DENMARK

Danish leader shuffles cabinet in wake of storm over Goldman Sachs deal

Danish leaderannounces sweeping changes in wake of bank deal that saw coalition collapse

PUBLISHED : Tuesday, 04 February, 2014, 9:31pm
UPDATED : Tuesday, 04 February, 2014, 9:33pm
 

Denmark's prime minister announced a sweeping cabinet reshuffle after her coalition collapsed over a deal involving US investment bank Goldman Sachs.

Six ministers from the leftist Socialist People's Party left Helle Thorning-Schmidt's government last week over the controversial sale of a stake in state- controlled utilities giant DONG Energy to a group of investors led by the bank.

The deal sparked an outcry few had anticipated amid fears Goldman Sachs could use tax havens to administer their holding in DONG and claims that the investment bank had been given unusually favourable terms.

In a country of 5.6 million people, just under 200,000 have signed a petition protesting against the sale of the company to a bank that has become a popular symbol of Wall Street excess after one US journalist dubbed it "the vampire squid".

In the new cabinet, former Minister of Climate and Energy Martin Lidegaard was named foreign minister and Morten Oestergaard, the former minister for higher education and research, was named tax minister.

"We have put Denmark on a better track than it was on 2½ years ago," Thorning-Schmidt said at a press conference.

The Danish leader has cast herself as a modern and fiscally responsible Social Democrat who wants to trim the welfare state in order to ensure its survival as Europe's population ages and jobs are shipped overseas.

While polls show most Danes believe the government was weakened after the Socialist People's Party left - the coalition now only controls a third of seats in parliament - Thorning-Schmidt asked the public to "judge the government by its results".

To that end, she emphasised falling unemployment, rising consumer sentiment and signs of Denmark's beleaguered property market picking up.

The government's sale of a 19 per cent stake in DONG to the Goldman Sachs-led group for eight billion kroner (HK$11.2 billion) had been justified by a need for the group to make new investments, especially after it lost money on natural gas bets.

But for the Socialist People's Party, which had already been accused by grass-roots members of supporting a government that was too right-wing, it became the straw that broke the camel's back.

Some observers believe their exit from government could lead to a more stable two-party coalition with less quibbling, given the long history of the Social Democrats and the Social Liberal Party of working together.

The current Social Democratic-led government has cut the corporate tax rate to 22 per cent from 25 per cent and tightened the requirements for claiming social benefits.

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