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Denmark and the euro

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Title: Denmark and the euro  
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Subject: European Exchange Rate Mechanism, Enlargement of the eurozone, Lithuania and the euro, Economy of Denmark, Danish euro referendum, 2000
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Denmark and the euro

eurozone participation
  European Union member states (eurozone) – 18
  European Union member state in ERM II scheduled to join on 1 January 2015 – Lithuania
  European Union member states not in ERM II but obliged to join – 7
  European Union member state in ERM II with an opt-outDenmark
  European Union member state not in ERM II with an opt-out – United Kingdom
  non-European Union member states using the euro with a monetary agreement – 4
  non-European Union member states using the euro unilaterally – 2

Denmark uses the krone as its currency and does not use the euro, having negotiated the right to opt-out from participation under the Maastricht Treaty of 1992. In 2000, the government held a referendum on introducing the euro, which was defeated with 46.8% voting yes and 53.2% voting no. The Danish krone is part of the ERM-II mechanism, so its exchange rate is tied to within 2.25% of the euro.

Most of the large political parties in Denmark favour the introduction of the euro and the idea of a second referendum has been suggested several times since 2000. However, some important parties such as the Danish People's Party and Socialist People's Party do not support joining the currency. Public opinion surveys have shown fluctuating support for the single currency with majorities in favour for some years after the physical introduction of the currency. However, following the financial crisis of 2008, support began to fall, and in late 2011, support for the euro crashed in light of the escalating European sovereign debt crisis.[1]

Denmark borders one eurozone member, Germany, and one EU member that is obliged to adopt the euro in the future, Sweden.


The Maastricht Treaty of 1992 required that members of the European Union join the euro once certain economic criteria had been met. However, the treaty gave Denmark the right to opt-out from participation, which they subsequently did. Denmark meets all five criteria and could join the euro if it chooses.[2]

The krone has been part of the ERM II mechanism since 1 January 1999, when it replaced the original ERM. This requires it is required to trade within 2.25% either side of a specified rate of 1 euro equal to 7.46038 kroner (making the lower rate 7.29252 and the upper rate 7.62824).[3] This band, 2.25%, is narrower than the 15% band used for most ERM II members. However, the exchange rate has kept within 0.5% of the defined rate, even less than the set limits.[4] The independence of the Danish central bank is therefore limited in practice. Its aim is to keep the krone within this exchange rate band. This policy marks a continuation of the situation that existed from 1982–1999 with regard to the Deutsche Mark, which provided a similar anchor currency for the krone. The ECB is also obliged to help protect the Danish currency in the case of speculative attacks.

  Criterion fulfilled
  Criterion potentially fulfilled: If the budget deficit exceeds the 3% limit, but is "close" to this value (the European Commission has deemed 3.5% to be close by in the past),[21] then the criteria can still potentially be fulfilled if either the deficits in the previous two years are significantly declining towards the 3% limit, or if the excessive deficit is the result of exceptional circumstances which are temporary in nature (i.e. one-off expenditures triggered by a significant economic downturn, or by the implementation of economic reforms that are expected to deliver a significant positive impact on the government's future fiscal budgets). However, even if such "special circumstances" are found to exist, additional criteria must also be met to comply with the fiscal budget criterion.[22][23] Additionally, if the debt-to-GDP ratio exceeds 60% but is "sufficiently diminishing and approaching the reference value at a satisfactory pace" it can be deemed to be in compliance.[24]
  Criterion not fulfilled

  1. ^ The 12-months average for the annual HICP inflation rate must be no more than 1.5% larger than the unweighted arithmetic average of the similar HICP inflation rates in the 3 EU member states with the lowest HICP inflation. If any of these 3 states have a HICP rate significantly below the similarly averaged HICP rate for the eurozone (which according to ECB practice means more than 2% below), and if this low HICP rate has been primarily caused by exceptional circumstances (i.e. severe wage cuts or a strong recession), then such a state is not included in the calculation of the reference value and is replaced by the EU state with the fourth lowest HICP rate.
  2. ^ The annual average for the yield of 10-year government bonds must be no more than 2.0% larger than the unweighted arithmetic average of the bond yields in the 3 EU member states with the lowest HICP inflation. If any of these states have bond yields which are significantly larger than the similarly averaged yield for the eurozone (which according to previous ECB reports means more than 2% above) and at the same time does not have complete funding access to financial markets (which is the case for as long as a government receives bailout funds), then such a state is not be included in the calculation of the reference value.
  3. ^ The change in the annual average exchange rate against the euro.
  4. ^ Reference values from the ECB convergence report of May 2012.[12]
  5. ^ Sweden, Ireland and Slovenia were the reference states.[12]
  6. ^ a b c The maximum allowed change in rate is ± 2.25% for Denmark.
  7. ^ Sweden and Slovenia were the reference states, with Ireland excluded as an outlier.[12]
  8. ^ Reference values from the ECB convergence report of June 2013.[15]
  9. ^ a b Sweden, Latvia and Ireland were the reference states.[15]
  10. ^ Reference values from the ECB convergence report of June 2014.[18]
  11. ^ a b Latvia, Portugal and Ireland were the reference states.[18]


