Global Economy,Government balance 1997-2012
To analyse the past and the years after the global financial crisis in Denmark, we use the numbers from OECD updated in June 2011. Furthermore we compare the forecast for the Danish government balance with the forecast for the Euro area.
The Danish government balance develops in a positive direction from 1997 up to 2000 from – 0,6% up to 2,2%. In year 1997 was the government balance at – 0,6 %, which is the lowest point before 2009. This was the year where the unemployment was at its highest point at 5,2 %, see the unemployment graph above/under, and it explains the low level in the government balance. The government has, because of the high unemployment rate, low tax income and high costs in transfer payments. The period from 2000 to 2003 develops in a negative direction from 2,2 % to – 0,1 %. This is the period after the IT-bubble blasted in year 2000. In this period the Danish government balance is lower than the euro convergence criteria. According to this, the lowest acceptable level is at 3 %. From 2003 the government balance begins a period with a positive direction up to 2007 and in the years from 2005 to 2007 the government balance is in a boom period. In this period Denmark experiences a high state of the market (høj konjunktur / opsving) up to the global financial crisis. The highest level is in year 2005 and 2006 where it is 5 % and in 2007 it is a little lower at 4,8 %. This can be explained by a lower unemployment rate because of the high state of the market/boom period, where the government had higher tax income combined with lower costs in transfer payments. The reaction of the financial crisis in 2008 is delayed at the labour market, because the companies hold on to their competent employees while they wait for the market to settle. The negative development in the government balance after the financial crisis, starting in 2008 with a small change at – 0,2 %, is connected to the rising unemployment...
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