Danish PM reshuffles Cabinet amid uproar over Goldman Sachs deal

COPENHAGEN (AFP) - Denmark's Prime Minister announced a sweeping Cabinet reshuffle on Monday after her coalition collapsed over a deal involving United States investment bank Goldman Sachs.

Six ministers from the leftist Socialist People's Party left Ms Helle Thorning-Schmidt's government Thursday over the controversial sale of a stake in state-controlled utilities giant DONG Energy to a group of investors led by the bank.

The deal sparked an outcry few had anticipated amid fears Goldman Sachs could use tax havens to administer their holding in DONG and claims that the investment bank had been given unusually favourable terms.

In a country of 5.6 million people, just under 200,000 have signed a petition protesting the sale of the company to a bank that has become a popular symbol of Wall Street excess after one US journalist dubbed it "the vampire squid".

In Monday's new line-up, former minister of climate and energy Martin Lidegaard was named foreign minister and Mr Morten Oestergaard, the former minister for higher education and research, was named tax minister.

"We have put Denmark on a better track than it was on two and a half years ago," Ms Thorning-Schmidt said at a press conference.

The Danish leader has cast herself as a modern and fiscally responsible Social Democrat who wants to trim the welfare state in order to ensure its survival as Europe's population ages and jobs are shipped overseas.

While polls show that most Danes believe the government was weakened after the Socialist People's Party left - the coalition now only controls a third of seats in Parliament - Thorning-Schmidt asked the public to "judge the government by its results".

To that end, she emphasised falling unemployment, rising consumer sentiment, and signs of Denmark's beleaguered property market picking up.

The government's sale of a 19 per cent stake in DONG to the Goldman Sachs-led group for 8 billion kroner (S$1.84 billion) had been justified by a need for the group to make new investments, especially after it lost money on natural gas bets.

But for the Socialist People's Party, which had already been accused by grassroots members of supporting a government that was too right-wing, it became the straw that broke the camel's back.

Some observers believe their exit from government could lead to a more stable two-party coalition with less quibbling, given the long history of the Social Democrats and the Social Liberal Party of working together.

The current Social Democratic-led government has cut the corporate tax rate to 22 per cent from 25 per cent and tightened the requirements for claiming social benefits.

Economic growth in Denmark has been persistently sluggish since a housing bubble burst in 2007, leading to anaemic household spending amid a high level of consumer debt.

The naming of a minister for social affairs and integration from the Social Liberal Party drew criticism from the anti-immigrant Danish People's Party, who fear the Danish immigration laws could be relaxed.

"Cutbacks for the elderly and weak, but more money and privileges for people from another continent," former party leader Pia Kjaersgaard wrote on her Facebook page.

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