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October 9th, 2013

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Positive developments in the economy mean the government can increase spending by five billion kroner in next year’s budget.

But this recommendation from the government’s council of economic advisers, Det Økonomiske Råd (DØR), yesterday has fallen on deaf ears.

The economy minister, Margrethe Vestager (Radikale), said that with predicted economic growth of 1.6 percent in 2014 and 2.2 percent in 2015, the economy was in good shape and there was no need for extra stimulation.

Economy on track
“It is clear that when growth gradually returns, the need to stimulate the economy will diminish,” Vestager wrote in a press release. “It is not the time to experiment with fiscal policy. It is the time to secure a responsible management of the public finances.”

The finance minister, Bjarne Corydon (Socialdemokraterne), also argued that the government couldn’t spend more while sticking to its legal obligations.

“[DØR] can find the space for it because they use a different measure to assess how close we are to the budgetary law’s limits for a public deficit,” Corydon said in a press release. “The government thinks that we have gone as far as we can to support employment within the framework of the budgetary law and the EU requirements.”

The five billion kroner recommendation is less than half of the 12 billion kroner that DØR recommended that the government could increase spending by in May.

Make jobs through tax cuts
The council now argues that the government should limit its increased spending to five billion kroner by introducing planned tax cuts early.

Both far-left party Enhedslisten and the Economic Council of the Labour Movement have urged the government to consider increasing spending next year to support employment.

But business lobby groups Dansk Industri and the Danish Bankers Association disagree.