May 30, 2017 / 10:33 AM / 2 months ago

Danish government seeks labour market reform to boost jobs

2 Min Read

COPENHAGEN, May 30 (Reuters) - Denmark's right-leaning government is seeking to create jobs through pension reforms and tax cuts to entice people to work, but its proposals to be presented later on Tuesday may not get the needed support of rightest ally Danish People's Party.

The government envisage average Danish GDP growth at 2 percent per year until 2025 from a current projection of around 1.5 percent. It has also raised its economic growth forecast for this year to 1.7 percent from a previous forecast of 1.5 percent.

Denmark's economic recovery is gathering pace, but companies face labour shortages, prompting the government to focus on jobs.

"We will strenghten and prolong the current economic upswing through reforms to increase the labour supply and our productivity," finance minister Kristian Jensen said in the report seen by Reuters ahead of the official release.

Prime Minister Lars Lokke Rasmussen secured a broad housing tax deal this month, ending months of policy deadlock. However, he also dropped a proposal to increase the retirement age due to a lack of support from anti-immigrant Danish People's Party (DF).

A key part of Rasmussen's new plan is to increase work force by up to 60,000 by getting more people off social benefits, incentivise people to postpone retirement, increase average workhours, and recruiting people from abroad.

Rasmussen's three-party government holds 53 of the 179 seats in the Danish parliament and is dependent on the DF's 37 seats to secure a majority.

The DF is generally supportive of the country's generous welfare model and has said it does not support tax cuts higher earners.

It has recently improved relations to main opposition party Social Democrats in a bid to increase political leverage over Rasmussen by highlighting that it has other options should he prove unwilling to cooperate sufficiently. (Reporting by Erik Matzen, writing by Teis Jensen, editing by Jacob Gronholt-Pedersen and Jeremy Gaunt)

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