A debt bomb threatens Denmark, local economists says. The alarms are screaming out loud; the national debt is increasing rapidly, and if not intervened, Denmark will soon approach a situation similar to Greece, calculations provided by the Danish AE-board shows. According to economists the deficit has been hidden for many years.
“There’s not a shadow of doubt on the fact that the big deficits, and a rapidly growing public debt, will be a huge problem for Denmark over the next decade.”
Jan Rose Skaksen
The debt could rise so sharply that it could reach the same levels seen in Greece right now. That means nearly 2000 billion Danish kroner, which correspond to a scary 120 percent of future GDP.
Public debt will grow to if the government is not making substantial reforms are the Danes become more productive, calculations done by the AE-board shows.
The AE-Board has prepared an preleminary report ahead of the governments so-called “Convergence Report”, which describes how the public finances and debt are expected to develop in the future.
Professor Jan Rose Skaksen at Copenhagen Business School says that “there is not a shadow of doubt on the fact that the big deficits, and a rapidly growing public debt, will be a huge problem for Denmark over the next decade.”
“It is a fact we can not ignore. It’s just like in our private economy; problems will also arise if we spend more than what’s entering into the account,” he says.
He adds that the growing indebtedness, are to dominate the economic policy totally in the future.
“The large debt becomes a straitjacket for Denmark. We will no longer have the same freedom to tackle future crises, invest more in education or other things,” says Professor Jan Rose Skaksen.
Chief Economist at RI, Klaus Rasmussen suggests that it has been clear for many years that there would be huge deficit of public finances when the number of retired people really began to grow.
“Therefore we should have built a fortune by 2015, which we could feed on. But now that has fallen completely apart. The debt is growing dramatically at a time we hoped it would drop. Therefore we need to tighten up on public finances and make structural reforms. The sooner action is taken, the better. If nothing is done, the financial markets will sooner or later force us to,” says Klaus Rasmussen.
According to Professor Jan Rose Skaksen the Danish deficit have been “hiding” for many years and could not be found. It’s been hidden, among other things, in the revenues from oil and gas production in the North Sea, which concealed the public overspending. But the economists underline that they for decades have warned about the demographic trends that would remove large groups from the labor market and increase government spending dramatically.
“That’s exactly what is happening now. It is very big numbers, we’re talking about. It’s pouring out from the labor market, and the number of pensioners grows with equally great strength,” says Mr. Skaksen.
Chief Consultant of the AE-Board, Martin Madsen, says that if the government doesn’t make reforms that increase the labor force and the country’s productivity, the public debt in 2050 will be more than DKK 2 000 billions, (converted to the present exchange rate), and at a dangerously high level that might result in the same problems as Southern Europe, Iceland, Dubai and similar locations.
“The debt can be even higher if unemployment become entrenched at high levels and we get a large alienated group of labor. In the a light of this facts, the government is conducting a deeply irresponsible economic policy. It is untenable to adopt an economic policy that allows the debt to grow this much,” Mr. Martin Madsen says.
This year alone, Denmark is expected to have a national deficit of 100 billion kroner. It is the largest deficit since the early 1970’s, and far beyond the deficit border of three percent of GDP which is set up by the EU.
It corresponds with an extra tax burden of 25 000 kroner for every taxpayer i Denmark.
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