DONG ENERGY (2)

The proposed minority investment by Goldman Sachs in state-owned Dong Energy caused the partial collapse of the Danish Government yesterday. Despite last-minute harrumphing by trade unions and an online petition against the deal, which attracted almost 200,000 signatures within days, the deal itself was never in doubt. The Danish People's Party, probably the only people to emerge from the mess with credit, were right to question the details of the investment, which were far too generous to Goldman Sachs. It also emerged that Goldman Sachs were intending to channel their investment through a company in the Cayman Islands (corporate tax avoidance is a big issue here at the moment). But the DPP could be, and were duly, ignored, since the Social Democrat/Socialist/Radical coalition Government had already secured in advance the votes of the opposition Venstre and Conservatives. With a secure Parliamentary majority, the deal was duly approved yesterday.

The problems were not with the opposition, but within the ruling coalition itself, and the Socialists in particular. This is the first time that they have ever been in Government, and the strains of moving from being a perennial protest party to a responsible part of the country's leadership were always going to be great. Those strains had increased markedly in the wake of the financial crisis as the coalition found itself in the position of being a left of centre Government forced to implement painful reforms more normally associated with right of centre parties. The Socialists have found themselves usurped as the protest party of the left by the even more left-wing Enhedslisten, and were duly thumped in last November's local government elections. Many Socialist members (if not their Ministerial representatives) have long questioned the wisdom of being in a coalition Government so far removed from what they perceive as the party's core principles.

Against that background, the Dong affair was not so much a fundamental issue, but the straw that broke the camel's back. And the catalyst came, when Enhedslisten tabled a preparatory motion in Parliament calling for a "time-out" on the vote on the Dong deal, while an all-Danish solution was found, that excluded Goldman Sachs. Many Socialist MP's, supported by party members and the obvious public support in the petition, thought that a time-out made eminent sense. However, for Socialist Ministers, the issue became the Danish equivalent of a three-line whip; if you are in Government, you vote for Government policy. Under a strong leader, rebellious MP's might well have been cowed. But Annette Vilhelmsen, elected party leader as an outsider in October 2012, has turned out to be a disastrous choice. Yesterday, after a series of crisis meetings and on the morning of the Dong vote, she pulled the Socialists out of the Government and announced her resignation as party leader. Within 24 hours, the remainder of the party's leadership had resigned, and two former Socialist Ministers, Health Minister Astrid Krag and Environment Minister Ida Auken, had defected to the Social Democrats and Radicals respectively. Leaderless, rudderless, and out of Government, there is now a real prospect that the party will simply implode and disappear.

In terms of Government, some have said that not much has changed; the number of MP's who support Helle Thorning-Schmidt as Prime Minister today is the same as the number who supported it yesterday. Indeed, it could be said that the Government has been strengthened; many of its problems stemmed from bickering, both internally and with its nominal supporters in Enhedslisten, and the first of those is now greatly reduced. However, it is never a good thing for a Government to lose Ministers, and after the turbulence of last autumn, the Prime Minister was at pains to stress that she didn't intend to change any more Ministers before the next election. Suddenly, she now has to find six new ones.

In a more general sense, the affair highlights one of the disadvantages of coalition politics. In a 2-party system such as the U.K.'s or America's, critics from the fringes can be accomodated within "broad church" parties by politely ignoring them and never giving them office. But in a multi-party system, those fringe critics can find a home in a party of their own (Enhedslisten, the DPP, the Socialists). If at some point, a coalition arises that places that party in power, then the whole party has to change it ways. In the case of the Socialists, that change was simply not possible; and I suspect it would be the same with Enhedslisten. The interesting question is whether the DPP can make the change, when (as I expect) the right come back to power at the next election. My prediction is that they can, not least because Pia Kjærsgaard and Kristian Thulesen Dahl are much better politicians than Annette Vilhelmsen and Villy Søvndal ever were.

Meanwhile, Goldman Sachs must be chuckling. Not only have they obtained a favourable investment, which they expect to make a lot of money for them, but they have demonstrated that they have the power to shake Governments. The fact that they seem to be widely hated in Denmark is probably not something that worries them. I once had a job interview with them, where I was asked whether I would rather make a lot of money or have friends. I mumbled something hopeless about how I didn't think you would have to choose. That was obviously the completely wrong answer, since the interview ended shortly thereafter.

Walter Blotscher