Jeopardizing the future of welfare in spite of economic sustainability. Political Changes of the Danish Welfare State in the Wake of the Economic Crisis

The Danish welfare state has been adjusted proactively and very efficiently over the last two or three decades to future challenges of ageing. Further, the tax system has been adjusted through seven major and a number of small reforms to deal with challenges of globalization and/or with the aim of improving labour market participation and the amount of labour supply. Because of self-inflicted problems, in particular a credit and house price bubble, Denmark experienced significant decline in GDP and employment, followed by sluggish growth, in the wake of the crisis, but state debt remained around zero, budget deficits remained below 3 per cent of GDP throughout the economic crisis, the balance of payment surplus reached historical records, and foreign debt had been replaced by quite considerable net assets abroad. Alongside the other Nordic countries (except Iceland) and Switzerland, Denmark has remained in at the very top regarding international assessments of creditworthiness. None the less, there have been path breaking reforms of social security during the crisis, and more has been proposed. Incremental long-term changes that have gone largely unnoticed add to the picture. First, the paper provides an overview of these changes and seek to assess whether they constitute a dismantling of the Nordic welfare model. Second, to explain these changes we have to move beyond the standard drivers of change in terms of economic challenges or power resources; the paper seeks to identify what alternative factors are at play.