Danish PM puts pension reform on election agenda

(Reuters) - Prime Minister Lars Lokke Rasmussen called Saturday for reform of Denmark's early retirement scheme, saying it had become too costly, setting the stage for a 2011 parliamentary election.

Rasmussen must hold the poll by mid-November and his centre-right coalition will face stiff opposition from the Left.

Rasmussen said in a New Year's speech that early retirement was costing Denmark 16 billion crowns (2.15 billion pounds) per year, which he said equals the cost of 240,000 school places or 40,000 assisted living flats for the elderly or three big hospitals.

The government will put forward in January a detailed proposal to abolish the early retirement entitlement for people now under 45 and cut back the scheme for others, with the biggest changes to affect the youngest citizens, he said.

The normal pension age in Denmark is 65, but the early retirement scheme lets people retire at 60. The system was designed for people who are sick or exhausted by hard labour, but it has become popular with many people still fit for work.

If the early retirement system was left unreformed, Rasmussen said, it would force Denmark to cut "core welfare" -- education and health care -- or risk deeper debt, higher interest rates and more unemployment.

Pension reform has been eyed by many European leaders, including French President Nicolas Sarkozy who in November pushed through an increase in the retirement age, as a way to shore up public finances strained by the economic crisis.

"Like other countries, Denmark faces a need for great economic responsibility after the crisis," Rasmussen said. "It is more important than ever to have order in the economy.

"The government therefore proposes that we gradually terminate early retirement," said Rasmussen, whose proposal is likely to draw fire from opponents as it means scrapping a 2006 welfare deal between governing and opposition parties.

Rasmussen said only half the population is in the workforce today and the active share is shrinking as the population ages. The average age of retirement among Danes is 61, Rasmussen said, adding: "There are simply not enough of us to pull the load."

(Reporting by John Acher and Mette Fraende; Editing by Janet Lawrence)