Socialists May Return to Power in Denmark

Denmark’s ruling coalition of conservatives and liberals is likely to be unseated in favor of a left-wing government.

Denmark’s ruling coalition of conservatives and liberals is likely to be unseated in elections this week as the opposition Social Democrats hope to secure a parliamentary majority of center-left parties. After a decade of right-wing government, the Scandinavian country is expecting a change although major reforms could be complicated by coalition politics.

According to recent opinion polls, Prime Minister Lars Løkke Rasmussen’s liberal Venstre, a pro-business party that champions smaller government, would lose maybe no more than a single point in support down from 26 percent of the vote in 2007. His conservative coalition partners could be decimated however.

Denmark’s conservatives and liberals were able to govern with the parliamentary consent of the far-right Danish People’s Party, an anti-immigration platform that has consistently polled at around 11 to 14 percent of the vote. Unlike the other two major parties on the right, the populists are wary of entitlement reform and liberalization and draw considerable support from pensioners.

Although unemployment is below the European average at 4 percent, Denmark’s economy contracted by almost 5 percent in the wake of the financial crisis, forcing the governing parties to consider welfare reforms as they simultaneously cut taxes.

The government’s borrowing conforms to European treaty norms with 2.7 percent deficit spending but to achieve balance in the long term, Copenhagen has to reduce expenditures.

Raising more revenue was not an option for Venstre. Instead, it enacted a reduction in the top income tax rate from 59 to 51.5 percent in January of last year. Overall tax revenue amounts to 49 percent of gross domestic product nevertheless — an extremely high figure even among Northern European countries.

Negative growth and its implications for fiscal policy exposed the rift that had always existed between two governing parties and their allies in the People’s Party. They may be far to the right on immigration and security issues; their national conservatism borders on a protectionist economic stance which conservatives nor liberals can embrace. The People’s Party’s staunch support for existing welfare programs moreover made it nigh impossible for the ruling parties to implement meaningful reforms.

The Social Democrats of Helle Thorning-Schmidt, who represented her party in the European Parliament before assuming its leadership in 2005, have progressively increased their support in opinion polls since the start of this year, climbing from 25.5 percent of the vote in January — which equaled their performance in 2007’s election — to 28 percent this summer. In coalition with smaller socialist and Green parties on the left, the party that has spearheaded the opposition for precisely a decade could well return to government and deliver Denmark’s first female prime minister this year.

An obstacle could be the social liberals in the Radikale Venstre who are considered left of center on social and immigration policy but otherwise in favor of the market driven economic policies of the main Venstre party. If they will not enter a coalition that is dominated by socialists, they may be persuaded to support the new government without joining it — fulfilling the very role that the People’s Party they so despise has for ten years.