Stealthy state investment in an age of austerity: The Danish state guarantee model and infrastructural mega projects

The fiscal realities imposed on European states by the Maastricht Treaty are a well-known facet of European integration, as are the various ways in which this regime has been entrenched and reaffirmed since its inception, whether through the European Semester, the Fiscal Compact, or the general turn to austerity in the aftermath of the Eurozone crisis. Yet, a burgeoning literature has started to uncover some mechanisms that European states have developed to work around these constraints. Contributing to this new scholarship, this article presents a case study of the Danish state’s investment in various infrastructural mega-projects. Using what we call a ‘state guarantee model’ (SGM), the Danish state has used special purpose vehicles under the auspices of state-owned enterprises or public private partnerships, financed via government guaranteed loans that leverage the excellent credit conditions on offer to the Danish state, while formally remaining within the bounds of Maastricht. It is this model that has allowed Denmark to build up extremely expansive infrastructure, including several new metro lines and the longest combined rail and road-bridge in Europe even in an age of austerity. Not only does this article contribute to a mor nuanced understanding of fiscal realities in Europe, it also shows how a state with high administrative capacity can repurpose some of the tools usually associated with the hollowing out of the state to invest in fundamentals.