A Danish ‘yes’ to build peace and prosperity

Date: 09/04/1998

Danish Economic Affairs Minister Marianne Jelved explains her country's approach to the key challenges facing the EU

ON 28 May, the Danes will once again hold a referendum on the EU in order to ratify the Amsterdam Treaty.

This will be the fifth referendum since we joined the Union in 1973. The Danish opt-out from the third phase of economic and monetary union was a result of one of these.

The ministry of economic affairs has now analysed the effect on Denmark of this political decision and the conclusions of this analysis are contained in the report Denmark and the euro, released last week.

The aim of the report is to prepare Danish business, the financial sector and consumers for one of the most important European political events this year: the establishment of EMU and the single currency.

Denmark will not participate in this event, but we will still be affected by the birth of the euro.

However, the most important task in the coming years is the enlargement of the EU to include the countries of central and eastern Europe. This is an event of utmost significance for Denmark.

Monetary union is considered an important element in building a politically stable and peaceful Europe. EMU is crucial to secure a successful enlargement of the EU to the central and eastern European countries. The new member states will need a stable and homogeneous economic and political environment to join, and the EU needs a strong economy in order to absorb new member states.

For a small country like Denmark, it is very important to be a part of Europe. Prosperity, freedom and cooperation are not only created within our own borders but also between countries. If we want to achieve new goals on international issues, we need close cooperation in Europe and in the world.

A good example of international cooperation was the result of the climate change conference in Kyoto last year.

The EU has the most ambitious goals for the environment. It is at the centre of environmental cooperation, and that is why the issue was given a more prominent position in the Amsterdam Treaty, underlining the great importance which the Union attaches to sustainable development.

It is also important in the future to take environmental considerations into account when formulating economic polices. One way in which these policies can promote growth and employment while at the same time protecting the environment is to shift the balance of taxation away from labour and towards other levies such as green taxes.

Sustainable growth and macroeconomic stability must go hand in hand. This will only happen if there is the necessary political will among the leaders of the European countries, although it also requires political participation and pressure from the citizens of the EU.

When 11 member states of the Union replace their national currencies with a single European currency, Denmark will not be among them. At the Edinburgh summit of 1992, Denmark announced that it would not take part in the third stage of EMU, but it would continue to participate fully in all other areas of economic cooperation in the EU.

The Danish strategy for economic policy, building on sound public finances, will not change after the start of the third phase of EMU. The economic policy goal will remain the maintenance of high employment, non-inflationary growth respecting the environment, and sound public finances leading to a surplus in government finances on average over the business cycle.

A cornerstone in Danish economic policy is a fixed exchange rate policy. Since the beginning of the Eighties, Denmark has followed this policy vis-à-vis the core currencies of the Exchange Rate Mechanism as a natural and important part of our stability-oriented economic policy.

In recent years, the Danish krone has been steady around its bilateral central rate in the ERM. This reflects the fact that the Danish economy has adapted to the era of low inflation and a stable economic environment.

Denmark will participate in the new currency mechanism, ERM II, which will succeed the present ERM on 1 January 1999.

The possibility of obtaining an agreement with the ECB on a closer link to the euro is a natural extension of the present Danish fixed exchange rate policy.

Economic policies in Denmark build on the same principles of sound public finances as in the stability and growth pact. In fact, fiscal policy strategy in Denmark is even more ambitious. Our objective is to reduce the gross public debt ratio to 40% of gross domestic product in 2005.

A more ambitious economic policy in Denmark is regarded as necessary not only to achieve room for manoeuvre in fiscal policy, but also because financial markets may be particularly attentive to economic developments in member states outside the euro area.

The continued credibility of the fixed Danish krone rate and a reduction in the interest rate differential vis-à-vis Germany is conditional upon Denmark conducting a tighter economic policy than that operating in the euro-zone countries.

Denmark is among the EU countries which have succeeded in reducing unemployment significantly without stoking up inflationary pressures.

Promoting lifelong learning within the labour force is an element of this process, along with schemes to reverse the trend of youth unemployment and long-term joblessness through the use of active measures to improve employability rather than passive support activities.

Our labour market reforms play an important role in this development together with our sound macroeconomic policies, but unemployment in the EU still remains unacceptably high.

Having said that, there is no easy answer to unemployment. It is thus important to create a favourable economic environment, with a sound macroeconomic framework combined with structural reforms in the labour market, as well as in product markets, to create a genuine internal market. In this way, the expansion of employment will be lasting.

The Amsterdam Treaty is, to a high degree, influenced by the Danish and Nordic way of thinking. The new treaty contains provisions on many important issues such as employment, the environment, openness, human rights and subsidiarity - an approach we share with many other like-minded countries in Europe.

The increasing challenges of globalisation underline the need for economic and political cooperation in these fields.

The key reason for ratifying the Amsterdam Treaty is, however, the need to take an important step in the process of enlargement.

The expansion of the EU is crucial for Europe and vital for Denmark. It will bring an end to the history of a divided Europe and we, the member countries of the Union, have a huge responsibility in this.

As a member of the Danish government, I would like to see the Danish and Nordic values I mentioned earlier spread and blend together with other European values among the citizens and political systems of an enlarged EU.

We are in the process of mixing a unique European cocktail of economic and political values - a process which has all the necessary potential to be a positive development for a small member country like Denmark, especially if we participate actively. It is therefore my hope that Danes will vote 'yes' in the referendum on the Amsterdam Treaty on 28 May.

It is essential that all European countries stand together. Only together can we prepare ourselves for the changes the 21st century will bring.

Major feature by Denmark's Economic Affairs Minister. She explains Denmark's approach to the key challenges facing the EU.