COPENHAGEN: Denmark’s government yesterday unveiled a budget proposal which would raise deficit spending, prompting allegations from the opposition that it was pandering to leftist allies ahead of an election.
Public spending for 2015 was projected to increase 0.8 percent from 2014 to four billion kroner (¤537m).
If approved, it would raise Denmark’s deficit to three percent of gross domestic product — the maximum permitted under EU rules — based on an unchanged economic growth forecast of 1.4 percent this year and two percent next year.
Denmark is a member of the European Union, but not of the eurozone where debate over economic policy and budget rigour has been highlighted by the collapse of the government in France on Monday. A new French government was due to be appointed later yesterday.
In eurozone-member Austria, the Finance Minister Michael Spindelegger resigned yesterday over a disagreement about reform of taxes and the impact this would have on the public deficit.
Denmark’s Social Democratic-led government has been in power since 2011 and will have to call an election next year at the latest.
Scandinavia’s weakest economy, hit by anaemic consumer spending after a housing bubble burst in 2008, last breached the EU’s budget deficit threshold in 2012, when the measure reached 3.9 percent of GDP.
Right-of-centre opposition party Venstre accused the government of increasing public spending in order to secure the support of its two leftist allies in parliament, the Socialist People’s Party and the Red Green Alliance, in next year’s election.
“It’s very concerning that the government raises the deficit so that we reach the limit of what the EU allows,” party spokesman Peter Christensen said in a statement.
The rise in projected public spending comes after a recently announced plan to improve mental health services and cancer treatment, as well as investments in education and higher subsidies for union memberships.
Denmark’s neighbour Sweden on Saturday lowered its economic growth forecast for 2014 to 1.9 percent from a July forecast of 2.5 percent, and to three percent from 3.1 percent next year, citing slowing growth in key export markets.
Danish companies to be hit by slowing exports include brewer Carlsberg, which said earlier this month that beer sales in Russia, its biggest market, were expected to fall.
AFP