Early monetary unions in Denmark (1873–1914)

On 5 May 1873 Denmark with Sweden fixed their currencies against gold and formed the Scandinavian Monetary Union. Prior to this date Denmark used the Danish rigsdaler divided into 96 rigsbank skilling. In 1875, Norway joined this union. A rate of 2.48 kroner per gram of gold, or roughly 0.403 grams per krone was established. An equal valued krone of the monetary union replaced the three legacy currencies at the rate of 1 krone = ½ Danish rigsdaler = ¼ Norwegian speciedaler = 1 Swedish riksdaler. The new currency became a legal tender and was accepted in all three countries. This monetary union lasted until 1914 when World War I brought an end to it. But the name of the currencies in each country remained unchanged.

European Monetary System and pre-euro monetary co-operation

The Danish krone was fixed to a basket of European currencies during the 1980s. This was formalised in the European Monetary System (EMS).[25] Prior to that Denmark had participated in the "European currency snake" in the years after the collapse of the Bretton Woods system.

Pre-eurozone documents (1992–1999)

The Maastricht Treaty of 1992 required that EU member states join the euro. However, the treaty gave Denmark the right to opt-out from participation, which they subsequently did following a referendum on 2 June 1992 in which Danes rejected the treaty. Later that year Denmark negotiated the Edinburgh Agreement, under which Denmark was granted further opt-outs, which led to the Maastricht Treaty being accepted in a referendum on 18 May 1993. As the result, Denmark is not required to join the eurozone. Denmark did however participate in Stage 2 of EMU, which was considered the preparatory phase for the introduction of the euro.[26] As a part of this process, the National Bank of Denmark participated in various aspects of the planning of the euro as it was still considered to be very important for future Danish economic policy. According to a history published by the central bank, "Firstly, it was important to create a solid framework for price stability in the euro area, making it an appropriate anchor for the Danish fixed-exchange-rate policy. Secondly, Denmark had an interest in developing an expedient framework for exchange rate cooperation between the euro area and the non-euro area member states. Thirdly, Denmark had a general interest in the formulation of the ground rules for Stage 3 of EMU to ensure that Denmark would be able to adopt the single currency at a later stage on the same terms as those applying to the initial euro area member states."[26]

Euro referendum (2000)

A [28]

Possible second euro referendum

Double krone and euro prices in Magasin (2009)

On 22 November 2007, the newly re-elected Danish government declared its intention to hold a new referendum on the abolition of the four exemptions, including exemption from the euro, by 2011.[29] It was unclear if people would vote on each exemption separately, or if people would vote on all of them together.[30] The uncertainty, both in terms of the stability of the euro and the establishment of new political structures at the EU level, resulting from the ongoing financial crisis led the government decided to postpone the referendum. After a new government came to power in September 2011, they stated that the referendum would not be held during its four-year term due to this uncertainty.[31]

There has been some speculation that the result of a Danish referendum would affect the Swedish debate on the euro.[32]

Usage today

The euro can be used in some locations in Denmark, usually in places catering to tourists, such as museums, airports and shops with large numbers of international visitors. However, change is usually given in kroner. Double krone-euro prices are used on all ferries going between Denmark and Germany.

Consequences of a euro adoption

If Denmark were to adopt the euro, the monetary policy would be transferred from the Danmarks Nationalbank to the ESCB. In theory this would limit the ability of Denmark to conduct an independent monetary policy. However, a study of the history of the Danish monetary policy shows that, "while Denmark does not share a single currency, its central bank has always tracked changes made by the ESCB".[33]

However, whilst outside the euro, Denmark does not have any representation in the ESCB direction. This motivated the support for an adoption of the euro by former Prime Minister Anders Fogh Rasmussen: "De facto, Denmark participates in the euro zone but without having a seat at the table where decisions are made, and that's a political problem".[34] Furthermore the ESCB does not defend the Danish krone exchange rate. This is done by Danmarks Nationalbank, and the Danish government. In a crisis it can be tough for a small country to defend its exchange rate.

