The probability of Denmark joining EMU by the first start date remains quite low. The primary reason for this outlook is due to the fact that Denmark has an opt-out clause. Based upon its economic performance, Denmark would qualify for EMU by 1999. Economic growth in Denmark should reach 3% in 1997. We also see steadily declining debt/GDP ratio underway placing Denmark near the top of the list of European nations economically.
Politically, the Danish do not share the popular support for EMU as is the case in many other nations. Nonetheless, there may be a silent growing support for the concept of a single currency if it is seen that the British change their minds as well. Clearly, opinion polls are not always reliable. The centre-left minority government is unlikely to put this issue before the electorate again before 1999. Consequently, the Danish Euro-sceptic views will most likely prevent this nation from jumping into EMU for the first round, which may very well prove to be a wise decision in the long-run. Any prospect for Denmark joining EMU in the future will require a national referendum. Despite the fact that Denmark has negotiated an “opt-out” position within EMU, the government will continue to maintain the criteria necessary to join EMU should that decision become obvious at some later date.
|Budget Deficit / GDP||1.6||1.4||0.6|
|Debt / GDP||71.9||60.2||68.8|
|10Y Bond Yields||8.3||7.2||6.9|
© Princeton Economic Institute