31 January 2014

Denmark's Thorning-Schmidt reshuffles cabinet after coalition government crisis

The Socialist People's Party, the junior coalition member, walked out in protest against a Goldman Sachs investment in a state-owned utility. This forced the Social Democrat PM to name another round of new ministers, who signalled they were ready to seek consensus on how to move Denmark forward.

As reported by the Financial Times (subscription required), the Socialist People’s party, one of the three members of the minority coalition that rules Denmark, quit government as the party leader Annette Vilhelmsen stepped down. The move was prompted by mounting public anger over the purchase of a 19 per cent stake in a state-owned utility, Dong Energy, by funds controlled by Goldman Sachs. Nearly 200,000 people in a country of just 5 million signed an online petition against a deal in one of the biggest displays of popular displeasure in Denmark in recent years.

Even bankers at Goldman – long accustomed to being on the receiving end of barbs – appeared to be taken aback by the depth of feeling in Denmark, as were government officials who had spent the past week defending the deal.

Finance minister Bjarne Corydon welcomed the vote backing the sale by the parliamentary finance committee, saying the proceeds would enable further investment in energy after a period of cost-cutting, writes the Irish Times. "It’s good that Dong Energy now has firm ground under its feet", he said. According to information of the Frankfurter Allgemeine Zeitung, US investment bank Goldman Sachs wants to manage Dong Energy in the future through a society which is based on the Cayman Islands, a well-known as a tax haven.

As reported by the Süddeutsche Zeitung, the Copenhagen Post further wrote that there had been another offer for the purchase of Dong Shares; a Danish pension fund had submitted an offer. However, the government is said to have refused the bid, even though it was higher than that of Goldman Sachs.

City AM adds that ex-Social Democrat PM Poul Nyrup Rasmussen denounced Goldman as "shady" and claimed that the 8 billion kroner (€1.07 billion) sale of 19 per cent of Dong threatens the country’s green credentials. Goldman Sachs said its deal supported the firm’s renewable energy goals. "This is a long-term commitment", it added.

The Irish Times also reported that Danish Social Democrat prime minister Helle Thorning-Schmidt has vowed to remain in office. After pulling out of the coalition, the Socialist People's Party (SF) said it would continue to support the government from the opposition benches. Ms Thorning-Schmidt said she looked forward to a "trusting co-operation" between her former coalition partner and her administration, already dependent on opposition support from the Red-Green Alliance. Seven weeks after her last cabinet reshuffle, she promised to fill quickly the six vacancies left by departing SF ministers. However, now there are only 61 MPs formally behind Thorning-Schmidt, not much more than a third of the 179 seats in Parliament, writes the Frankfurter Allgemeine Zeitung.

In the WSJ's article, Margrethe Vestager, the economic affairs minister and a member of the Danish Social Liberal Party, the remaining coalition partner, said "we cooperate with those willing"—regardless of if they are on the political right or left of the coalition. Ms Thorning-Schmidt said the priority is spending on "education, our health and children".

Kasper Moller Hansen, a political scientist at University of Copenhagen, said the latest appointments reflect a willingness "to turn toward the left when it comes to welfare policy and to the right when it comes to economic policy".

In coming months, the government is expected to outline plans to boost productivity and to reform vocational training. Lars Lokke Rasmussen, head of Denmark's largest oppositional party, Monday invited the government to pursue a business friendly growth plan. Ms. Thorning-Schmidt, however, has already reduced corporate taxes once and isn't open to considering deeper cuts. "We will continue to conduct an economically responsible policy", she said. Mr Hansen said the prime minister could, however, ease other fees levied on companies. Some political opponents have called for a freeze in spending, but she said "we are not supporting zero public spending growth."

The Financial Times (subscription) reports that under the reshuffle, Martin Lidegaard, the former minister of climate and energy, becomes the third foreign minister in six weeks while the position of minister for European affairs is abolished. Many of the most important jobs – such as prime minister, and the ministers of finance, economy, defence and business – are unchanged. Those affected by the reshuffle include the ministers for health, environment, transport, and taxation.