The expected practical advantages of euro adoption are a decrease of transaction costs with the eurozone, a better transparency of foreign markets for Danish consumers, and more importantly a decrease of the interest rates which has a positive effect on growth.[33] However, when joining the euro, Denmark would abandon the possibility to adopt a different monetary policy from the ECB. If ever an economic crisis were to strike specifically the country it would have to rely only on fiscal policy and labour market reforms.

In the wake of the 2010 European sovereign debt crisis European leaders established the European Financial Stability Facility (EFSF) which is a special purpose vehicle[35] aimed at preserving financial stability in Europe by providing financial assistance to eurozone states in difficulty.[36] It has two parts. The first part expands a €60 billion stabilisation fund (European Financial Stabilisation Mechanism).[37] All EU countries contribute to this fund on a pro-rata basis, whether they are eurozone countries or not.[38] The second part, worth €440 billion consists of government-backed loans to improve market confidence. All eurozone economies will participate in funding this mechanism, while other EU members can choose whether to participate. Unlike Sweden and Poland, Denmark has refused to help fund this portion of the EFSF.[39][40] If Denmark joined the eurozone it would then be obliged to help fund the second portion.

Public opinion

Euro opinion in Denmark since August 2006 by Børsen.
green – support of adopting the euro
red – against adopting the euro
blue – undecided
DKK-EUR exchange rate since 1999

There have been numerous polls on whether Denmark should abolish the krone and join the euro. The actual wording of the questions have varied. In 2008 and 2009 they generally, but not always, showed support among Danes for adopting the euro.

Greens Analyseinstitut, a public opinion research company, has generally asked "How would you vote at a possible new referendum about participation of Denmark in the common currency?" ("Hvad ville du stemme ved en evt. ny folkeafstemning om Danmarks deltagelse i den fælles valuta?").

Danish dominions

The Faroe Islands currently use the Faroese króna, a localised version of the Danish krone but legally the same currency. Such notes are normally not accepted by shops in Denmark proper, or foreign exchange bureaus, but exchanged 1:1 in Danish banks. Greenland currently uses ordinary Danish kroner but has considered introducing its own currency, the Greenlandic krone in a system similar to that of the Faroese one.[75] Both continue to use Danish coins.

It remains unclear if Greenland and the Faroe Islands would adopt the euro should Denmark choose to do so. Both are parts of the Kingdom of Denmark, but remain outside of the EU. For this reason, they do not take part in EU referenda.

Possible euro coin design

Before Denmark's 2000 referendum on the issue, Danmarks Nationalbank and the Royal Mint were asked by the Ministry of Economics to propose possible designs for the future Danish euro coins.[76] The suggested design was based on the designs of the Danish 10- and 20-krone coins, with Queen Margrethe II on the front, and the 25- and 50-øre coins, switching their back motif (a crown) to the front of the euro coins.

