Government to cut billions from public investment
The government is preparing to curb the current construction boom in the public sector by slicing three billion kroner, or seven percent, from the public investment budget next year.
It is the first time since the financial crisis took hold in 2008 that the government has proposed to decrease public investment.
“When you are in a restoration period, then you must go from a gentle financial policy to a less gentle financial policy,” the minister of economic affairs and the interior, Margrethe Vestager, told Børsen business newspaper.
Public investment is at a record high of 44.1 billion kroner this year thanks to ongoing investment into larger infrastructure projects such as the Fehmarn Belt Fixed Link to Germany, the expansion of the Copenhagen Metro, the construction of a Copenhagen light rail and super hospitals.
But the government thinks that the economy has turned the corner and is strong enough now to begin ridding the country of some debt, and it hopes that private investment will make up a large chunk of the loss in public investment. The Danish construction advocate organisation Dansk Byggeri is sceptical, however.
“I am worried that the government will begin to tighten the financial policy too soon, as it did in 2010 when it quelled promising improvement with its so-called restoration package,” said Bo Sandberg, the head economist with Dansk Byggeri.
Sandberg argued that it was the financial crisis and not the economy that the premature restoration package restored.
Recent analysis showed that Denmark ranked 22nd out of the 27 EU member states plus Norway in a comparison of public investment as a proportion of gross domestic product (GDP) between 2009 and 2012.