Denmark’s government will introduce tax cuts and subsidies, mainly aimed at the poorest of its citizens, after Danes have been hit by the highest inflation rate in a generation.
The Nordic country will spend a total of 3.1 billion kroner ($440 million) on the measures, which include a reduction in electricity taxes and a one-time 5,000-krone payment for senior citizens, the finance ministry said on Friday.
Denmark’s inflation rate is at 7.4%, the highest in almost four decades, as prices for food and energy are surging. The Social Democrat cabinet, facing elections no later than June 2023, has been under pressure to counteract inflation after other European countries have introduced such measures. With the best fiscal balance in the European Union since 2019, it also has fewer worries about the effects on its finances.
"The Danish economy is fundamentally strong but is obviously challenged by rising prices in the wake of Putin’s war in Ukraine,” Finance Minister Nicolai Wammen said in a statement. The new measures "don’t fully compensate, but will have an effect for those who find it difficult to make ends meet.”
The proposal is backed by the government’s allies in parliament as well as by parties in the opposition.
The government also said it will build a green fund with 53.5 billion kroner in assets through 2040 to help finance the country’s plans to transition away from fossil fuels. Denmark will reserve 1.5 billion kroner for the fund in 2024 and 3.25 billion kroner a year from 2024-2040. The country has a goal to reduce emissions by 70% before 2030, compared with 1990 levels.
