Denmark is grappling with the financial implications of a significant military build-up to meet NATO’s force goals, initially projected to strain the Danish economy. However, recent economic developments, particularly the influx of European labor and subsequent boost to state coffers, may alleviate the need for immediate tax increases or cuts to public welfare.

NATO defense ministers are set to convene on Thursday to finalize military goals for member countries, with a proposed target of 3.5% of GDP for defense spending and an additional 1.5% for related security expenses. This translates to a substantial increase in Denmark’s defense budget, escalating from approximately 27 billion kroner in 2022 to over 100 billion kroner annually, plus an extra 45 billion kroner for cybersecurity, infrastructure, and similar security concerns.

Despite earlier warnings of potential austerity measures, the Danish government now appears to have the financial capacity to manage the military build-up without implementing drastic measures. The unexpected surge in revenue has created economic leeway, potentially covering the costs without resorting to tax hikes or compromising public services.

This financial cushion has seemingly quelled the anticipated political turmoil, as the government avoids unpopular decisions regarding tax increases, reforms, or public savings ahead of parliamentary elections. While the military force goals remain confidential, the unexpected economic boost has lessened the urgency for the government to address long-term economic planning and prioritize public spending.

However, the debate on prioritizing climate protection and earlier retirement options persists, suggesting that further political discussions on long-term economic strategies are still necessary. The government’s crisis narrative, initially intended to justify reforms, is also losing traction amid the improved economic outlook.