EN    EN EN 
 
EN    EN  EUROPEAN COMMISSION 
Brussels, 15.6.2010 
SEC(2010) 742 final 
  
COMMISSION OPINION 
on the existence of an excessive deficit in Denmark 
 
EN 2   EN COMMISSION OPINION 
on the existence of an excessive deficit in Denmark 
THE APPLICATION OF THE STABILITY AND GROWTH PACT IN THE CURRENT 
CRISIS SITUATION 
1. Many EU countries are presently facing gene ral government deficits above the 3% of 
GDP reference value set in the Treaty. The of ten strong deterioration in the deficit as 
well as the debt positions must be seen in the context of the unprecedented global 
financial crisis and economic downturn in 2008/09. Several f actors are at play. First, 
the economic downturn brings about declinin g tax revenue and ri sing social benefit 
expenditure (e.g. unemployment benefits ). Second, recognising that budgetary 
policies have an important role to play  in the current extraordinary economic 
situation, the Commission called for a fiscal stimul us in its November 2008 
European Economic Recovery Plan (EERP), endorsed by the European Council in December. The Plan explicated that the stimulus should be timely, targeted and 
temporary and differentiated acr oss Member States to reflect  their different positions 
in terms of public finance sustainability and competitiveness and should be reversed when economic conditions improve. Finally, several countries have taken measures 
to stabilise the financial sector, some of which have impacted on the debt position or 
constitute a risk of higher deficits and debt in the future, although some of the costs 
of the government support could be recouped in the future. 
2. The Stability and Growth Pact requires the Commission to initiate the excessive 
deficit procedure (EDP) whenever the defici t of a Member State exceeds the 3% of 
GDP reference value. The amendments to the Stability and Growth Pact in 2005 
aimed at ensuring that in particular  the economic and budgetary background was 
taken into account fully in al l steps in the EDP. In this way, the Stability and Growth 
Pact provides the framework supporting gover nment policies for a prompt return to 
sound budgetary positions taking account of the economic situa tion, and thereby 
ensuring long-term sustainability of public finances. 
LEGAL BACKGROUND 3. Article 126 of the Treaty on the Functioni ng of the European Union lays down an 
excessive deficit procedure (EDP). This procedure is further specified in Council 
Regulation (EC) No 1467/97 “on speeding up and clarifying the implementation of 
the excessive deficit procedure”
1, which is part of the Stability and Growth Pact. 
4. According to Article 126(2) of the Treaty, the Commission has to monitor 
compliance with budgetary discipline on th e basis of two criteria, namely: (a) 
whether the ratio of the planned or act ual government deficit to gross domestic 
                                                 
1 OJ L 209, 2.8.1997, p. 6. The report also takes into account the “Specifications on the implementation 
of the Stability and Growth Pact and guidelines on the format and content of stability and convergence 
programmes”, endorsed by th e ECOFIN Council of 10 November 2009, available at 
http://ec.europa.eu/economy_finance/sgp/legal_texts/index_en.htm. 
 
