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Danish CEOs Say Joining Euro to Take at Least 5 Years

Denmark's Prime Minister Lars Loekke Rasmussen
Staying outside the euro “damages” Denmark’s interests, Prime Minister Lars Loekke Rasmussen told reporters. Photographer: Simon Dawson/Bloomberg

Oct. 6 (Bloomberg) -- Chief executive officers at three of Denmark’s biggest financial companies said the Nordic country may stay outside the euro for at least the next five years as the debt crisis puts voters off the single currency bloc.

“It’s relatively natural that there’s some reluctance toward the euro at a time when we’ve seen turmoil with countries in the euro area having very, very high debt levels,” said Peter Straarup, CEO of Danske Bank A/S, Denmark’s biggest lender, during a Sept. 30 interview in Copenhagen.

The euro dropped 21 percent against the dollar from last November’s peak to the lows in June as investors bet record deficits run up by so-called peripheral nations such as Greece might fracture the region’s monetary union. European Union leaders are struggling to design better controls to prevent a repeat after the euro went through the most severe test since its 1999 creation.

Support for euro membership has been dwindling among Danish voters. A Sept. 22 poll commissioned by Danske Bank showed backing for the euro was 46.6 percent last month, while 51.7 percent of those surveyed want to keep the krone. That compares with 53.4 percent for the euro two years ago after the central bank raised interest rates to an eight-year high to defend the krone, which is pegged to Europe’s single currency.

The euro slipped 0.2 percent against the dollar at 1:08 p.m. in Frankfurt, after trading 0.3 percent higher earlier in the day. Fitch Ratings lowered Ireland’s credit grade one level to A+ from AA-, with a negative outlook, it said today. Straarup, who led his bank’s 2005 acquisition of National Irish Bank, said loan losses in the country probably peaked in the second quarter.

‘We Have Suffered’

Straarup and Stine Bosse, CEO of Tryg A/S, the country’s biggest non-life insurer, said joining the monetary union would help their companies and Denmark’s economy. Staying outside the euro “damages” Denmark’s interests, Prime Minister Lars Loekke Rasmussen told lawmakers yesterday.

“If you ask politicians, central bankers and business people, everybody knows that we have suffered from not being a full member,” Bosse said in a Sept. 29 interview in Ballerup, Denmark. It will take at least five, possibly 10 years, before the country can join the euro because the government missed a window in 2008 when voter support for the currency switch was high, she said.

“If we don’t use the situation at a time when people can see things are difficult for Denmark outside the euro, then I don’t know when we will have the opportunity,” she said.

Narrowest Spread

The government has backed away from its promise to hold a referendum by next year. A vote won’t be held until Denmark meets the EU’s fiscal rules, Rasmussen has said.

The budget deficit will reach 4.6 percent of gross domestic product this year, breaching the EU’s 3 percent threshold, after the government deployed $10 billion in stimulus funds to pull the country out of its worst recession since World War II, the Finance Ministry said Aug. 24.

Denmark, rated AAA at Fitch, Moody’s Investors Service and Standard & Poor’s, will comply with the bloc’s fiscal rules by 2013 at the latest, Rasmussen said. The euro area’s average deficit will reach 6.6 percent of GDP this year, the European Commission said in May.

The yield spread on Denmark’s 10-year government bonds relative to German bunds is smaller than for any euro member, according to data compiled by Bloomberg. Danish 10-year benchmark debt yielded 2.34 percent today, compared with 2.24 percent for German benchmark debt.


Denmark’s three-month interbank deposit rates jumped as high as 0.9 percent today, the highest since March 22, and were trading at 0.81 percent at 1 p.m. The yield on the benchmark six-year bond rose 3 basis points to 2.73 percent.

“It will take quite a number of years before Denmark’s euro membership again becomes a headline,” Straarup said.

That may hamper corporate expansion, according to Bosse.

“If we have the ambition that Danish financial companies should be consolidators, the euro is crucial,” Bosse said.

Tryg is targeting acquisitions in the northernmost euro member Finland, as well as in Sweden and possibly also in Poland and the Baltic states, she said.

Christian Sagild, CEO of insurer Topdanmark A/S, said his company wouldn’t benefit from a currency switch. The firm only does business inside Denmark.

Denmark’s krone may even have helped the economy avoid the fallout of Europe’s debt crisis, Sagild said in an Oct. 1 interview in Ballerup. It is “unlikely” that Danes will join the euro within five years, he said.

“Unless you have a reporting system that works and that allows you to react to the developments in the different countries, then I think the common currency is more of a risk than an opportunity,” he said.

The central bank raised its benchmark interest rate to an eight-year high of 5.5 percent in October 2008 to protect the krone from a sell-off as investors shunned smaller markets. It has since cut the rate to a record low 1.05 percent.

To contact the reporters on this story: Niklas Magnusson in Stockholm at; Christian Wienberg in Copenhagen at

To contact the editors responsible for this story: Frank Connelly at; Tim Quinson at

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