The Danish Economic Council published is semi-annual report last week and the economic experts were not happy about the fiscal policy being led by the government and the Danish People’s Party. To make a long story short, the economists argue that the fiscal policy is expansive at the top of an economic boom and that the government needs to take initiative to improve the supply of labour while controlling wage increases. The council even published a strong warning to the government in an op-ed piece in Berlingske Tidende on Monday.
Earlier, the Director of the National Bank voiced strong criticism of the government’s fiscal policies.
The OECD is not happy either:
Monetary conditions are no longer stimulating aggregate demand, but fiscal policy is set to do so in 2008 with rising public consumption and tax cuts that are not financed in the short run. This stimulus and additional municipal and regional overspending should be avoided or offset by savings elsewhere. Measures to boost labour supply should be pursued in ways that help long-run fiscal sustainability. (OECD Economic Outlook, December 2007)
This of cause comes as the Danish People’s Party, supported by the Social Democrats and the Socialist Party, has made strong demands for substantial pay-rises for selected groups of public sector employees and threatened to derail the government’s quality reform initiative.
How much power do the economic experts hold when it comes to influencing the public opinion? The prime minister brushed off the Economic Council’s criticism by declaring that economists should rewrite their textbooks (part of this is a real academic and practical discussion about what the level of what is called the structural unemployment actually is in Denmark) but I really can’t remember that “the economic expertise” has criticized the Danish government’s economic policies in unison and in such strong terms.