Denmark and the euro

The bourgeois coalition government of Denmark in 1992 consisting of Conservatives, Agrarian Liberals, and the Social Democrats held approximately 80% of the seats in the Danish parliament (Folketing) and therefore believed that the referendum would easily get approved which was not the case.

[5] The ratification of the Maastricht Treaty needed to be a unanimous decision by all the member states in the EU and the Danish "no" therefore posed a significant issue for the further integration process.

The Danish "no" and the French "petit oui" are known in scholarly circles as the erosion of the permissive consensus regarding public support for European integration.

[7] In the years after Maastricht, the European integration faced more political scrutiny and pro-integration politicians could no longer rely on diffuse support.

In the ERM II the domestic central bank, Danmarks Nationalbank, and the ECB commits to the stability of the Danish currency within the given fluctuation band.

When the Danish currency goes beyond the agreed upon limits, it is up to the domestic Central bank to intervene until the level is back within the fluctuation band.

To avoid going beyond the fluctuation limits the domestic Central bank has two tools to adjust the money supply and exchange rate.

[12] The European Central Bank is conducting monetary policy independently from the national governments from the eurozone countries and has the aim of price stability.

Fixed exchange rate policy based on the euro creates a framework for low inflation in the long run.

Therefore, the adoption of ERM II is not a change in this sense or a loss of autonomy in monetary policy as it has been limited since the creation of the Bretton Woods system.

[16] Even though the Danish central bank governor does not participate in the governing council of the ECB, where the monetary policy and guidelines are formulated and adopted, Denmark have other channels of influence.

The tendency of ECOFIN topics increasingly being transferred and therefore more discussed in the Eurogroup meetings is therefore again a limitation for Danish influence on monetary decisions.

Other channels of influence and interaction with other officials can be done through ESCB framework, IMF, OECD and the ECB committees in which the Central Bank of Denmark also participates.

This participation in the ECB committees is essential, as seen in the fact that its influence over monetary policy has improved compared to earlier systems.

[52] The first step toward a more integrated monetary system in Europe was the Basel agreement which created the European Currency Snake.

The snake cooperation was negatively impacted by exogenous pressures e.g. oil crises, the weakness of the dollar and differences of economic policy.

[52] The EMS provided a stable system though it was still possible to have adjustable exchange rates and the Danish government used any opportunity to devaluate the currency.

[55] The most significant reform was the decision to opt for a fixed exchange rate policy in 1982 and the government stopped devaluating the Danish currency.

[57] As a part of this process, the National Bank of Denmark participated in various aspects of the planning of the euro as it was still considered to be very important for future Danish economic policy.

According to a history published by the central bank, "Firstly, it was important to create a solid framework for price stability in the euro area, making it an appropriate anchor for the Danish fixed-exchange-rate policy.

[58] Most political parties, media organisations and economic actors in Denmark campaigned in favour of adopting the euro.

The bank believes that the debate was "coloured by the view that, on account of its fixed-exchange-rate policy, Denmark had already reaped some of the benefits of joining the euro area.

[61] However, the uncertainty, both in terms of the stability of the euro and the establishment of new political structures at the EU level, resulting first from eruption of the Financial Crisis and then subsequently from the related European government-debt crisis, led the government to postpone the referendum to a date after the end of its legislative term.

[62] As part of the European elections in 2014, it was argued collectively by the group of pro-European Danish parties (Venstre, Konservative, Social Democrats and Radikale Venstre), that an upcoming euro referendum would not be in sight until the "development dust had settled" from creation of multiple European debt crisis response initiatives (including the establishment of Banking Union, and the Commission's – still in pipeline – proposal package for creating a strengthened genuine EMU).

[66] The euro can be used in some locations in Denmark, usually in places catering to tourists, such as museums, airports and shops with large numbers of international visitors.

In an opinion published in February 2019, it argued that it conflicted with the principle of "sincere cooperation" set out in Article IV of the Treaty on European Union, and noted that no ban was planned for other high-value units of currency, such as the highest Swiss franc banknote,[70][71] worth more than 6,500 DKK at the time.

However, a study of the history of the Danish monetary policy shows that, "while Denmark does not share a single currency, its central bank has always tracked changes made by the ESCB".

[83] The exact same poll conducted in May 2024, signaled a gradual rise for supporting the euro from the previous level recorded in 2012 and 2018; with 34% now in favour, 58% against and 8% undecided.

[84] Greens Analyseinstitut, a public opinion research company, has generally asked "How would you vote at a possible new referendum about participation of Denmark in the common currency?"

Before Denmark's 2000 referendum on the issue, Danmarks Nationalbank and the Royal Mint were asked by the Ministry of Economics to propose possible designs for the future Danish euro coins.