As night turned to day on Jan. 30, Denmark’s biggest newspapers were predicting Prime Minister Helle Thorning-Schmidt’s coalition would survive a dispute over letting Goldman Sachs Group Inc. buy part of Dong Energy A/S.
By 10 a.m., the Socialist People’s Party had quit her minority coalition and Danes were trying to understand how a Wall Street bank could have shaken the political landscape in their Scandinavian haven. Thorning-Schmidt said she will appoint a new Cabinet “soon” to replace the six ministers who walked out over the dispute.
The 48-year-old Social Democrat watched her coalition fall apart yesterday after pushing a $1.5 billion sale of an 18 percent stake in Dong to Goldman. The deal, opposed by 68 percent of Danish voters in a Megafon poll for TV2, dominated headlines after it emerged Goldman would get some veto powers in exchange for its investment. Goldman has said it views the stake as a long-term holding and will support the strategy of the current management.
“Most Danes don’t know the details of this deal,” Peter Kurrild-Klitgaard, a professor of political science at the University of Copenhagen, said by phone. “A great many voters fear Danish politicians are surrendering control of the energy grid. Many think Denmark is selling all of Dong and not just 18 percent.”
Voters are now punishing Thorning-Schmidt for siding with a bank they think represents “everything Danes really don’t like about the crisis,” Kurrild-Klitgaard said. They also don’t like that the buyer “is not Danish, or even European.”
Goldman will buy the stake through its European merchant banking unit in a company named New Energy Investment S.a.r.l. Goldman will partner with Denmark’s two largest pension funds, ATP and PFA, which will own 4.9 percent and 1.8 percent, respectively.
Dong is selling shares as part of a restructuring announced in February last year to cut costs, reduce debt and bolster investments in oil and gas exploration, as well as in wind farms. The plan included cutting expenses by 20 percent and selling assets to raise 10 billion kroner.
“It’s a good contract,” ATP Chief Executive Officer Carsten Stendevad said in an interview yesterday. “It’s good for all parties. We hope for the sake of Dong that soon our focus can return to the very difficult investment case.”
Thorning-Schmidt has been battered in the polls since taking power in 2011. To ward off a recession and deficits, she enacted measures that alienated many core voters.
The government, which now comprises Thorning-Schmidt’s Social Democrats and the Social Liberal Party, has started to means test services including study grants and childcare benefits. It also requires Danes to work longer before retiring. Meanwhile, Danes bear the world’s highest tax burden relative to gross domestic product.
In a Jan. 26 poll published by newspaper Berlingske, 55.1 percent of Danes said they’d vote for the opposition bloc led by Lars Loekke Rasmussen’s Liberal Party. That compares with 49.7 percent in the Sept. 15, 2011 general elections.
With her coalition in tatters, Thorning-Schmidt says she doesn’t need to call an election because the Socialist People’s Party will continue to support her government. The next election is due in September 2015 at the latest.
Denmark became Scandinavia’s weakest economy after a housing bubble that burst in 2008 triggered a community banking crisis. The country’s biggest lender, Danske Bank A/S, has lost 135,000 clients in the past 16 months and customer satisfaction is the lowest in at least six years, according to pollster Voxmeter.
The central bank estimates consumer indebtedness is hurting household demand, and Denmark’s economic growth is lagging behind rates in neighboring Sweden and Norway. Danish GDP will expand 1.6 percent this year, versus 2.3 percent in Sweden. The mainland economy of Norway will expand 3 percent, the Organization for Economic Cooperation and Development estimated in November.
Thorning-Schmidt’s decision to partly privatize a state- owned utility was the last straw for some voters, according to Kurrild-Klitgaard.
“It’s still very strange to Danes to have someone from the outside control energy distribution,” he said. “This was no easy camel to swallow for the socialists. Only 20 years ago they wanted production resources to be nationalized.”
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