Country Report Denmark October 2009

Outlook for 2010-11

• The minority Liberal-Conservative government is expected to retain parliamentary support from the populist Danish People's Party (DF), and should remain in office for much of the outlook period.
• An election must be held by November 2011. Although an earlier vote is possible, the government is likely to wait until an economic recovery is well underway before seeking a fourth term in office.
• The outcome of the election will be close. There is a good chance that a left-of-centre coalition could win a majority, but divisions over key policy areas may lead voters to re-elect the incumbent centre-right coalition.
• 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 the sharp economic downturn, through tax cuts and higher public spending.
• Fiscal policy will be expansionary. Personal income taxes will be cut in 2010-11. The budget balance will swing into deficit. Interest rates should remain stable until late 2010 or early 2011, rising only gradually thereafter.
• The Danish economy is experiencing one of the most prolonged recessions in Europe. Real GDP is forecast to shrink by a revised 5.1% in 2009, with a gradual recovery to growth of 0.5% in 2010 and of 1.3% in 2011.

Monthly review

• The prime minister, Lars Lokke Rasmussen, launched the new parliamentary session on October 6th with a speech that concentrated on Denmark's youth, including new measures to combat youth crime.
• The DF said that its support for the 2010 budget would be conditional on an agreement to reduce the age of criminal responsibility from 15 to 12 years. The government has proposed reducing it to 14 years.
• A cabinet reshuffle is now expected later in the year, after it emerged that the government would need to find a replacement for Mariann Fischer Boel, who announced that she is to retire from the European Commission.
• The Danish central bank (Danmarks Nationalbank) has made a further, small reduction in interest rates, eliminating the differential with euro area rates that had opened up during the financial crisis in late 2008.
• The government has indicated that it will not seek to introduce greater competition into the railway system until the period between 2014-20.
• Real GDP contracted by 2.6% quarter on quarter in the second quarter, and by 7% year on year. Economic indicators show that the pace of decline has slowed in the third quarter, but there are few signs of a recovery in activity.

This report covers the following industry codes:
SIC Code: 37
NAICS Code: 336