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Investing.com -- Denmark is in a position to temporarily increase its defense spending above current plans without risking its financial stability, according to the country’s largest banking institution, Danske Bank (CSE:DANSKE) A/S.
This statement comes in the wake of the nation’s announcement last month to increase military spending by over $17 billion through 2033, pushing its defense budget to more than 3% of its gross domestic product (GDP) in the short term.
Danske Bank’s economists anticipate a significant government surplus, which could potentially finance these additional temporary expenses without undermining the sustainability of the government’s finances. This information was published in the bank’s recent Nordic outlook on Wednesday.
The Danish government’s financial reserves are substantial, thanks to five years of the European Union’s largest budget surplus relative to GDP, and government net financial assets exceeding 20% of GDP, Danske Bank noted.
However, the bank also cautioned that a permanent increase in defense spending to 3% of GDP would likely necessitate some form of financing, such as tax increases or cutbacks, particularly when other political priorities need to be considered.
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