Ovi -
we cover every issue
Visit Ovi bookshop - Free eBooks  
Ovi Bookshop - Free Ebook
Join Ovi in Facebook
Ovi Language
Murray Hunter: Essential Oils: Art, Agriculture, Science, Industry and Entrepreneurship
Stop violence against women
Tony Zuvela - Cartoons, Illustrations
International Red Cross and Red Crescent Movement
BBC News :   - 
iBite :   - 
Danish report Danish report
by Euro Reporter
2011-04-15 08:03:47
Print - Comment - Send to a Friend - More from this Author
DeliciousRedditFacebookDigg! StumbleUpon
Danish 'flexicurity' failing the test of the recession

A few years ago, there was a lot of praise for Denmark's "flexicurity" labour market strategy of flexible hiring and firing combined with generous unemployment benefits (particularly for people with low income) and "activation" policies. This was understandable as Denmark in early 2007 had the lowest unemployment rate in the EU, only 3.4%. By comparison, Denmark's southern neighbour Germany had an unemployment rate of 7.1% and its northern neighbour Sweden had an unemployment rate of 6.7%. Already then, the strategy wasn't really as successful as it seemed because there was a lot of "hidden unemployment", but then again that was true of Germany and Sweden as well.

Yet during the recession in 2008-09, Denmark saw a much greater decline in employment than both Germany and Sweden and while both Germany and Sweden are now experience robust job growth (so robust that in both countries employment is now higher than before the recession), Denmark continues to experience a decline in employment. As a result, despite the fact that "hidden unemployment" has declined in Germany and Sweden but not in Denmark, Denmark (7.9%) now has a higher unemployment rate than both Sweden (7.6%) and Germany (6.3%).

While employment is up 3% in Germany and 2.6% in Sweden since 2007, it is more than 2% lower in Denmark (hours worked is down 4%). Note that the German gains are a lot more impressive given that it has had a slight population decline while Sweden's population is up by 3% and Denmark's population is up by 2.1% since 2007.  The main reason for the poor Danish performance is that while both Germany and Sweden has improved incentives, Denmark's government has failed to do anything useful in this aspect.


Danish government 2020 budget plan met by tough political resistance

Danish Prime Minister Lars Loekke Rasmussen Tuesday presented a much awaited fiscal austerity plan aimed at reducing public spending by 47 billion Danish krone ($9.13 billion) to balance the country's budget by 2020. However, the plan was instantly rejected by the government's support party Dansk Folkeparti, whose votes are needed to push the plan through parliament. "There are no easy solutions. We need to find DKK47 billion, and not through belief, hope and higher debt," Loekke Rasmussen said, calling for other parties' support in parliament.

This request was directed not only at Dansk Folkeparti, the populist far-right leaning party that has secured the government a parliamentary majority for its main decisions since it came to power in 2001. Loekke Rasmussen's minority government will start Friday preliminary negotiations with other parties over the package, the prime minister said. The plan consists of five main elements: a post-crisis budget reform package, which was already agreed on last year, a cost-cutting program for the Danish armed forces, a reform of the student’s grants, a reform of the Danish pension system and a reform of early retirement schemes. The post-crisis package is meant to shave DKK24 billion off the budget, while the other four elements should save another DKK23 billion, with the largest saving generated by pushing forward a planned gradual increase of two years in the country's retirement ages, according to the plan.

Parallel to the budget cuts, the government expects the plan to help generate 80,000 new jobs, the prime minister said at the presentation. He said that the government doesn't consider it an option for Denmark to generate sufficient growth going forward to avoid painful fiscal measures. Dansk Folkeparti has previously rejected a full abolishment of the transitional retirement benefits, which is a cornerstone in the 2020 plan, and shortly after the presentation Tuesday, party leader Pia Kjaersgaard reiterated this position in comments to Danish daily Jyllandsposten. "The model that the government presents, it won't be," she told the paper, dismissing "absolutely" the plan to cancel the retirement benefits, which workers can qualify for if they have been worn down by their jobs and left the labour market early.

"The government will need to adjust to the fact that it doesn't have majority alone," she said. Loekke Rasmussen said at the presentation that he is willing to "listen to other ideas", but also maintained that "we consider it necessary that retirement benefits in this form are abolished." Denmark came out of 2010 with a budget deficit of 2.7%, placing it below the European Commission's 3% threshold, but the 2020 austerity plan is still necessary to avoid the gap from widening and spinning out of control in coming years, Danske Bank chief economist Steen Bocian told Dow Jones Newswires Tuesday. "It's strictly necessary to act now. The deficit development will become highly explosive in the years ahead if the government doesn't counter steer now, " Bocian said.

Print - Comment - Send to a Friend - More from this Author

Get it off your chest
 (comments policy)

© Copyright CHAMELEON PROJECT Tmi 2005-2008  -  Sitemap  -  Add to favourites  -  Link to Ovi
Privacy Policy  -  Contact  -  RSS Feeds  -  Search  -  Submissions  -  Subscribe  -  About Ovi