Why high inflation is a headache for Denmark’s government

The government faces a thorny problem as it decides how to respond to the ongoing inflation, according to an analyst.

“To respond passively to inflation with a general election coming relatively soon would be very difficult,” Erik Holstein, commentator with Danish political media Altinget, told news wire Ritzau.

Danish inflation hit a near four-decade high in April, as energy and food prices soared, official figures showed Tuesday.

READ ALSO: Food and energy prices rocket as Danish inflation hits 40-year high

Denmark's consumer price index (CPI), rose 6.7 percent in April, compared to a year earlier, the highest rate since June 1984, according to Statistics Denmark.

Prices of goods have meanwhile risen by 10.3 percent over the past year, a rate last matched in November 1982, the official statistics keeper said.

"Within goods, price increases for electricity, food, fuel and gas are very much evident in April 2022," the agency said in a statement.

Excluding energy and unprocessed foodstuffs, Danish consumer prices rose 3.6 percent, which is still up from 3.2 percent in March.

While prices are increasing at breakneck speeds, economists have warned against the government and parliament sending one-off cash benefits to sectors of the population affected by the high prices.

“This is a devil of a problem for the government because there is no good solution to it. And politically, remaining passive would go against the distribution politics the government stand for,” Holstein said.

The government has earlier proposed paying a one-off sum of 5,000 kroner to 290,000 senior citizens who receive a social benefit known as ældrecheck (elderly cheque).

But economists have warned that such a measure could make the inflation problem worse.

READ ALSO: Danish central bank director says cash help for high prices will cause inflation

“The government could certainly explain to voters (why) it is not responding to inflation with economic help but there would be a lot of dissatisfaction amongst those groups,” Holstein said.

“Economists are right that it could potentially make the problem worse,” he said.

Withdrawing the proposal to send money to senior citizens could already cost votes for the government, he added.

“And they have to think about the upcoming election,” he said. Denmark is scheduled to vote in a general election by June 2023.

“The high inflation is not the government’s fault but it’s the government that will be given responsibility if it fails to solve the problems of individual voters,” he said.