By Teis Jensen
COPENHAGEN (Reuters) - A small right-wing party threatened on Monday to bring down Danish Prime Minister Lars Lokke Rasmussen's government if it postpones planned tax cuts in order to pay for an increase in asylum seekers in Denmark.
Rasmussen's Liberal Party, which holds just 34 of 179 seats in parliament, needs the support of small Liberal Alliance (LA) as well as the populist Danish People's Party (DF), the second largest faction in the house, and the Conservative Party.
The threat demonstrates the precarious situation of the 7-month old government, although much of the focus until now has been on how the traditionally EU-friendly Liberals got along with the eurosceptic views of the People's Party.
While the Liberals and their supporting parties are all right of centre to varying degrees, the DF differs on economic policies and wants increased spending and no tax cuts.
Finance Minister Claus Hjort Frederiksen said on Monday the government needed to address the challenge of housing asylum seekers before it would be able to start talks on the tax cuts.
LA Chairman Anders Samuelsen responded if the government did not begin talks on tax reform in the spring, as scheduled in its programme to which all supporting parties had agreed, then he could not guarantee the government's survival come summer.
DF, the largest of the government's three supporting parties, has said it cannot see where the money for the cuts on the highest and lowest income tax payers could come from.
The threat from LA comes at a time when the voter support for Rasmussen's party is at the lowest level in 25 years, and ahead of a series of major negotiations including proposed reforms of pensions, property taxes and housing benefits.
The Liberal Party is the third-largest party in parliament after the Social Democrats, who came out top during the June election but whose centre-left bloc did not gain a majority.
DF came second in the election but refused to join a coalition government due to differences over social spending.
Analysts question whether LA would bring down the government as it would risk an election that could produce a new government led by the Social Democrats, in power until last summer.
Polls show the Social Democrats are the most popular party with just under 25 percent support, with DF at just under 20 percent and Liberals at 18 percent. But the centre-right and centre-left blocs would end up neck and neck with the same amount of seats in parliament.
The number of asylum seekers in Denmark rose to around 21,000 last year from 14,815 in 2014, and is expected by the government to increase to around 25,000 this year - a large jump but still far below the 163,000 that applied for asylum in neighbouring Sweden last year.