Tight fiscal policy strangling growth, economic advisors warn – The Post

Tight fiscal policy strangling growth, economic advisors warn

Government, OECD and business reject calls to slacken economic discipline

May 29th, 2013 2:33 pm| by admin

The government's independent panel of economic advisors is calling on the administration to relax its economic discipline in order to help stimulate economic growth.

“The tight fiscal policy that has been followed since 2011 and is scheduled to continue for the next few years is slowing growth,” Det Økonomiske Råd stated in its latest report, published yesterday. 

The report concludes that the economy has made modest gains and that the timing is right for less restrictive policies that would give it a boost.

The economy minister, Margrethe Vestager (Radikale), said at a press conference on Monday in advance of the report that current policies are unlikely to change.

“Further concessions are a risk we are not willing to take,” she said.

University of Aarhus economics professor Bo Sandmann Rasmussen said he doubted the government would follow the council’s recommendations to do things like cut interest rates on loans and make changes in the retirement system.

“That would be too much of a break from their current strategy,” Rasmussen told DR News.

Rasmussen expected the government would wait until the international economic recovery begins in earnest and then get onboard.

The OECD recommended today that the government should maintain its current course, while business lobby group Dansk Industri (DI) also rejected the report’s conclusions.

“Compared with Germany, Europe's largest economy and our largest trading partner, we are not competitive enough,” said DI head Karsten Dybvad. “Danish wages have risen 10 percent more than the countries around us since 2001, putting huge restrictions on our ability to be productive and innovative.”

The Økonomiske Råd report, however, contended that Danish wage increases have levelled off in recent years while exporters have improved their market share, putting the economy in a good position against neighbouring countries. It argued that lowering corporate taxes and reducing energy surcharges would help companies become even more competitive.

“It is important to realise that we can do more and that creating growth at home makes us even more competitive in the marketplace,” council president Hans Jørgen Whitta-Jacobsen told DR News.