The Swedish economy is seething

By Claus Rosenkrantz Hansen

Should Denmark copy the Swedish model? Professor says yes - and no

The debate of Denmark's financial future is in full swing. The economic growth in Denmark is not very impressive. If this development continues, the Danish welfare model and standard of living are going to suffer in the long run.

Growth is booming

The gloomy outlook has urged politicians and others to look beyond our borders, where the economy looks better, for instance Sweden, whose growth is booming.

- Sweden is doing very well, says Professor Svend Erik Hougaard Jensen from the Department of Economics, who thinks that Denmark has plenty of reasons to look across the other side of the Sound and get some inspiration to boost the economy.

- Sweden has managed to restore their economy after the massive crisis they experienced during the 1990'es. My opinion is that Denmark has plenty to learn from Sweden, he says.

How to keep public spending under control

According to Svend Erik Hougaard Jensen, we can especially learn from the Swedish way of handling the fiscal policy. When Sweden talks about fiscal discipline and spending caps, they actually act on it. In Denmark, the politicians talk the talk, but too often they do not walk the walk. This may cause problems for Danish growth in the long term.

- The Swedes clearly demonstrate how public spending is kept under control. They formulate three-year goals and live up to them. In Denmark, we have problems with the local authorities, for instance, who keep spending without adjusting the tax level - their income - to the size of their consumption. It prevents the whole country from living up to our goal of keeping public spending down, says Svend Erik Hougaard Jensen.

Commitment to education, innovation and research

The intentional Swedish commitment to more education, research and innovation are also elements in a growth-promoting and productivity-enhancing policy that the Danes ought to adopt in their attempt to optimise the growing conditions.

- We have to make sure that we don't cut off our nose to spite our face. Even if we need to implement turnaround schemes to establish order in the Danish economy, it is risky to cut down on investments in education, research and innovation, says Svend Erik Hougaard Jensen.

Small threat to the Swedish economy

Danish politicians have placed an intense focus on tax policy, but according to Svend Erik Hougaard Jensen, the Swedish tax policy is not particularly different from the Danish one, so we should not gather too much inspiration from Sweden in that area. Actually, the Swedish property tax reliefs have led to the apprehension of an actual housing bubble in Sweden.

The potential housing bubble and a juvenile unemployment of 25 % pose the only threat to the Swedish economy right now.