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Denmark Seeks 2% Growth With First Company Tax Cuts Since Crisis

Feb. 26 (Bloomberg) -- Denmark pledged to boost growth to at least 2 percent a year as the government proposed lowering corporate taxes for the first time in half a decade.

The Social Democrat-led coalition, which is also planning to raise spending to help create 150,000 private jobs by 2020, unveiled a plan today that will grow to about 15 billion kroner ($2.6 billion) over six years, from about 10 billion kroner in 2014, including a gradual cut in corporate taxes to 22 percent from 25 percent. The plan will in part be financed by cuts in student aid and slower growth in public spending and pay.

“We need to create jobs to fund the things we like,” Prime Minister Helle Thorning-Schmidt said at a press briefing. “To finance taking care of those who need it.”

The Danish economy is struggling to emerge from a burst property bubble in 2008 that triggered a local banking crisis and wiped out more than a dozen lenders. Gross domestic product probably contracted 0.4 percent last year, matching a decline in the 17-member euro area, the government has estimated.

Denmark, which ties its krone to the euro, had in December the lowest trade surplus in four years as exporters suffer from the sting of a strong euro via the currency peg.

The government has already sought to stimulate growth through paying out an early retirement program.

Its latest plan, with the exception of a couple of measures, will do little to spur domestic demand, Helge Pedersen, chief economist at Nordea Bank AB, said in a note.

“The main reason Danish businesses have chosen to invest abroad is the high Danish labor costs, which this growth plan does nothing to change,” he said. “It will be exciting to see whether the new initiatives will turn the investment stream back to Denmark.”

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net

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