COMMISSION STAFF WORKING DOCUMENT Assessment of the 2012 national reform programme and convergence progamme for DENMARK Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on Denmark’s 2012 national reform programme and delivering a Council Opinion on Denmark’s convergence programme for 2012-2015
Date: 2012-05-30
Institutions: European Commission
Subjects: Denmark, banking system, budget deficit, budgetary equilibrium, dropout, free competition, labour market, property market, traineeship

EUROPEAN COMMISSION 

Brussels, 30.5.2012  
SWD(2012) 304 final 

COMMISSION STAFF WORKING DOCUMENT 

Assessment of the 2012 national reform programme and convergence progamme for 
DENMARK 

Accompanying the document 

Recommendation for a  

COUNCIL RECOMMENDATION 

on Denmark’s 2012 national reform programme and delivering a Council Opinion on 
Denmark’s convergence programme for 2012-2015 

{COM(2012) 304 final} 

EN 

   EN 

 
 
 
 
  
 
 
 
CONTENTS 

EXECUTIVE SUMMARY ................................................................................................. 3 

1. 

INTRODUCTION....................................................................................................... 4 

2.  ECONOMIC DEVELOPMENTS AND CHALLENGES .......................................... 5 

2.1.  Recent economic developments and outlook .................................................... 5 

2.2.  Challenges ......................................................................................................... 6 

3.  ASSESSMENT OF POLICY AGENDA .................................................................... 8 

3.1.  Fiscal policy and taxation.................................................................................. 8 

3.2.  Financial sector................................................................................................ 14 

3.3.  Labour market, education and social policies ................................................. 16 

3.4.  Structural measures promoting growth and competitiveness.......................... 18 

3.5.  Modernisation of public administration .......................................................... 21 

4.  OVERVIEW.............................................................................................................. 23 

ANNEX ............................................................................................................................. 27 

2 

 
 
 
EXECUTIVE SUMMARY  

In 2012, the Danish economy is expected to pick up slightly as compared to 2011, with a 
foreseen GDP growth of 1.1%. Unemployment more than doubled from a record low of 
3.4 % in 2008 to 7.6 % in 2011 and is expected to remain broadly stable in 2012 at 7.7%.  

A  reform  of  the  voluntary  early  retirement  pension  scheme  was  adopted  last  year, 
establishing  a  good  basis  for  raising  the  effective  retirement  age.  In  addition,  an 
ambitious  budget  law  was  recently  agreed.  The  government  has  announced  a 
comprehensive  set  of  reforms  to  raise  labour  supply  further,  improve  competitiveness, 
and lower income taxes.  

The budget deficit must be reduced to comply with the EDP recommendation and further 
reforms  are  warranted  to  increase  the  labour  supply.  The  quality  of  compulsory  and 
upper  secondary  education  needs  to  be  improved  to  tackle  problems  of  future  skills 
imbalances and low productivity growth. In this respect, further steps are also warranted 
to remove obstacles to competition. In addition, strengthening the medium-term stability 
of  the  housing  market  remains  a  challenge,  partly  on  account  of  the  rise  in  household 
debt and its composition on the back of the housing boom prior to the crisis. 

3 

 
 
1. 

INTRODUCTION 

In June 2011, the Commission proposed five country specific recommendations (CSRs) 
for economic and structural reform policies for Denmark. On this basis, the Council of 
the European Union adopted five CSRs in July 2011. These recommendations concerned 
public finances, the pension system, the labour market, education, competition, and the 
housing market and financial system. 

In November 2011 the Commission published its Annual Growth Survey for 2012 (AGS 
2012) in which it set out its proposals for building the necessary common understanding 
of the priorities for action at national and EU level in 2012. It focuses on five priorities 
—  ensuring  growth-friendly  fiscal  consolidation,  restoring  normal  lending  to  the 
economy, promoting growth and competitiveness, tackling unemployment and the social 
consequences of the crisis, and modernising the public administration — and encourages 
Member States to implement them in the 2012 European Semester. 

