New Danish center-left government

An agreement was reached on 24 June between the Social Democrats (Socialdemokraterne), who were previously in opposition, and three leftist parties, which allows the former to form a one-party minority government. Socialdemokraterne won the 5 June general election, but only commands 48 out of 179 seats in parliament and has sought parliamentary support from other parties to govern effectively. The three left-leaning parties - the Social Liberals (Radikale Venstre), the Socialist People's Party (Socialistisk Folkeparti: SF) and the Red Green Alliance (Enhedslisten - De Rød-Grønne: RG) - obtained several concessions on migration policy from Socialdemokraterne in return for their support, together controlling 92 seats.

Under the leadership of Mette Frederiksen, Socialdemokraterne has veered to the right on migration policy, allowing it to win back working-class votes previously lost to the far-right Danish People's Party (Danske Folkeparti). To secure support from the left, the party has agreed to abandon some anti-immigration measures, including a plan to gather all rejected asylum-seekers to the uninhabited island of Lindholm.

Frederiksen has also committed Denmark to a 70% reduction of greenhouse gas emissions by 2030, including the introduction of binding reduction targets for agriculture, and increasing welfare spending by 0.8% per year. Proposals to increase the capital gains tax and the personal income tax for high-income earners have also been made by SF and RG, but no outline has been finalized by the wider coalition.

Significance

The political program of the new government marks the end of welfare cuts and prioritization of climate change and energy policies. Denmark's low public debt of 35% of GDP and an estimated (by IHS Markit) yearly GDP growth of 1.5% in 2019 is likely to allow the government the fiscal space to implement the bulk of its electoral pledges.

Support from the three leftist parties also gives Socialdemokraterne a parliamentary majority to push through legislation. The coalition's ability to implement its policy agenda would be tested if Denmark experienced an increase in immigration. Under this scenario, Socialdemokraterne would probably seek case-by-case collaboration with right-leaning parties to introduce more draconian measures, which would jeopardize the cooperation agreement with left-leaning parties, paralyzing policy implementation in the process.

Posted 03 July 2019 by Dijedon Imeri, Senior Analyst, Country Risk, S&P Global Market Intelligence