Stockholm (Ekonamik) – A healthy economy is paradoxically likely to contribute to the ouster of the centre-right government of Prime Minister Lars Løkke Rasmussen, as Danes look set to take a chance on the Social Democrats in Denmark’s general election on June 5th. The party has promised to raise welfare and public spending against a backdrop of increasing worry about the erosion of the welfare state, including faltering healthcare services. The Danish economy, meanwhile, is expected to grow by 1.8% in 2019 (against 1.3% in the eurozone) and the country is enjoying almost full employment, with a jobless rate of 3.7% (against 7.7% in the eurozone). Nevertheless, polls consistently predict that the Social Democrats, led by Mette Frederiksen, will be the largest party in the country with around 27% and the bloc of left-leaning parties it is likely to lead lead the vote with over a combined 55%.
Mr Rasmussen’s liberal party, Venstre, enjoyed a surprisingly good showing at the European Parliament elections, becoming the largest party to be seated in the EP with 4 mandates and reflecting the abandonment by voters of the far right People’s Party. That result, nevertheless, is not likely to translate to general election success for Mr Rasmussen, as his travails are connected to a significant loss of popularity for several of his coalition partners. Meanwhile, the Social Democrats have adopted many of the government’s hard line stances on immigration while promising to raise welfare spending by 0.8% annually over the next five years and increasing taxes on the wealthy and businesses. The party is also proposing a DKK 1.5 billion ($225 million) tax on banks following a tax fraud scandal and the money laundering scandal that consumed Danske Bank late last year.
“The polls currently point toward the Danish parliamentary election having a negative outcome for the Danish banks,” Handelsbanken wrote in a note to clients. “Overall, the suggested financing of the welfare promises is considered to be negative for the Danish banking sector.” The Social Democrats are planning to use the higher tax revenue for better health care and education, while also contemplating higher taxes on income from dividends and interest payments. Mr Rasmussen is also proposing more spending on welfare, but with more fiscal conservatism and without raising taxes.
Meanwhile, it remains to be seen whether Ms Frederiksen will be in a position to govern alone, as intended, or whether she will be compelled to form a coalition government with the other left-leaning parties. There has also been talk of a possible coalition across the middle between the Social Democrats and Venstre given their similar positions on a number of issues, but this suggestion largely came from the Prime Minister himself, no doubt with a keen eye on the polls, and has been disavowed by Ms Frederiksen. Finally, it is an open question where the voters deserting the far right People’s Party (and who made it the biggest party in Denmark in the previous election in 2015) will go. Theoretically these could be apportioned between Venstre, the Social Democrats and two small new parties even further to the right of the People’s Party with a solid chance of entering the 179-seat Folketing (parliament), which Mr Rasmussen has ruled out working with. While Ms Frederiksen is almost certain to lead the next government, the election could yet yield some surprises.
Image: Børsen_Copenhagen_Denmark (Wikimedia Commons)