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however, a growing malaise was reflected in newspaper articles and political speeches complaining of the "too large bureaucracy," the excessive "paper pushing and official stamping," and notably the continuing high taxes needed to sustain the ever-expanding government agencies, notwithstanding the slowed economic growth. The ruling Social Democrats under Prime Minister Jorgensen, nonetheless, forged ahead for a while, programing a consolidation of welfare administration and a further expansion of its services, along with the inauguration of true "economic democracy," featuring the introduction of organized labor into the counsels of management and a gradual leveling of wages. The Social Democrats hoped by such initiatives to win back the loyalty of the party's left-wing, which had become severely strained over the leadership's support of EC accession. This element appeared ready to bolt to the Socialist People's Party. And in an effort to broaden the base of its support, the Social Democratic government also planned major reforms in the educational system and extensive construction projects in housing and school plants, as well as road and bridge building.

By the early spring of 1973, however, the government was obliged to reconsider. Recent large deficits in the balance of payments, deadlocked national wage negotiations, and a significant loss of support from the moderate center could not be ignored. Indeed, the loss of voters to the right promised to exceed any gains made through a reconciliation with the party's left-wing. In keeping with the national temper, which - reflecting a degree of satiation with socialization - has been moving rightward in the 1970s, the Social Democrats veered to the right in March 1973, with a 31-point austerity program holding in abeyance for 2 years much of its earlier platform. Over the period, in which government expenditures will hopefully be reduced by DKr3.6 billion ($600 million), gradual economic integration with the EC would help restore foreign earnings. Then by 1975 the forward momentum could be resumed.

But the Radical Liberal, Moderate Liberal, Conservative opposition coalition may well again have the reins of power in 1975. They represent a large and seemingly growing constituency that believes some limits should be placed on the continuing extension of costly welfare benefits and the ever-mounted taxes needed to sustain them. Recognizing that their taxes are the second highest in the free world, after those imposed on their Swedish cousins, the industrious Danes are prepared to go easy on further socialization and welfarism. The more dynamic entrepreneurs, whose imagination and skills produced Denmark's post-World War II economic miracle, not only opposed vigorously further taxation, but find the Social Democrats' "economic democracy" platform particularly unpalatable. Their influence on future policy, even that of a Social Democratic government, cannot be discounted. This influence is already seen in 1973 in the curtailment of government largesse through the widespread introduction of means tests, the reduction of rent subsidies, and the cutting of benefits in several pet Social Democratic welfare programs, viz., maternity benefits, family allowances, and national old-age pensions.

2. Defense

Prior to the middle of the 19th century Denmark sought to defend itself adequately and to maintain unchallenged control of its gatekeeper location between the Baltic and North Seas by building alliances and by supporting a strong defense force. Ultimately, the alliance strategy made Denmark a victim rather than a victor. In 1807 its suspected imminent association with Napoleon's continental system led the British to bombard Copenhagen and capture and make off with the entire Danish fleet, a blow to the small nation's proud status as a status power, from which it never recovered. In 1864 Denmark's defense "understandings" with the United Kingdom and Sweden were not honored, and the combined forces of Prussia and Austria-Hungary overwhelmed the Danish Army, stripped Denmark of Schleswig and Holstein, and thus reduced the kingdom to two-thirds of its former size. Disillusionment stemming from this final debacle led to the advocacy of a policy of lightly armed neutrality, particularly among the burgeoning political parties representing middle and working class sentiment. Parties of the right continued to stress a strong defense effort, but by 1900 the forces favoring neutrality were in the ascendency. Denmark's success in staying out of World War I, coupled with the founding of the League of Nations, which supposedly would secure the integrity of small countries, lent weight to the now entrenched rationale for neutrality. Only the threat of a resurgent Germany under Hitler caused a reversal of the anti-militarist trend of several decades. This change of sentiment brought some slight improvement in the physical defenses of Denmark by the outbreak of World War II in September 1939. Apparently, however, there was little, if any, improvement in the will to resist aggression. Danish military forces, still very inadequate, offered virtually no resistance when the German invasion force arrived on 9 April 1940, in

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APPROVED FOR RELEASE: 2009/06/16: CIA-RDP01-00707R000200110016-6