Denmark and the euro

Eurozone participation

  19 European Union member states in the eurozone

  7 European Union member states not in ERM II, but obliged to join the eurozone once convergence criteria are met (Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania and Sweden)

  1 European Union member state in ERM II, with an opt-out (Denmark)

  1 European Union member state not in ERM II, with an opt-out (United Kingdom)

  4 non-European Union member states using the euro with a monetary agreement (Andorra, Monaco, San Marino and Vatican City)

  2 non-European Union member states using the euro unilaterally (Kosovo and Montenegro)

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, Socialist People's Party and Red–Green Alliance 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.

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

Status

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.

The krone has been part of the ERM II mechanism since 1 January 1999, when it replaced the original ERM. This implies 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). 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. 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.

Convergence criteria
Assessment month	Country	HICP inflation rate	Excessive deficit procedure		Exchange rate		Long-term interest rate	Compatibility of legislation
			Budget deficit to GDP	Debt-to-GDP ratio	ERM II member	Change in rate
2012 ECB Report	Reference values	Max. 3.1% (as of 31 Mar 2012)	None open (as of 31 March 2012)		Min. 2 years (as of 31 Mar 2012)	Max. ±15% (for 2011)	Max. 5.80% (as of 31 Mar 2012)	Yes (as of 31 Mar 2012)
			Max. 3.0% (Fiscal year 2011)	Max. 60% (Fiscal year 2011)
	Denmark	2.7%	Open			-0.4%	2.39%	Unknown
			1.8%	46.5%
2013 ECB Report	Reference values	Max. 2.7% (as of 30 Apr 2013)	None open (as of 30 Apr 2013)		Min. 2 years (as of 30 Apr 2013)	Max. ±15% (for 2012)	Max. 5.5% (as of 30 Apr 2013)	Yes (as of 30 Apr 2013)
			Max. 3.0% (Fiscal year 2012)	Max. 60% (Fiscal year 2012)
	Denmark	1.8%	Open			0.1%	1.33%	Unknown
			4.0%	45.8%
2014 ECB Report	Reference values	Max. 1.7% (as of 30 Apr 2014)	None open (as of 30 Apr 2014)		Min. 2 years (as of 30 Apr 2014)	Max. ±15% (for 2013)	Max. 6.2% (as of 30 Apr 2014)	Yes (as of 30 Apr 2014)
			Max. 3.0% (Fiscal year 2013)	Max. 60% (Fiscal year 2013)
	Denmark	0.4%	Open (Closed in June 2014)			-0.2%	1.78%	Unknown
			0.8%	44.5%

  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), 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. 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.

  Criterion not fulfilled

Notes

History

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). 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. 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."

Euro referendum (2000)

Main article: Danish euro referendum, 2000

A referendum held on 28 September 2000 rejected membership of the eurozone. 87.6% of eligible voters turned out, with 46.8% voting yes and 53.2% voting no. Most political parties, media organisations and economic actors in Denmark campaigned in favour of adopting the euro. However, a couple of major parties campaigned against. Had the vote been favourable, Denmark would have joined the eurozone on 1 January 2002, and introduced the banknotes and coins in 2004. The immediate run-up to the referendum saw a significant weakening of the euro vs. the US dollar. Some analysts believe that this resulted in a general weakening of confidence in the new currency, directly contributing to its rejection. The bank believes that the debate was "coloured by the view that, on account of its fixed-exchange-rate policy, Denmark had already reaped some of the benefits of joining the euro area."

Possible second euro referendum

Main article: Danish European Union opt-outs 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. It was unclear if people would vote on each exemption separately, or if people would vote on all of them together. However, the uncertainty, both in terms of the stability of the euro and the establishment of new political structures at the EU level, resulting first from eruption of the Financial Crisis and then subsequently from the related European government-debt crisis, led the government to postpone the referendum to a date after the end of its legislative term. When a new government came to power in September 2011, they outlined in their government manifest, that a euro referendum would not be held during its four-year term, due to a continued prevalence of this uncertainty. As part of the European elections in 2014, it was argued collectively by the group of pro-European Danish parties (Venstre, Konservative, Social Democrats and Radikale Venstre), that an upcoming euro referendum would not be in sight until the "development dust had settled" from creation of multiple European debt crisis response initiatives (including the establishment of Banking Union, and the Commission's - still in pipeline - proposal package for creating a strengthened genuine EMU). When a new Venstre-led government came to power in June 2015, their government manifest did not include any plans for holding a euro referendum within their four-year legislative term.

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

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".

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". 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. 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 aimed at preserving financial stability in Europe by providing financial assistance to eurozone states in difficulty. It has two parts. The first part expands a €60 billion stabilisation fund (European Financial Stabilisation Mechanism). All EU countries contribute to this fund on a pro-rata basis, whether they are eurozone countries or not. 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. 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.

