the past and it’s where we want to regain them,” Minister of Economic and Interior Affairs Margrethe Vestager said.

However, the plan was not immediately well received by the leftist Red-Green Alliance party, on which the government depends for support.

“The way the plan looks right now, more people will be forced to work because the government is going to cut their benefits. And then there’ll be more employed people. This is a philosophy that we are against, and we don’t think it will create the amount of jobs, they say,” Frank Aaen, a member of the parliament for the Red-Green Alliance, told the daily Politiken.

 

How the Danish government will raise money:

  • Five billion crowns should come from a modernised public sector with more digitalisation, less bureaucracy and control.
  • Three billion crowns coming from cost savings on the defense and EU contribution.
  • Reforms of pensions, benefits and a tax reform. This should release 14 billion crowns.

How the Danish government will spend the money:

  • Five billion crowns on different priorities in the public sector.
  • Nine billion crowns to create structural balance and public growth of 0.8% per year. The government’s goal is that the Danish economy will grow by on average 2.25% per year from 2014 to 2020.
  • Six billion crowns will be spent on growth, employment, education, green transformation and public welfare. The government aims to increase employment with 180.000 people by 2020.
  • Two billion crowns go to the educational sector to create among other things more internships and training for young people.

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