Country Report Denmark April 2009

Summary

Lars Lokke Rasmussen was chosen as Denmark's new prime minister in early April, after his predecessor was appointed as secretary-general of NATO. The change has no immediate implications for government stability.
Opinion polls suggest that a majority of voters now support the opposition parties, but the minority Liberal-Conservative government is expected to retain sufficient parliamentary support to remain in office in 2009-10.
The government's main short-term policy priorities will be to ensure the stability of Denmark's financial institutions and to alleviate the effects of a sharp economic downturn.
The government has stated an ambition to hold a referendum on whether to join the euro area during the current parliamentary term (2007-11), but uncertainty over the result is likely to lead it to back off.
Fiscal policy will be expansionary. Public investment is set to rise. Personal income taxes will be reduced in 2010-11, paid for by higher environmental taxes, although the reform will be under-financed during the downturn.
The Nationalbank (the central bank) will further reduce interest rates during 2009, although it will maintain a positive differential with comparable euro area rates if this is necessary to protect the krone's peg to the euro.
The Danish economy is heading for a severe contraction. Real GDP is forecast to shrink by a revised 3.5% in 2009, with growth stagnant in 2010.

Months of speculation over the political future of Anders Fogh Rasmussen ended on April 4th when he announced that he was stepping down as prime minister to become the next secretary-general of NATO.
In a widely expected move, Mr Fogh Rasmussen was succeeded by the minister of finance and deputy Liberal leader, Mr Lokke Rasmussen.
The new prime minister faces a resurgent political opposition. Polls suggest that the leader of the Social Democrats, Helle Thorning-Schmidt, is more trusted by voters in relation to a number of policy issues.
A reshuffled cabinet must consider whether additional fiscal measures are required to boost the economy. Recent figures show that the budget remained in surplus in 2008, but the debt/GDP ratio increased.
In late March Denmark's largest financial institution, Danske Bank, sought a Dkr26bn (US$4.7bn) loan under the governments capital injection scheme.
The bankruptcy rate has doubled over the past year. Confidence indicators continue to stagnate. Retail sales have risen in 2009, but remain weak.

This report covers the following industry codes:
SIC Code: 60;37;65
NAICS Code: 52;336;53