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Just Another Week in the Land of Borgen



What does it take for a leader of a small Scandinavian country to draw international attention?  When that leader is an imposing flaxen-haired female prime minister of Denmark, a "selfie" with a US president while the first lady glowers is one way to accomplish that goal.  But selling a minority stake of a national utility to Goldman Sachs, everyone's favorite whipping boy, will also get the global media to take the bait.

None of this drama would surprise viewers of the Danish political cult drama Borgen, about the public and private lives of a fictitious female prime minister of Denmark. But as I keep telling my hardcore Borgen fan colleagues at the Peterson Institute, Danish political reality generally surpasses the Borgen script. So, too, is the case in the political furor surrounding the partial sale of the utility DONG Energy to Goldman Sachs.

But what actually happened and why?

First, the Danish government is reducing its stake in DONG from 80 to only 61 percent, though a future initial public offering (IPO) will likely lead to a full privatization of the company. Second, Goldman Sachs accounts for only 72 percent of the new equity capital, with Danish pension funds ATP and PFA supplying the rest.1 Goldman is thus a small minority investor, though with representation on the DONG board. Third, Goldman Sachs did receive some additional minority protections on the board, aimed at ensuring that a future DONG IPO will take place, while the company plans to exercise its ownership rights though a subsidiary located in Luxembourg, Delaware, and the Cayman Islands. These offshore sites gave rise to a perception of unfair play and potential tax evasion, easily exploited by the political opponents of the transaction backed by the center-left prime minister, Helle Thorning-Schmidt.

The sale was approved last month by 80 percent of the Danish parliament, but only after kicking up a political firestorm in Denmark. The furor caused the Socialist People's Party, one of the three members of the governing coalition, to bolt.

In reality, however, the Socialist Party revolt had less to do with the facts than with the party finding that Goldman Sachs was a highly effective mobilizing target for left-wing activists in Denmark.

Besides the Socialist People's Party, the current governing coalition in Denmark comprises the center-left Social-Democrats and the centrist Social-Liberals. Together they have pursued an overall centrist and fiscally responsible political course, despite winning the 2011 election on a more welfare-oriented political platform, in the best tradition of Borgen's charismatic fictional Prime Minister Birgitte Nyborg. Feeling frustrated and bullied, parts of the Socialist People's Party lashed out at the number of political compromises necessary to govern. Despite being in a government for the first time since its founding, the party saw the sale to Goldman Sachs as the last straw—and an opportunity for the party left-wingers to force the party out of government and—presumably—back towards their utopian socialist ideals.

Opponents of the DONG deal exploited the basic ignorance of the Danish public about the facts of Goldman's proposed minority stake. They managed to exploit a mixture of Danish nationalism and latent opposition to global finance on the left. Not only did the party leave the governing coalition, with its chairman resigning, but its representatives actually voted for the sale of DONG to Goldman Sachs in parliament. (It is of course ridiculous for a country that imports and exports most of its energy to care much about a minority foreign stake in a large utility.)

So what happens next?  Not much really. The Socialist People's Party heads towards political oblivion with many of its most promising young parliamentarians switching to other parties in the governing coalition and a cabal of left-wingers now seemingly in charge. A small left-wing party in a small northern European country has senselessly committed political hara-kiri. It will not be missed by anyone except maybe the political cartoonists.

For the beleaguered Prime Minister Schmidt, not much has changed either. Yes, she lost a coalition member. But the last thing the Socialist People's Party wants now is an early election, which would likely annihilate the party. Schmidt can thus feel pretty sure of its support on most political issues so that its dissent does not cause an election to occur prematurely.

Hence Schmidt now presides over a smaller, but more coherent, governing coalition and can look forward to some of the more centrist elements of the Socialist People's Party flowing to her own Social-Democrats. On the other hand, like the fictional Danish leader on television, she remains most likely to lose the next Danish election after disappointing both moderates and the left with a lackluster performance. Elections must be held by September 2015 at the latest.

The next chapter in the life of Prime Minister Schmidt could well be determined not in Denmark but throughout Europe. If the center-left wins the upcoming elections to the European Parliament, she would be a strong candidate for the next head of the European Commission. She checks the right boxes. She is a woman of the (potentially) victorious center-left. There is a precedent for the EU Council to pick a sitting prime minister to run the European Commission. Presumably this is a way for the EU Council to exert control by selecting a not-too-independent-minded president, one whom the European Parliament cannot reject. There may be more "selfies" of her in the future, even though Borgen has ended its run on television.


1. A number of regional government entities in Denmark have been minority shareholders in DONG all along and will remain so, though with a stake diluted from 19 to 14 percent.

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