Denmark Strives to Improve Balance of Payments Position
Frenchman, Michael, American Banker
High interest rates and the strength of the U.S. dollar are taking their toll on the Danish economy, which continues to struggle under the burden of a 200 billion Danish kroner ($18 billion) external debt, half of which is in dollars.
Denmark, one of the smaller members and only Scandinavian country to join the European Economic Community, has one of the highest standards of living in Europe and the highest tax rate. These two factors, coupled with 257,000 unemployed people out of a population of 5.1 million, have combined to make membership in the EEC, not to mention the more controversial issue of NATO, an irksome duty.
To maintain its $12,001 per capita income, 90% unemployment benefit for its jobless, and its welter of social services, the government has to borrow, and borrow, and borrow again. Some people see Denmark as a kind of Latin America of Europe but without the Latin levels of inflation -- one of the few things that the Danes have steadily brought under control.
The minority coalition government, elected last January, has the unenviable task of trying to balance fiscal policies with a tightening incomes policy in order to attempt an improvement of the overall balance of payments position. But moves to continue tightening incomes policies have invoked howls of criticism from Mr. Anker Jorgensen, leader of the Social Democratic opposition, as well as rumors of forcing yet another election.
The projected budget deficit this year is expected to be 45.5 billion kroner ($4 billion) with an increased revised balance-of-payments deficit of 15 billion kroner ($1.35 billion) instead of an expected 10 billion kroner ($900 million). The government has been forced to keep revising its estimates for the balance-of-payments deficit throughout the year.
According to a report by Mr. Torben Nielson, chief economist with the Privatbanken, many institutions, including Denmark's own Central Bank, now estimate the deficit to be as high as 16 billion-17 billion kroner ($1. …