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April 16th, 2013

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Tough political negotiations are currently underway as the government attempts to strike a deal with the opposition on two important political reforms and a bill to support Danish business and help the economy grow.

The negotiations are complicated, however, as the reforms are being used to finance the growth and jobs bill meaning that all three must take place simultaneously.

The growth bill is hoped to rekindle the Danish economy but two opposition parties, Venstre (V) and Konservative (K), want the government to be more ambitious than the 1.8 billion kroner currently offered for “new initiatives”.

“We have congratulated the government for its proposal but are now pushing to increase the ambition,” K's financial spokesperson, Mike Legarth, told Berlingske newspaper. “We want to find an even larger amount and ensure that its effect is felt even quicker so that businesses feel the help now rather than in a few years.”

V's leader, Lars Løkke Rasmussen, also said that the proposed growth package was a “step in the right direction”. But while he would like to see a complete halt on any new taxes and levies on businesses, a so-called 'burden stop', he admitted it’s unlikely the government would agree to it.

The reforms of the student grant system, SU, and the least generous unemployment benefit, kontanthjælp, will result in significant long-term changes and, as a result, the government is interested in passing both reforms by as large a majority as possible.

The main obstacle is currently the far-right Dansk Folkeparti (DF), which wants the government to address several demands before continuing with the negotiations.

First is the recent EU ruling that EU students should be entitled to SU as long as they have worked in Denmark prior to starting their studies. The ruling is likely to significantly increase the cost of SU and negate part of the savings the reform achieves.

“During the negotiations the government told us that SU will end up costing between 400 and 500 million kroner more and that is problematic,” DF's leader, Kristian Thulesen Dahl, told Berlingske on Monday. “We face a challenge if we have to save SU while also allowing residents from other countries to come to Denmark and claim SU even if they have only had a part-time job working between six and eight hours a week.”

DF is also unhappy with using savings made through the reforms of SU and kontanthjælp to pay for cutting the corporate tax rate from 25 to 22 percent, which is a central element in the government’s growth bill. The government has decided, therefore, to open a parallel negotiation with DF about an alternative growth package that does not include the corporate tax cut.

Finally, DF objects to how deeply the government has proposed cutting kontanthjælp especially its reduction for all recipients under the age of 30. They want to increase the rate that under-30s with an education receive and remove the demand that couples under the age of 25 provide for each other instead of receiving the benefit.

“If a couple moves in together as 22-year-olds, it’s far from certain that they will stay together the rest of their lives,” DF spokesperson Bent Bøgsted told Altinget. “That’s why we can’t demand that they provide for each other.”

V, on the other hand, is pushing for stronger sanctions for kontanthjælp recipients who consistently refuse to take work.

Rasmussen has also argued that the growth bill needs new initiatives to limit the amount of products, such as beer and soda, that Danes buy cheaply across the border in Germany.