The Social Democratic Party, historically identified with a well-organized labor movement but today appealing more broadly to the middle class, held power either alone or in coalition for most of the postwar period except from 1982 to 1993. From February 1993 to November 2001, Social Democratic Party chairman Poul Nyrup Rasmussen led a series of different minority coalition governments, which all included the centrist Social Liberal Party. However, with immigration high on the November 2001 election campaign agenda, the Danish People's Party doubled its number of parliamentary seats; this was a key factor in bringing into power a new minority right-of-center coalition government led by Liberal Party chief Anders Fogh Rasmussen (no relation to Nyrup Rasmussen).

Parliamentary elections held February 8, 2005 returned the coalition to government for another term of up to four years. The coalition consists of the Liberal Party ("Venstre") and the Konservative Party, holding 71 of the 179 seats in the Folketing , and has the parliamentary support of the Danish People's Party, holding another 24 seats. The opposition Social Democrats hold 47 seats and the Social Liberals hold 16 seats. Addressing the costs and benefits of the Denmarkís comprehensive social welfare system, restraining taxes, and immigration are among the key issues on the current domestic political agenda.

Denmark's role in the European Union (EU) remains an important political issue. Denmark emerged from two referenda (June 2, 1992, and May 18, 1993) on the Maastricht Treaty on the European Union with four exemptions (or "opt-outs"): common defense, common currency, EU citizenship, and certain aspects of legal cooperation, including law enforcement. The Amsterdam Treaty was approved in a referendum May 28, 1998, by a 55% majority. Still, the electorate's fear of losing national identity in an integrated Europe and lack of confidence in long-term stability of European economies run deep. These concerns were at the forefront of the September 28, 2000 referendum on Denmark's participation in the third phase of the Economic and Monetary Union, particularly the common currency, the euro; more than 53% voted "no," and Denmark retained its "krone" currency unit. The government and the pro-EU opposition have agreed, and Denmark has received an EU green light, to maintain the four opt-outs throughout the process of approving and ratifying a new EU constitutional treaty, with the ambition to eliminate all opt-outs in the longer term. The government intended to put Danish approval of the new EU constitution to the public in a referendum, but that process has been put on hold until further discussion of the constitution has taken place in the European Council.