See also


  1. ^ "Danskerne siger nej tak til euroen". (in Danish). 27 September 2011. Retrieved 29 September 2011. 
  2. ^ Travel Document Systems – Denmark Economy: Denmark meets, and even exceeds, the economic convergence criteria for participating in the third phase (a common European currency–the euro) of the European Monetary Union (EMU)
  3. ^ Upper and lower limits of the exchange rate of the DKK
  4. ^ The lowest and highest rates as posted by the ECB are 7.4234 (0.49% below) and 7.468 (0.1% above) kroner per euro, posted on 25 April 2003 and 18 September 2000 respectively. See [1] (previous rates: CSV zipped).
  5. ^ "HICP (2005=100): Monthly data (12-month average rate of annual change)". Eurostat. 16 August 2012. Retrieved 6 September 2012. 
  6. ^ "The corrective arm".  
  7. ^ "Long-term interest rate statistics for EU Member States (monthly data for the average of the past year)". Eurostat. Retrieved 18 December 2012. 
  8. ^ "Government deficit/surplus data". Eurostat. 22 April 2013. Retrieved 22 April 2013. 
  9. ^ "What is ERM II?". European Commission. 31 July 2012. Retrieved 8 September 2012. 
  10. ^ "Euro/ECU exchange rates - annual data (average)". Eurostat. Retrieved 5 July 2014. 
  11. ^ "Former euro area national currencies vs. euro/ECU - annual data (average)". Eurostat. Retrieved 5 July 2014. 
  12. ^ a b c "Convergence Report May 2012".  
  13. ^ "Convergence Report - 2012".  
  14. ^ a b "European economic forecast - spring 2012" (PDF). European Commission. 1 May 2012. Retrieved 1 September 2012. 
  15. ^ a b "Convergence Report".  
  16. ^ "Convergence Report - 2013".  
  17. ^ a b "European economic forecast - spring 2013" (PDF). European Commission. February 2013. Retrieved 4 July 2014. 
  18. ^ a b "Convergence Report".  
  19. ^ "Convergence Report - 2014".  
  20. ^ a b "European economic forecast - spring 2014" (PDF). European Commission. March 2014. Retrieved 5 July 2014. 
  21. ^ "Luxembourg Report prepared in accordance with Article 126(3) of the Treaty" (PDF). European Commission. 12 May 2010. Retrieved 18 November 2012. 
  22. ^ "EMI Annual Report 1994" (PDF). European Monetary Institute (EMI). April 1995. Retrieved 22 November 2012. 
  23. ^ "Progress towards convergence - Nov. 1995 (report prepared in accordance with article 7 of the EMI statute)" (PDF). European Monetary Institute (EMI). November 1995. Retrieved 22 November 2012. 
  24. ^ "Progress towards convergence - November 1995 (report prepared in accordance with article 7 of the EMI statute)" (PDF). European Monetary Institute (EMI). November 1995. Retrieved 17 March 2013. 
  25. ^ "Monetary and Exchange-Rate Policy". Danmarks Nationalbank – Report and Accounts 1998. Danmarks Nationalbank. Retrieved 25 October 2011. 
  26. ^ a b Abildgren, Kim (2010). Monetary History of Denmark 1990–2005. Copenhagen: Danmarks Nationalbank. p. 216. 
  27. ^ "Folkeafstemning om euroen den 28. september 2000" (in Danish). Folketinget. 8 August 2006. Retrieved 2008-12-23. 
  28. ^ Abildgren, 221.
  29. ^ Stratton, Allegra (22 November 2007). "Danes to hold referendum on relationship with EU". London: Guardian Unlimited. Retrieved 2007-11-22. 
  30. ^ Dagens Huvudledare (24 November 2007). "Danmark går före" (in Swedish). Dagens Nyheter. Retrieved 2008-12-23. 
  31. ^ Brand, Constant (13 October 2011). "Denmark scraps border-control plans". European Voice. Retrieved 18 October 2011. 
  32. ^ Henrik Brors (22 November 2007). "Utspelet kan höja temperaturen i den iskalla svenska EU-debatten" (in Swedish). Dagens Nyheter. Retrieved 2008-12-23. 
  33. ^ a b
  34. ^ "Rasmussen Says He Isn't Candidate for EU Presidency (Update1)". Bloomberg. 31 March 2008. 
  35. ^ [2] "The Council and the member states decided on a comprehensive package of measures to preserve financial stability in Europe, including a European financial stabilisation mechanism, with a total volume of up to EUR 500 billion."
  36. ^ [3] "European Financial Stability Facility, the special-purpose vehicle (SPV) set up to support ailing euro-zone countries, is even being run by a former hedgie. But this is one fund that will never short its investments."
  37. ^ [4] "Media reports said that Spain would ask for support from two EU funds for eurozone governments in financial difficulty: a €60bn ‘European financial stabilisation mechanism', which is reliant on guarantees from the EU budget."
  38. ^ Moya, Elena (10 May 2010). "Debt crisis Q&A: How the EU bailout will work". The Guardian (London). Retrieved 12 May 2010. 
  39. ^ "France attacks UK over attitude to bail-out fund". EUObserver. 11 May 2010. Retrieved 12 May 2010. 
  40. ^ "EU's lånepakke kan koste Danmark ni milliarder kroner" (in Danish). Politiken. 10 May 2010. Retrieved 12 May 2010. 
  41. ^
  42. ^ a b (Danish)
  43. ^ a b Many Danes Willing to Switch to Euro | Angus Reid Global
  44. ^ a b Danes Still Willing to Adopt Euro | Angus Reid Global
  45. ^
  46. ^ (Danish)
  47. ^ (Danish)
  48. ^ (Danish)
  49. ^ a b (Danish)
  50. ^ (Danish)
  51. ^ Support for euro in free fall -
  52. ^
  53. ^
  54. ^
  55. ^ (Danish)
  56. ^
  57. ^
  58. ^
  59. ^
  60. ^
  61. ^
  62. ^
  63. ^
  64. ^
  65. ^
  66. ^ Danskere tvivler på euro efter græsk krise - - Indland/Fyn
  67. ^
  68. ^ - Nyheder - Indland - Voksende modstand mod at indføre euroen
  69. ^ a b c d e f g h i
  70. ^ Rungande danskt nej till euron | Näringsliv | SvD
  71. ^ Tilslutningen til euroen styrtdykker
  72. ^
  73. ^
  74. ^
  75. ^ Parliament of Denmark, 2006–2007 session, law no. 42
  76. ^ Folketingets EU-oplysning – Illustration af danske euromønter (Danish)
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