High-taxed Danes fear for their home-grown model

Sarah Helm concludes her series with a report on Denmark's view of EMU

Copenhagen - Gazing down over the Danish Parliament a tall, elegant woman stands in her office, at the top of the national Bank of Denmark, musing about the evolution of the Danish "social model". Why is it that Danes are prepared to pay such high taxes, and to let the state distribute their wealth?

Nothing symbolises the special Danish way of doing things more than the fact that the country has placed two women in charge of its money. Bodil Nyboe Andersen is governor of the Bank of Denmark, and Marianne Jelved is economics minister.

"It is true we probably have the most egalitarian society in Europe," says Mrs Nyboe Andersen. "But I can't answer why it happened this way here. It just did - it is an evolution which has lasted more than 150 years. It is a question of faith - do you think one way is better than the other. We are not saying ours should be copied."

So what would happen to the Danish model if the country joined the single currency and succumbed to economic and monetary harmonisation? Those matters, Mrs Nyboe Andersen says, are "political" - a ruse, used by many Danes in sensitive positions, to avoid answering the big question: will Denmark join economic and monetary union?

The answer, on the face of it, is clearly no. The Danes, like the British, secured an opt-out from the single currency after Maastricht. But the Danes went even further than Britain - they chose to exercise the opt- out, deciding not to enter at the 1999 launch.

As the deadline approaches, however, some believe Danish resolve to remain out of EMU is faltering. The Danish opt-out could be reversed - after a referendum - in time to join a second wave, perhaps in 2002. If EMU is a success Denmark will not be able to resist joining, say diplomats. It will be part of a second wave, probably coming in along with Britain, Ireland, Sweden, Italy, Spain and Portugal.

Denmark today provides both a model for those striving for monetary union - and a model for those who believe it is better to stay outside.

Along with Luxembourg and Ireland, Denmark is one of only three countries which meet all the Maastricht economic criteria.

The country will balance its public deficit books next year. Unemployment is at 6 per cent, according to Commission figures, and growth is between 2.5-3 per cent.

Denmark reviewed its public spending in the early 1980s, when it carried out many of the painful adjustments which other countries are undergoing today. The country then set up a "stability pact" to control public spending, which is something of a forerunner of the EMU stability pact.

While Denmark's success shows the Maastricht way works, however, it also raises questions about the necessity of any deeper economic union which could lead to a levelling of European tax and welfare systems.

Denmark has managed to maintain fiscal discipline while keeping to its own unique policies of high tax and high state provision. Income tax, along with environmental taxes and high VAT, mean everyone loses at least 60 per cent of their salary in tax. In return, all health care is provided for and public education is of the highest standard, with private schools available only for special needs.

Although Denmark is making adjustments to improve labour market flexibility, it still is able to offer every worker a six-month sabbatical and early retirement on virtually full pay.

When it comes to the crunch, however, Danes may not be so sentimental about their welfare state. "Taxes on everything" is a regular cry. Green taxes are scorned as a means for the government to raise revenue, not to clean the water.

Pro-Europeans, such as Uffe Elleman-Jensen, the former foreign minister say Danes will see sense and accept the single currency once they realise the country will lose influence over European economic policy-making by remaining outside. The country would also risk exchange rate instability. "As soon as Danes start crossing the border to go shopping with euros in Germany they will realise it makes sense," he says.

Mrs Nyboe Andersen seems less sure. "I don't think we should over-estimate the economic costs of staying out," she says. "We already accept the economic policy and would continue to follow it. Although there is a political cost to be paid if we have no influence over decision-making."

If the messages from the political elite remain so unsure, it seems unlikely that Danes will be persuaded to say "yes" to the euro in the near future.

Start your day with The Independent, sign up for daily news emails
New Articles
tvDownton Abbey Christmas special
Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
tvOur review of the Doctor Who Christmas Special
News
peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
News
news
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
News
i100
Arts and Entertainment
Left to right: Stanley Tucci, Sophie Grabol and Christopher Eccleston in ‘Fortitude’
tvSo Sky Atlantic arrived in Iceland to film their new and supposedly snow-bound series 'Fortitude'...
Arts and Entertainment
Jenna Coleman as Clara Oswald in the Doctor Who Christmas special
tvForget the rumours that Clara Oswald would be quitting the Tardis
Arts and Entertainment
Japanese artist Megumi Igarashi showing a small mascot shaped like a vagina
art
News
The Queen delivers her Christmas message
newsTwitter reacts to Her Majesty's Christmas Message
Arts and Entertainment
tv
Life and Style
fashion
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Account Manager

£20000 - £35000 per annum: Recruitment Genius: This full service social media ...

Recruitment Genius: Data Analyst - Online Marketing

£24000 - £35000 per annum: Recruitment Genius: We are 'Changemakers in retail'...

Austen Lloyd: Senior Residential Conveyancer

Very Competitive: Austen Lloyd: Senior Conveyancer - South West We are see...

Austen Lloyd: Residential / Commercial Property Solicitor

Excellent Salary: Austen Lloyd: DORSET MARKET TOWN - SENIOR PROPERTY SOLICITOR...

Day In a Page

A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all