Denmark is shelving indefinitely its euro adoption goal, as Prime Minister Helle Thorning-Schmidt says an exchange rate peg without full European monetary membership is proving the best currency regime for the Nordic nation.
Thorning-Schmidt, half-way through her first four-year term, said Denmark’s chosen model of an opt-out from the euro has shielded the economy from the worst of the crisis further south. The nation, which together with the rest of Scandinavia emerged as a haven from Europe’s fiscal turmoil, will continue to debate the question of whether Denmark should join the euro at some point, she said.
“The euro has been subject to a lot of uncertainty over the course of the last couple of years, actually many years, and the time isn’t ripe for a referendum on Denmark joining the euro”, Thorning-Schmidt said. “That doesn’t change the fact that Denmark will remain at the core of European cooperation.”
Thorning-Schmidt said a currency peg has proved a safer regime than a free floating krone. The framework has prevented exchange rate fluctuations such as those plaguing neighbouring Norway and Sweden. Those two nations have struggled with appreciations that are hurting exporters and even causing bouts of deflation. “There are many drawbacks to not having a fixed currency policy and I’m sure countries employing such a regime can subscribe to that”, she said.
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