COPENHAGEN -- So complicated are the names of the 16 political parties running in Tuesday's Danish election that campaign posters often are written in a sort of code, with each party identified only by a letter of the alphabet.

Some are easier to decipher than others. The Conservatives, leaders of the ruling four-party minority coalition, are "C," leaving "K" for the Communists. Posters for the Social Democrats are a red-painted "A," a letter befitting their status as the country's largest political party.

But while the Greens are "G," and the Humanists "H," the new left-wing Forward Together Party has ended up with "P."

The shorthand is useful on ballots, presumably making it easier for voters to recognize their party of choice on lists ranging from 36 names for a small constituency on the island of Bornholm, to 149 candidates in one district of Aarhus, Denmark's second-largest city.

The electoral system, based on proportional representation that makes vote counting seem a mathemetical nightmare, bewilders outsiders. The Danes explain that the longer the list of parties -- both on the ballot and in the government -- the better their democracy.

For most of the last 40 years, Denmark has been run by minority coalitions whose tenure has depended on their ability to negotiate policy, issue by issue, with independents and the opposition in the 179-member Folketing, or parliament. The center-right government, led by Conservative Prime Minister Poul Schlueter since 1982, controls only 80 seats, compared to the 79 controlled by the opposition bloc that includes the Social Democratic and Socialist People's parties.

The rulers have gained a majority on most issues with the help of the independent 10-seat Radical Liberal Party. But while the Radicals have often supported the coalition's efforts to balance the budget and cut government spending, they have repeatedly turned against it on foreign policy and security issues.

The results, over government opposition, have been a stagnant defense budget, rejection of a role in the U.S. Strategic Defense Initiative and an embarrassing series of Danish exceptions to North Atlantic Treaty Organization nuclear weapons policy. This has led some of Denmark's NATO allies to question its commitment to western defense.

Other than a sputtering political debate over a government proposal to increase the defense budget by nearly 9 percent over the next five years, however, security has played a negligible role in the election. Debate has centered on economic policy.

For decades now, Denmark has been one of the most prosperous countries in the world. A University of Pennsylvania study several years ago credited it with the highest quality of life among 124 countries. It has one of the most extensive welfare systems. Danes make more money, save less and consume more goods than most other westerners.

Danes' taxes also are among the world's highest. Their foreign debt outstrips that of many Third World countries on a per capita basis. They have run a foreign trade deficit for the past quarter of a century. How Denmark can afford to go on living in the manner to which it clearly has become accustomed is a question that rarely seems to enter into the public consciousness.

It is this same relatively laid-back attitude, sociologists here say, that encourages the expansion in the number of political parties. Because they are confident of their agreement on the basic framework of daily life and the general concentration of both left and right political thought near the center, a significant number feel free to spend their votes on single-issue parties.

"If two people have the same idea about any one subject here, they form an organization," said Finn Kenneth Hansen of the Danish Social Sciences Institute. "But of the five or six parties on the left," he noted, "it's hard to see much of a difference."

Nine parties were represented in the last parliament, making for some interesting political horse-trading. This time, however, Schlueter has asked for a stable political majority centered around the four-party coalition and the Radical Liberals to continue making what he says are the tough economic decisions on which the future depends.

The current government came into office, after a seven-year period of Social Democratic rule, hobbled with a $7 billion budget deficit. "In their last years, our predecessors spent three krone for every two krone they had in the box," Schlueter said last week.

With substantial parliamentary support, the new government embarked on a policy of creative new taxes and stringent wage controls. A cap was put on local public spending -- comprising a large portion of the welfare budget -- as well as on some categories of welfare benefits.

The results were dramatic. Danish growth, at 4 percent in 1984, became the highest in the European Community. Unemployment went down, along with interest rates and inflation. By this year, the budget was balanced.

But with the exchange rate of the krone rising along with the currencies of its bigger EC partners, and the dollar weakening, local industry has been unable to gain a competetive export edge. The balance-of-payments deficit last year reached a high of $5 billion.

Foreign debt, Schlueter said, remains at about 58 percent of annual gross national product. Although the government has campaigned on a promise of more jobs, most Danish economists expect unemployment will increase from its current 8 percent.

Raising the personal income tax, now at a base rate of 50 percent for all income up to about $30,000, and 68 percent for all additional income, is not considered an option for increased government revenue. Nor are further cuts in the welfare system, which absorbs a third of all governmental expenditures.

The centerpiece of the government's new economic plan is a package of tax cuts and other financial breaks for export industries. Although the opposition bloc on the left agrees that Danish exports must be made more competitive, the left would like to see this accomplished through more, rather than less, state participation in industry.

Most opinion polls in the three weeks since Schlueter called the snap election -- four months before he was required to do so -- have indicated that the government will be returned to office, still as a minority but perhaps with a slightly improved parliamentary position.

With another minority government virtually guaranteed, interest has focused on performance of maverick parties. Most attention centers on the Progress Party, an anti-tax, anti-immigration group difficult to characterize as far right because its followers also are anti-defense. Party leader Mogens Glistrup, recently released from a three-year jail term for tax evasion, once said that Denmark's defense policy should consist of a telephone answering service saying "We surrender" in Russian.

Although early in its 15-year history the Progress Party commanded 28 seats, then second only to the Social Democrats, it currently has four.