Against this background, Denmark presented updates of its national reform programme 
and convergence programme in April 2012. These programmes detail the progress made 
since  July  2011  and  future  plans.  This  Staff  Working  Document  assesses  the  state  of 
implementation  of  the  2011  CSRs  as  well  as  the  AGS  2012  in  Denmark,  identifies 
current policy challenges and examines the country’s latest policy plans in this context. 

Overall assessment 

In 2011, the Danish government deficit was kept below 3 % due to extraordinary pension 
yield tax revenue, as was also the case in 2010. The country also managed to cut public 
spending  as  part  of  its  consolidation  strategy  under  the  Excessive  Deficit  Procedure 
(EDP).  Furthermore,  the  reform  of  the  voluntary  early  retirement  pension  scheme  was 
adopted, thus establishing a good basis for raising the effective retirement age. Moreover, 
an ambitious budget law was recently agreed on among the government and a majority in 
parliament. 

The  government,  which  came  into  office  in  October  2011,  has  announced  a  number  of 
reforms  of  relevance  to  the  CSRs  on  public  spending,  the  labour  market,  education, 
competition  and  tax  policy,  most  of  which  have  not  yet  been  implemented.  Therefore, 
some of the Danish CSRs may only be considered partially implemented and many of the 
challenges identified in July 2011, and reiterated in the AGS 2012, remain valid. 

Denmark  continues  to  face  challenges  in  the  areas  of  public  finances,  labour  supply, 
education,  competition  and  the  housing  market.  The  budget  deficit  must  be  reduced  to 
comply  with  the  EDP  recommendation.  Reforms  of  the  disability  pension  and  flex-job 
schemes  are  warranted  to  increase  the  labour  supply.  Improving  the  quality  of 
compulsory and upper secondary education would mitigate the problems of future skills 
imbalances,  have  a  positive  impact  on  the  future  labour  supply  and  contribute  to 
productivity  growth.  In  this  respect,  further  steps  to  remove  obstacles  to  competition 
could  also  be  taken,  including  the  reinforcement  of  competition  law.  In  addition, 
strengthening  the  medium-term  stability  of  the  housing  market  remains  a  challenge, 
partly  on  account  of  the  rise  in  household  debt  and  its  composition  on  the  back  of  the 
housing boom prior to the crisis. 

The  policy  plans  submitted  by  Denmark  are  relevant  and  credible  but  concrete  policy 
action  in  some  areas  has  been  postponed.  The  possibility  of  liberalising  the  services 
sector  is  still  being  examined.  The  possibility  of  increasing  public  procurement  in 

4 

 
 
 
municipalities  and  regions  will  be  dealt  with  in  negotiations  with  regional  and  local 
governments in June. A survey on the risks related to the distribution of loans and assets 
across households is being prepared by the Ministry of Business and Growth. However, 
the government has announced that it will not change the property tax during the current 
electoral cycle. Headline targets are generally high but given Denmark’s starting point, 
some  of  the  required  improvements  towards  the  targets  do  not  appear  to  be  ambitious. 
However, Denmark’s target to reduce greenhouse gas emissions in non-ETS (emissions 
trading  system)  sectors  by  20 %  by  2020  is  ambitious  and  can  only  be  achieved  if 
additional policy measures are implemented. 

2.  ECONOMIC DEVELOPMENTS AND CHALLENGES 

2.1.  Recent economic developments and outlook 

The partial recovery of the Danish economy in 2010 was driven predominantly by fiscal 
stimulus  measures,  export  growth  and  the  turnaround  in  the  inventory  cycle.  The 
anticipated shift from the public to the private sector as a major growth driver has been 
indecisive  thus  far.  Despite  solid  exports,  the  overall  performance  of  the  Danish 
economy was subdued in 2011, with GDP growth reaching only 1 %, owing in particular 
to consolidation efforts among households and firms in the light of the ongoing sovereign 
debt crisis. The sovereign debt crisis has, on the other hand, led to strong demand for the 
highly rated Danish mortgage bonds and government securities, resulting in low interest 
rates that are currently underpinning the still fragile housing market. 

