Why Denmark should either abandon its peg to the euro or join the single currency

Following Switzerland’s announcement in January 2015 that it would no longer hold the Swiss franc at a fixed exchange rate with the euro, Denmark has faced mounting speculation that it will follow suit and abandon its euro peg. Lorenzo Codogno and Paul De Grauwe write that there is a paradox in the approach of Denmark to the issue: the Danish central bank has made it clear that it will never change its parity with the euro, but if this is true then there is no reason for the country to avoid joining the single currency. They argue that while there are still instruments available to resist the immediate pressure from financial markets, ultimately the costs of any adjustment in policy will be lower if action is pursued now.

Denmark: Danmarks Nationalbank: Monetary policy: Foreign-exchange-rate policy and ERM 2 http://www.nationalbanken.dk/en/monetarypolicy/fixed_exchange_rate_and_ERM2/Pages/default.aspx

The Local.dk, 03.02.15: PM firm on Denmark's euro currency peg http://www.thelocal.dk/20150311/denmark-euro-kroner-currency-peg

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