The economic Wise Men are well-behaved and careful people.

But make no mistake – they are sharp as a knife.

In their latest six-monthly report that was published today, they have laid the government’s economic policy bare and documented how the Liberal-Conservative-Danish People’s Party (VKO) majority has abused the Danish economy.

Worst decline
The Wise Men have demonstrated that the downturn started earlier in Denmark than in most other countries. The Danish economy has experienced one of its greatest retreats, and contrary to what most Danes think, the retreat did not take place from a high level. As you can see from the figure, Denmark has now retreated much further than Sweden and Norway.

Self-inflicted downturn
The government has persistently tried to convince the Danes that the crisis has come from abroad in the form of the global economic crisis. But it’s a lie. The Wise Men write that: ‘the recession started at a time when the economic crisis had not yet begun to force the global economy to its knees’.

Irresponsible policy
The Wise Men point out that Denmark has traditionally run a so-called market-levelling fiscal policy. Various governments have supported the economy when times have been bad and taken the steam out of the economy when it has been moving towards overheating. But ‘during the latest upturn, this good practice was changed,’ the Wise Men say. “An expansive fiscal policy was conducted with major growth in public consumption and at the same time the freeze in property value taxation has resulted in increases as house prices rose considerably.”

VK at fault
The Wise Men’s conclusions regarding the government’s economic policy are harsh. They conclude that the government has made the recession worse than it needed to be: “In a situation in which overheating was a threat, fiscal policy helped to increase the pressure on the labour market, and housing prices were stimulated further. Fiscal policy that paralleled the market situation helped to increase the imbalances in the economy and make the downturn even worse.”

Longer crisis for Denmark
Precisely because the government refrained from intervening, the crisis not only became deeper, it will also last longer according to the Wise Men. “The significant imbalances that the boom contributed to in the form of high housing prices and bad competitiveness, have contributed in making the drop in production in Denmark greater than in several other countries, and have meant that the Danish economy will probably take longer to get out of the crisis.”

Lower growth
The consequences of the bad state of the Danish economy are that in coming years Denmark will have lower growth than most of our trading partners. While the Wise Men estimate that Sweden will have nine percent growth over the next three years, Denmark is facing growth of five percent.

Unemployment
Low growth means that it will take a long time before the pace of the Danish economy grows at such a rate that more people will be hired than fired. Unemployment will – according to the Wise Men – continue to grow until 2011 when it will reach 171,000. At the same time some 60,000 people will be in activation systems. This equals an unemployment rate of eight percent.

Horrifying debt
The massive economic crisis means that Denmark is currently indebting itself at a ghastly rate. The Wise Men estimate that public debt will reach DKK 700 billion at the end of 2010. That is DKK 200 billion more that planned in the so-called 2015 plan. A plan that describes what is needed to maintain a sustainable welfare state.

All in all, this is one of the most critical Wise Men’s reports in recent years. And with good reason.

With its irresponsible economic policy the government has abused the Danish economy to such an extent that it will take many years to repair.