Danish regions and municipalities benefit from strict oversight and involvement from the central government. Automatic state grant mechanism and extensive equalization counterbalance risks stemming from economic slowdowns. Budgetary discipline enforced by negotiated expenditure ceilings. Tax-raising autonomy limited by agreements between the central government and local and regional government (LRG) sector. S&P Global Ratings considers that the central government's close oversight of the Danish LRG sector--which includes a strict budgetary framework, extensive equalization, and automatic block grants--supports stable budgetary performance, and helps to contain debt levels in the sector. We could revise our assessment if the central government displayed relaxed oversight and inadequate funding of the sector resulted in deteriorating budgetary performance and rising indebtedness. In 2021, a recalibrated equalization system
