This chapter examines what happens when Third Way social democrats are confronted with a serious challenger on the authoritarian right. Moreover, the chapter analyses the credibility considerations for competitor parties, as mentioned in the theoretical chapter. This will be done by examining the electoral consequences for Danish social democracy (Socialdemokratiet i Danmark, SD) since the mid-1990s. Replacing a centre-right government in 1993, Danish social democracy engaged in path-break ing labour market reforms under a Third Way agenda. The sd has traditionally faced a competitor on the Left, the Socialist People's Party (Socialistisk Folkeparti, SF). In addition, it has been challenged by the right-wing Danish People's Party (Dansk Folkeparti, DF) since the mid-1990s. The sd's biggest challenger, the mainstream Liberal Party (Venstre), also deserves some attention, as the party has transformed ideologically since 1993.

The SD was one of the early parties to transform itself under a Third Way agenda in terms of both ideology and policy, after the party regained office in 1993 (Green-Pedersen et al. 2001). It was responsible for three rounds of labour market reforms between 1993 and 2001, reforms that have been identified as path-breaking (Goul Andersen 2002, 2003a). These reforms broke with the decommodification principle, as social security became more conditional and entitlements were tightened under the social democratic government.

After the sd changed its policy under the new leader and then Prime Minister, Poul Nyrup Rasmussen, the party lost votes in the period between 1993 and 2001. It was overtaken by the Liberals in the 2001 election, for the first time in decades. In the same election, the Danish People's Party emerged as a serious right-wing competitor, gaining about one out of eight votes. The case of Denmark makes it possible to examine (1) the potential of a right-wing challenger to foster realignment after recommodifying welfare state reforms and (2) the strategic dilemmas of leftwing competitors. The following expectations will guide the remainder of this chapter. First, with the 2001 election, we would expect the right-wing Danish People's Party to foster a realignment of social democratic core constituents, as Danish social democracy had alienated its core constituents with its welfare policy in the 1990s.