EN 3   EN product (GDP) exceeds the reference value of 3% (unless either the ratio has 
declined substantially and continuously a nd reached a level that comes close to the 
reference value; or, alternatively, the excess over the reference value is only exceptional and temporary and the ratio remain s close to the reference value); and (b) 
whether the ratio of government debt to GDP exceeds the reference value of 60% (unless the ratio is sufficiently diminishi ng and approaching the reference value at a 
satisfactory pace). 
5. Article 126(3) of the Treaty stipulates that, if a Member State does not fulfil the 
requirements under one or both of these cr iteria, the Commission has to prepare a 
report. This report also has to “take into account whether the government deficit 
exceeds government investment expenditure and take into account all other relevant factors, including the medium-term econom ic and budgetary position of the Member 
State”. 
6. On the basis of the data notified by  the Danish authorities in April 2010
2 and taking 
into account the Commission services’ spring 2010 forecast,  the Commission 
adopted a report under Article 126(3) for Denmark on 12 May 20103. 
7. Subsequently, and in accordance with Artic le 126(4) of the Treaty, the Economic and 
Financial Committee formulated an opini on on the Commission report on [27 May 
2010]. 
8. Article 126(5) of the Treaty requires th e Commission to address an opinion to the 
Council if the Commission considers that an  excessive deficit in a Member State 
exists or may occur. In order to reach a conclusion on whether an excessive deficit 
exists or may occur, the Commission cons iders that account shoul d be taken of: (i) 
the conclusions of its report under Artic le 126(3) and (ii) the opinion of the 
Economic and Financial Committee on this re port. On the basis of these elements, 
the Commission has established a number  of considerations for Denmark. 
CONSIDERATIONS CONCERNING DENMARK 9. According to data notified by the Danish authorities in April 2010, the general 
government deficit in Denmark is planned to reach 5.4% of GDP in 2010, thus exceeding the 3% of GDP reference valu e. The Commission report under Article 
126(3) considered that the planned deficit was not close to the 3% of GDP reference 
value, but that the planned excess over th e reference value could be qualified as 
exceptional within the meaning of the Treaty  and the Stability and Growth Pact. In 
particular, it resulted from a severe econom ic downturn in the sense of the Treaty and 
the Stability and Growth Pact. Accordi ng to the Commission services’ 2010 spring 
forecast, real GDP in Denmark is projected  to recover at 1.6% in 2010 after the sharp 
contraction of 4.9% in 2009. The deficit in 2010 is a consequence of both the 
                                                
 
2 According to Council Regulation (EC) No 479/2009, Member States have to report to the Commission, 
twice a year, their planned and actual government deficit and debt levels. The most recent notification 
of Denmark can be found at: 
 http://epp.eurostat.ec.europa.eu/portal/page/porta l/government_finance_statistics/excessive_deficit/edp_
notification_tables. 
3 All EDP-related documents for Denmark can be found at the following website: 
 http://ec.europa.eu/ec onomy_finance/sgp/defic it/countries/index_en.htm. 
 
EN 4   EN economic downturn and the stimulus measur es taken in line with the EERP by the 
Danish authorities. However, the planne d excess over the refere nce value cannot be 
considered temporary. According to the Commission services’ spring 2010 forecast, 
the deficit would decline to 4.9% of GDP in 2011 on a no-policy change4 basis. The 
deficit criterion in the Treaty is not fulfilled. 
10. According to data notified by the Danish authorities in April 2010, the general 
government gross debt stands at 45.1%  of GDP in 2010. The Commission services’ 
spring 2010 forecast projects the debt rati o to increase over the 2010-2011 period 
from 46% to 49.5% of GDP, remaining belo w the 60% of GDP reference value. The 
debt criterion in the Treaty is fulfilled. 
11. In line with the provisions  in the Treaty and the Stab ility and Growth Pact, the 
Commission also analysed in its report “rel evant factors”. According to the Stability 
and Growth Pact, these can only be taken into account in the st eps leading to the 
decision on the existence of an excessive deficit if the deficit satisfies the double 
condition of closeness and temporarine ss. In the case of Denmark, the double 
condition is not met. Considered on their own merit, the relevant factors in the 
current case seem to be relatively favourable. 
12. The opinion of the Economic and Financ ial Committee in accordance with Article 
126(4) of the Treaty is c onsistent with the assessmen t in the Commission report 
under Article 126(3). 
CONCLUSION The monitoring of the budgetary situation in De nmark and, in particular, the examination of 
the compliance with the criter ia laid down in Article 126(2) has led the Commission to 
prepare a report in ac cordance with Article 126(3) of the Treaty. The Commission, having 
taken into account its report and the opinion of the Economic and Financial Committee, is of 
the opinion that an excessive deficit exists in Denmark.  
 
                                                
 
4 The no-policy change forecast takes into account the (partial) withdraw al of measures of extraordinary 
nature linked to the crisis.