Executive Summary

Credible, transparent governance
Democracy functions well, and governance is credible and transparent in Denmark. Public trust in government and public administration is high. Comparatively, Denmark is extraordinary for having achieved a relatively strong economic performance (e.g., as measured by per capita income), but also a relatively equal distribution of income and low poverty rates. The Danish welfare state is extensive both in terms of service provision and the social safety net. Though this translates into a high tax burden. Overall, Denmark has shown that it is possible to combine an extensive welfare state with a well-functioning economy.
Fully recovered from recession
The economy has now fully recovered from the Great Recession. Current levels of activity and unemployment are close to their structural levels, and public debate is increasingly focusing on possible bottlenecks in the labor market. Key macroeconomic indicators are favorable and perform comparatively well. Key economic policy debates focus on increasing labor supply, integrating immigrants and the provision of welfare services (e.g., education, and social and health care).
Strong reform agenda bolsters labor market
In an attempt to strengthen the incentive structure, and boost labor supply and employment, both the previous and present governments have had strong reform agendas. These agendas have aimed to overhaul the structure and design of the social safety net (e.g., pensions, early retirement, social assistance and disability pensions), labor market policies and the tax system. Higher labor supply and employment is an objective in itself, but also improves public finances through lower government spending and higher tax revenue. This reform strategy obtained broad support in comparison to alternative strategies involving tax increases or spending cuts. The reforms will ensure the fiscal sustainability of current welfare arrangements. Denmark is among the frontrunners in terms of addressing the challenges to fiscal sustainability arising from an aging population.
Consensus tradition
drives reform
All of the previously mentioned reforms were based on work by parliamentary commissions, an important policy instrument in a country with a strong consensus tradition that has mostly been governed by minority governments.
High educational spending, weaker performance
The country’s significant strengths notwithstanding, several issues are high on the political agenda. First, Denmark ranks among the top OECD countries with regard to educational expenditure, but scores lower on various indicators of educational performance. Recently, this led to educational reforms that increased curricular demands and improved teacher training.
Second, the public sector (mainly municipalities) has experienced increased strain in relation to service provision. Many citizens have found that standards lag behind their expectations, but tight finances have made it difficult to improve services.
Integration remains
thorny issue
Third, immigration and the integration of immigrants remains controversial. The general trend, with broad parliamentary support, has been toward increasingly strict immigration rules and further tightening is currently being considered. Moreover, the social assistance scheme has been changed, including the residence and employment requirements, and the cap on total support, which particularly affects migrants from low-income countries outside Europe.
International role a controversial question
Finally, Denmark’s engagement in international politics remains a controversial issue. This debate applies to foreign policy in general, and military operations in Afghanistan and Iraq in particular. As these earlier military operations were being phased out, Denmark joined the international coalition against the so-called Islamic State (IS) in Iraq and Syria. The country’s position vis-à-vis the European Union also remains a contested issue. It is an implicit political arrangement that all essential EU decisions are put to a referendum. A December 2015 referendum confirmed the Danish opt-out position on justice and home affairs. A special agreement on Danish cooperation with Europol was reached in April 2017.
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