Danish election set to reshape government

By Kim McLaughlin

COPENHAGEN (Reuters) - Danish Prime Minister Anders Fogh Rasmussen has lost the opinion poll lead he had when he called an early election, and whatever the result of Tuesday's vote it will reshape the Nordic nation's government.

Rasmussen, fighting for a third term on the back of strong economic growth, is level in polls with new Social Democrat leader Helle Thorning-Schmidt, who aims to be Denmark's first woman prime minister and wants to stop planned tax cuts.

Even if his Liberal Party prevails, he will need the support of two disparate groups -- an anti-immigrant party and a centrist group led by a Syrian-born Danish Muslim that backs better treatment of refugees.

Rasmussen told Reuters he believed he would be able to put together such an alliance if need be after the November 13 vote, which he called 15 months before it was due.

"In free and democratic elections you can never be sure, but I hope that we will win and believe the chances that my government will be able to continue are good," he said.

Rasmussen, 54, has carried out most of the pledges he made six years ago -- using some of Europe's toughest immigration laws to slash the number of immigrants granted permission to stay by almost 80 percent, and cutting taxes.

He has presided over an unprecedented economic boom in the country of 5.5 million, bolstered by North Sea oil money.

"Much has gone well in the last six years," Rasmussen said in a televised debate on Sunday.

"Never before have so many Danes had jobs, unemployment is at a record low...Give us the backing to continue the stability and progress we've seen in the last six years," he said.

But polls show the most burning issue for voters now is the fate of the welfare system.

TAX CUTS OR WELFARE

This is where Social Democrat Thorning-Schmidt, 40, has gained ground, arguing that Danes have to choose between tax cuts and better welfare.

She has said she will roll back tax cuts Rasmussen plans for next year and told Reuters after the debate that if elected, she would spend the next four years improving public services.

"The prime minister is good at talking about welfare, while we are good at doing something about it," she said.

The candidates have similar pro-EU foreign policies and would keep troops in Afghanistan. Rasmussen, trying to disarm his opponent in key areas, this year pulled ground troops from Iraq and proposed to raise public spending to improve welfare.