Date	YES	NO	Unsure	Number of participants	Held by	Ref
29 March – 30 April 2002	47%	33%	20%	unknown	Eurobarometer
March 2007	56%	39%	5%	910 Persons	Greens Analyseinstitut published in Børsen
April 2007	53%	40%	7%	910 Persons	Greens Analyseinstitut published in Børsen
November 2007	54%	42%	4%	unknown	Greens Analyseinstitut published in Børsen
26 November 2007	52%	39%	9%	1016 Danish Adults	Vilstrup Synovate published in Politiken
April 2008	55%	38%	7%	1009 Danish Adults	Greens Analyseinstitut published in Børsen
5–7 May 2008	54%	42%	4%	1009 Danish Adults	Greens Analyseinstitut published in Børsen
Mid-June 2008	40%	48%	12%	1036 Danes	Capacent Epinions
29 September – 1 October 2008	52%	44%	4%	1050 Danish Adults	Greens Analyseinstitut published in Børsen
3–5 November 2008	54%	38%	8%	1098 Danish Adults	Greens Analyseinstitut published in Børsen
December 2008	54%	40%	6%	>1000 Danish Adults	Greens Analyseinstitut published in Børsen
5–7 January 2009	56%	38%	4%	1307 Danish Adults	Greens Analyseinstitut published in Børsen
2–4 February 2009	57%	39%	4%	1124 Danish Adults	Greens Analyseinstitut published in Børsen
11 February 2009	42%	42%	16%	unknown	Gallup Poll in Berlingske Tidende
2–4 March 2009	52%	38%	10%	1085 Danish Adults	Greens Analyseinstitut published in Børsen
30 March – 1 April 2009	51%	42%	7%	1007 Danish Adults	Greens Analyseinstitut published in Børsen
27–29 April 2009	52%	40%	8%	1178 Danish Adults	Greens Analyseinstitut published in Børsen
13 May 2009	43%	45%	11%	unknown	Rambøll
25–27 May 2009	51%	42%	7%	951 Danish Adults	Greens Analyseinstitut published in Børsen
September 2009	50%	43%	7%	951 Danish Adults	Greens Analyseinstitut published in Børsen
October 2009	50%	43%	7%	1081 Danish Adults	Greens Analyseinstitut published in Børsen
2–4 November 2009	54%	41%	5%	1158 Danish Adults	Greens Analyseinstitut published in Børsen
30 November – 2 December 2009	50%	40%	10%	1001 Danish Adults	Greens Analyseinstitut published in Børsen
2–4 January 2010	51%	42%	7%	1162 Danish Adults	Greens Analyseinstitut published in Børsen
1–3 February 2010	49%	45%	6%	1241 Danish Adults	Greens Analyseinstitut published in Børsen
1–3 March 2010	48%	46%	6%	552 Danish Adults	Greens Analyseinstitut published in Børsen
12–14 April 2010	52%	41%	7%	988 Danish Adults	Greens Analyseinstitut published in Børsen
3–5 May 2010	48%	45%	7%	1004 Danish Adults	Greens Analyseinstitut published in Børsen
11–13 May 2010	45%	43.2%	11.2%	1002 Danish Adults	Catinét Ritzau published in Fyens
31 May – 2 June 2010	45%	48%	7%	1079 Danish Adults	Greens Analyseinstitut published in Børsen
27 September 2010	45%	48.3%	6.7%	unknown	Jyllands-Posten
1 October 2010	46%	48%	6%	1025 Danish Adults	Greens Analyseinstitut published in Børsen
1 November 2010	44%	49%	7%	unknown	Greens Analyseinstitut published in Børsen
1 December 2010	46%	48%	6%	1006 Danish Adults	Greens Analyseinstitut published in Børsen
1 January 2011	43%	50%	7%	1336 Danish Adults	Greens Analyseinstitut published in Børsen
1 February 2011	43%	48%	9%	1053 Danish Adults	Greens Analyseinstitut published in Børsen
1 March 2011	47%	46%	7%	1060 Danish Adults	Greens Analyseinstitut published in Børsen
1 April 2011	43%	50%	7%	1286 Danish Adults	Greens Analyseinstitut published in Børsen
1 May 2011	44%	48%	8%	1133 Danish Adults	Greens Analyseinstitut published in Børsen
1 August 2011	37%	54%	9%	1143 Danish Adults	Greens Analyseinstitut published in Børsen
September 2011?	22.5%	50.6%	28.1%	unknown	Danske Bank
11 October 2011	29%	65%	6%	1239 Danes	Greens Analyseinstitut published in Børsen
4–6 May 2012	26%	67%	7%	1092 Danish Adults	Greens Analyseinstitut published in Børsen
24–27 February 2013	29%	64%	7%	1004 Danish Adults	Greens Analyseinstitut published in Børsen
3–9 January 2014	30%	62%	8%	1199 Danish Adults	Greens Analyseinstitut published in Børsen
25 April – 1 May 2014	26%	66%	8%	1235 Danish Adults	Greens Analyseinstitut published in Børsen
25–30 July 2014	30%	64%	6%	1298 Danish Adults	Greens Analyseinstitut published in Børsen
22–27 August 2014	29%	64%	7%	1222 Danish Adults	Greens Analyseinstitut published in Børsen
24–29 October 2014	28%	64%	8%	1139 Danish Adults	Greens Analyseinstitut published in Børsen
21–26 November 2014	30%	61%	9%	1165 Danish Adults	Greens Analyseinstitut published in Børsen
23–28 January 2015	31%	61%	8%	1242 Danish Adults	Greens Analyseinstitut published in Børsen
20–26 February 2015	27%	64%	9%	1179 Danish Adults	Greens Analyseinstitut published in Børsen
24–29 March 2015	28%	62%	10%	1232 Danish Adults	Greens Analyseinstitut published in Børsen
22–26 May 2015	30%	60%	10%	961 Danish Adults	Greens Analyseinstitut published in Børsen
27 July – 3 August 2015	25%	66%	9%	1205 Danish Adults	Greens Analyseinstitut published in Børsen
25–30 September 2015	25%	64%	11%	1143 Danish Adults	Greens Analyseinstitut published in Børsen
27 November – 2 December 2015	22%	70%	8%	1191 Danish Adults	Greens Analyseinstitut published in Børsen

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. 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. 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

• Enlargement of the eurozone