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.

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
tv
Sport
Ojo Onaolapo celebrates winning the bronze medal
commonwealth games
Arts and Entertainment
Rock band Led Zeppelin in the early 1970s
musicLed Zeppelin to release alternative Stairway To Heaven after 43 years
Arts and Entertainment
Tracey Emin's 'My Bed' is returning to the Tate more than 15 years after it first caused shockwaves at the gallery
artTracey Emin's bed returns to the Tate after record sale
Environment
Neil Young performing at Hyde Park, London, earlier this month
environment
News
i100
News
Prince Harry is clearing enjoying the Commonwealth Games judging by this photo
people(a real one this time)
Sport
Lionel Messi looks on at the end of the final
football
Extras
indybest
News
Richard Norris in GQ
mediaGQ features photo shoot with man who underwent full face transplant
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
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

Project Coordinator

Competitive: The Green Recruitment Company: The Organisation: The Green Recrui...

Project Manager (HR)- Bristol - Upto £400 p/day

£350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...

Embedded Linux Engineer

£40000 - £50000 per annum + competitive: Progressive Recruitment: Embedded Sof...

Senior Hardware Design Engineer - Broadcast

£50000 - £65000 per annum + Benefits: Progressive Recruitment: Working for a m...

Day In a Page

The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
Countries that don’t survey their tigers risk losing them altogether

Countries that don’t survey their tigers risk losing them

Jonathon Porritt sounds the alarm
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz
A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on