Danes Face New Reality in Struggle to End Crisis, PM Says

Danes face a new reality as the Nordic country needs to provide more welfare services at a lower cost and stop a slide in its competitiveness amid a struggle to end a four-year economic crisis, Prime Minister Helle Thorning-Schmidt said.

The country will have to prepare for a “long, enduring stretch,” the premier said yesterday in a traditional televised New Year’s speech from Copenhagen.

Denmark can emerge from the crisis if we “understand that we are in a new reality,” she said. “The abundance of the last decade will not return.”

Denmark is struggling to recover from a real estate slump that’s pushed at least a dozen banks into insolvency since 2008. The International Monetary Fund has urged the government to consider direct stimulus measures to avoid a recession as house prices continue to sink. Property values have lost more than 20 percent since their 2007 peak and will probably drop 4.7 percent this year, the government-backed Economic Council said Nov. 1.

Danish 10-year yields rose 12 basis points to 1.18 percent as of 11:15 a.m. in Copenhagen. They yielded 28 basis points below benchmark German bunds.

The economic plight is destroying jobs and unemployment will continue to rise until 2014, council estimates. The jobless rate, including people in vocational training programs, was at 6.3 percent in October, up from below 3 percent in 2008, the statistics office said on Nov. 29.

‘Slow Turnaround’

The government last month predicted the economy will probably contract 0.4 percent in 2012, matching a decline in the 17-member euro area. Economic output will expand 1.2 percent this year, the government said.

The premier said in the speech that while 2012 was a tough year, a “slow turnaround” is expected this year even as the government will have to think hard about new spending.

A survey today showed the country’s purchasing managers’ index rose to 57 in December from 56.6 in November, indicating an acceleration. A reading above 50 signals growth.

The country will need to target exports markets in Asia, keep wage growth in check and improve education, she said, urging students to complete their degrees quicker.

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