Key Challenges

Strong reform capacity
Being a small and open economy, Denmark has a long tradition of meeting the challenges posed by international integration and globalization, and has shown a capacity to enact needed reforms to reconcile an extensive welfare state with a well-functioning economy. Comparatively, Denmark is favorably positioned with regard to adaptability and the enactment of political reforms to address challenges, despite sometimes delaying and deferring such reforms. A tradition of open dialogue, cooperation and broad-based reform goals contribute to the country’s adaptability. Trust between different actors and societal groups, often referred to as “social capital,” has also been an important factor. However, to remain among the leading industrialized nations, Denmark must continue to monitor its policies and institutions. Additional changes and reforms will be necessary.
The following briefly lists areas of crucial importance to Denmark and outlines where policy initiatives are needed:
Ensuring schools align with labor market
First, the challenge of maintaining a high employment rate remains relevant, particularly in a context of rapid technological change (e.g., automatization), globalization and migration. A key question in this debate is whether the extent to which the education system is sufficiently equipped to supply the type and quality of education needed by the private sector. The labor market possibilities for low-skilled workers is a particular challenge.
Productivity growth
Second, the economy’s growth potential is an issue given the low level of productivity growth. In addition, given the relative size of the public sector, improving government efficiency and productivity will be an important task. There is considerable political debate about how to square the risk of a labor shortage with strict immigration laws.
Inequality low
but rising
Third, although inequality is low and social cohesion is high, in comparison to other OECD countries, Danish society is trending toward greater disparity and inequality. A particular challenge involves the integration of immigrants and other marginalized groups into the labor market, which is often difficult due to insufficient labor market relevant qualifications.
Balancing welfare
policies remains
Fourth, while the long-term financial viability of the welfare state, despite an aging population, has been strengthened by a series of recent reforms, fiscal challenges remain due to increasing demands on welfare services in general and healthcare in particular. When designing welfare policies, it is important to balance concerns for equality and social insurance with incentives for education and work. The hallmark of Danish society has been its ability to reconcile low inequality and an extensive public sector with a well-functioning economy that supports high income levels. Reconciling these objectives remains an ongoing challenge.
Continued tension
over EU relationship
Fifth, Denmark, with its small yet open society, has a long tradition of being an active participant and partner in international frameworks for political cooperation. At the same time, there is a strong desire in the country to maintain an “arm’s length distance” to certain issues so as to underscore Denmark’s independence while at the same time to keep the country from being marginalized in international forums. As a result, the Danish debate on the European Union has always been somewhat fragmented and not always comprehensible to foreign observers. The four Danish opt-outs included in the Maastricht Treaty are illustrative of this. European Monetary Union membership has remained a very delicate subject since the referendum in 2000. Denmark is not a member, but pursues a tight, fixed exchange rate policy with the Danish krone pegged to the euro. This peg has proven very credible, as is reflected in a very small (and in some periods negative) interest rate spread to the euro area. Denmark is, in this sense, a shadow member of the euro area, although it is not directly represented in the supranational executive bodies. The recent referendum on justice and home affairs cooperation confirmed Denmark’s “sideline” participation in EU cooperation.
Ambitious strategic
Overall, both the previous and current governments have set ambitious strategic targets. Various policy plans signal a political awareness of the country’s structural problems. Dealing with these challenges remains a work in progress.

Party Polarization

Pandemic increased polarization
The 2019 election produced a parliament in which 10 parties are represented. The coronavirus pandemic has had a small but palpable polarization effect on the left and right within parliament. The has been most visible in the discussion concerning governmental prerogatives to fight the pandemic ensured by the Law on Epidemics( Epidemi loven) which, in the early stages of the pandemic, granted the government near-absolute power over restrictions such as curbing the right to assemble. This legislation was modified in March 2020 to allow parliament greater control over restrictions.
Scandals enhanced tensions
Two recent scandals in the country have also fueled polarization. The first concerns the decision to kill the country’s minks in response to fears that they might carry a harmful mutation of COVID-19 that would potentially endanger vaccination programs – a decision that lacked a clear legal justification. The second scandal involved the former Minister Inger Støjberg, who was impeached after being found guilty of unlawfully separating married asylum-seekers.
Internal debates
within left bloc
Despite these polarizing events, the two blocs are not monoliths. On the left, debates continue over how restrictive immigration laws should be, how ambitious climate policies should be, and whether to implement a CO2 tax or not. The municipal elections in November 2021 showed that the governing social democratic party lost voters in the four major cities, while the leftist Unity List saw gains in all the major cities and is now the largest party in Copenhagen.
More fluidity in
political landscape
On the right, the Danish People Parties, a populist right-wing party, imploded during the municipal election, which resulted in the resignation of its chair. At the time of this writing, the new chair has yet to be nominated and the process is highly politicized. While the liberal party, Venstre, has until recently been the leading opposition party, polls place the Conservative party ahead of Venstre in terms of voter support. While the political landscape has become more fluid, research shows that, despite polarization effects among parties in parliament, super-majorities are still the order of the day across all policy areas. (Score: 9)
Jørgen Grønnegård Christensen og Jørgen Elklit (red). Det demokratiske system. 4. udgave. Hans Reitzels Forlag, 2016.


Green-Pedersen, Christoffer, and Asbjørn Skjæveland. “Blokpolitik og nye politiske emner. Hvordan går det med samarbejdsmønstrene i Folketinget?.” Politica: Tidsskrift for Politisk Videnskab 52.3 (2020).

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