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Politics and economy

Below you can read about the Danish government, the state of the Danish market, foreign policy and the employment rate.

The Danish Parliament at Christiansborg Palace is the centre of Danish democracy. This is where the 179 MPs meet to discuss and pass the laws used to govern the country.

Government and politics

The political system of Denmark is that of a multi-party structure, where several parties can be represented in Parliament at any one time. Danish governments are often characterized by minority administrations, aided with the help of one or more supporting parties. This means that Danish politics is based on consensus politics. Denmark is a constitutional monarchy.

Currently Denmark has a minority government formed by the political party Socialdemokratiet with support from the political parties: Radikale Venstre, Socialistisk Folkeparti og Enhedslisten. The government was elected at the parliamentary election on June 5, 2019. As leader of Socialdemokratiet, Mette Frederiksen was elected as prime minister of Denmark in 2019. Next parliamentary election will be held before June 4, 2023.

Foreign policy

Denmark pursues an active foreign policy combining Danish core values of democracy, human rights and the rule of law with a willingness to act. Based on these values, Danish foreign policy aims at increasing international security and stability, ensuring the greatest possible economic progress and prosperity while promoting democracy, human rights and good governance. Denmark has been part of the European Union since 1973.

Danish industrial development

Before the discovery of oil and natural gas in the Danish sector of the North Sea in the 1970s Denmark had almost no significant natural resources apart from farmland. As a result, industrial development occurred later than in most other European countries and Denmark remained primarily agricultural until the 1930s.

During the 1960s industrial development accelerated, and production industry became the primary export sector. Manufacturing remains a key factor in the Danish economy, but in recent decades the service sector has become increasingly important and today employs more than half of the workforce.

This aligns with the aim of the Danish government to develop Denmark further as a knowledge society, as the economy’s dependence on technology and know-how is increasing for Danish corporations to manage the global markets.

Another important development in Denmark has happened within the energy sector. Energy efficiency is a central part of Danish energy politics. The government has an aim of Denmark being independent of fossil fuels in 2050 by investing in sustainable energy sources and promoting the limitation of the use of energy. This enabled Denmark to now be one of the leading countries in the development and utilization of wind energy.

Employment rate

Denmark suffered, like many other European countries, from the financial crisis in the years following 2008. Henceforth, the unemployment level reached its highest point in the first quarter of 2012 at 8.1%. However, since 2012 the unemployment rate has had a declining trend with minor fluctuations to reach a level of 5% in 2019. Despite the marks from the financial crisis, the Danish unemployment rate and the Danish economy in general are characterized as stable and healthy.

State of the market

Denmark has a fixed exchange-rate policy, which means that Denmark’s monetary policy is aimed at keeping the Danish Krone stable against the euro. This means that the Danish National bank conducts monetary policy by setting the national interest rates relative to those of the European Central Bank. The fiscal policy and economic policy in Denmark is thereby used to achieve a stable economic development.

The GDP is still in recovery and the growth of the GDP from 2018-2019 decreased by 0,6%. Yet, the GDP per capita is still below its pre-crisis level.

The Danish Parliament has shown willingness to carry through reforms in Denmark in order to meet the challenges of slow productivity growth, which undermines the long-term prospects for growth in the Danish economy. The slow productivity growth is a significant challenge considering Denmark is also having an ageing population. However, Denmark is still having high GDP per capita, welfare benefits, a low Gini index and political stability, which constitute the Danish living standards to be among the highest in the world.

Labour market and wages

Danish wages appear relatively high compared to other European countries, a factor which has often been considered a threat to Danish competitiveness on the world market.
However, unlike most European countries, Denmark has virtually no social contributions paid by employers as a normal, compulsory part of the cost of labour, and total labour costs are on a level with the average for EU member states.
The Danish labour market operates with a clearly defined organisational structure based on collective agreements, which have contract status, and a comprehensive mediation system. This exists to settle disputes with minimum delay. The result is that major industrial conflicts are very rarely seen in Denmark, and as a consequence of the high level of trade union membership - 67% of the workforce - unofficial disputes are also rare.