Danish opposition to joining the euro rose to a record high as the single currency bloc’s debt crisis made voters favor the krone, according to a poll published by Danske Bank A/S.
The lead of the “no” bloc widened to 23.3 percentage points in September, compared with a 16.5 point lead in June, according to the poll released today by Denmark’s biggest bank and conducted by Copenhagen-based Statistics Denmark. The poll puts opposition to the euro at the highest since the currency was introduced in 1999.
Danes, who rejected a currency switch in a 2000 referendum, have grown more skeptical toward the euro as Greece’s debt plight puts Europe’s single currency through its toughest test since its inception. The euro yesterday slumped to a decade low against the yen as policy makers are discussing beefing up the 440 billion-euro ($591 billion) European Financial Stability Facility, seeking a way to prevent the 18-month crisis from spreading.
“Sovereign debt problems have probably increased opposition to Denmark joining” the euro area, Steen Bocian, chief economist at Danske Bank, said in the statement.
Denmark’s central bank uses monetary policy to maintain the krone’s peg to the euro in a 2.25 percent band. The bank on July 7 raised its benchmark lending rate to 1.55 percent from 1.3 percent, matching a quarter-point increase by the European Central Bank and keeping the spread between the rates at 5 basis points.
In October 2008, Denmark raised its rate to an eight-year high of 5.5 percent to protect the krone as the credit crisis spread. That increase brought the difference between Danish and euro area benchmark rates to 175 basis points. Since the crisis flared up again in August, the central bank has cut rates twice as investors in search of low-debt markets buy kroner.
“The ‘no’ camp surge is probably also due to the Danish central bank having narrowed the policy interest rate spread to the eurozone,” Bocian said. “Hence the costs of not being part of the eurozone appear significantly less now.”
The krone’s strength may force Denmark’s central bank this week to cut two of its non-benchmark interest rates, the current account rate and the rate for certificates of deposits, according to economists at Sydbank A/S and Nykredit A/S.
Social-Democrat leader Helle Thorning-Schmidt, whose opposition bloc is still in talks to form a new government after winning this month’s national elections, has said she won’t hold a euro referendum in the next four years, even though her party targets euro adoption in the longer term.
“When the Danes will again vote on joining the euro remains uncertain,” Bocian said. “However, the Danes will most likely not be asked to decide on Denmark’s euro opt-out in the foreseeable future.”
According to the poll, 60.6 percent of respondents would reject or would be inclined to reject the euro, while 37.3 percent said they would support or be inclined to back the currency switch, Danske Bank said.
Statistics Denmark interviewed 974 people in the first two weeks of September for the poll. The lender didn’t provide a margin of error.