In 2012 and 2013, real GDP is expected to grow by 1.1 and 1.4%, respectively, driven 
primarily  by  domestic  demand  until  the  global  economy  gradually  becomes  stronger 
towards 2013. Export growth will be substantially lower in 2012 than in 2011 due to a 
less  favourable  external  environment.  In  2013,  exports  are  expected  to  pick  up  on  the 
back  of  a  rise  in  world  trade.  Credit  conditions  are  expected  to  remain  tight  and  gross 
fixed capital formation continues to be driven largely by public initiatives, in line with 
the  government’s  ‘kick-start’  stimulus  package  and  supported  by 
large-scale 
infrastructure  projects.  Private  consumption  is  expected  to  accelerate  in  the  course  of 
2012  as  contributions  to  the  voluntary  early  retirement  pension  scheme  are  to  be 
reimbursed  following  the  adoption  of  the  retirement  reform  by  the  Danish  Parliament. 
However,  it  is  envisaged  that  a  fragile  housing  market  and  a  stagnating  labour  market 
will continue to restrict consumer spending. Moreover, households are likely to continue 
with  the  needed  balance-sheet  deleveraging  and  to  maintain  precautionary  savings  at  a 
relatively  high  level  during  the  current  period  of  increased  economic  uncertainty.  Real 
wages  are  likely  to  be  contained  by  elevated  inflation  and  moderate  increases  in  the 
spring round of private sector wage agreements. As a result of the sustained significant 
increase  in  energy  prices  over  the  past  year  as  well  as  the  effects  of  tax  hikes,  the 
Harmonised Index of Consumer Prices (HICP) is projected to be around 2.6% this year 
before dropping to 1.5% in 2013.  

In  the  absence  of  adverse  financial  and  external  developments,  GDP  growth  could 
average  2%  annually  in  2014-2015.  This  should  bring  the  unemployment  rate  down  to 
around  6.6%  by  the  end  of  2015.  The  recently  concluded  pension  reform  and  other 
reforms  undertaken  to  raise  labour  supply,  together  with  the  normalisation  of  the 
economic cycle, should make it possible to keep growth at this level in the medium term. 

The national reform programme and the convergence programme provide an integrated 
overview of fiscal consolidation efforts, the key structural reforms and the reforms that 
underpin  macro-economic  stabilisation.  Both  documents  share  the  same  economic 

5 

 
 
outlook  and  quantify  the  impact  of  the  proposed  structural  reforms  on  growth.  The 
outlook for 2012 and 2013 is broadly in line with the most recent Commission forecast.  

2.2.  Challenges 

The main policy challenges for the country have remained broadly unchanged compared 
to  the  situation  described  in  the  2011  Commission  Staff  Working  Document.  However 
the government has made some progress with its reform agenda which needs to be taken 
into account. 

In  particular,  continued  fiscal  consolidation  is  required  to  meet  the  requirements  under 
the  EDP  and  reach  the  medium-term  objective  (MTO)  for  the  deficit.  With  the 
government’s ‘kick-start’ stimulus package, the consolidation strategy has become more 
back-loaded  than  previously  planned  and  considerable  consolidation  efforts  will  be 
required  in  2013.  Moreover,  as  pointed  out  in  the  2011  Commission  Staff  Working 
Document, Denmark has a history of substantial expenditure overruns, in particular at the 
regional and local levels, and better expenditure controls at all levels of government are 
necessary if Denmark is to meet its short- and long-term deficit targets. To this end, the 
government  and  a  majority  in  parliament  recently  agreed  on  an  ambitious  budget  law 
which will come into force in 2014. 

The main challenge for the labour market has been to increase labour supply overall, in 
particular  labour  force  participation  among  older  workers,  by  raising  the  effective 
retirement  age.  In  this  regard,  Denmark  has  implemented  an  ambitious  reform  of  the 
voluntary early retirement pension scheme and brought forward the planned increase to 
the  statutory  retirement  age  and  linking  to  life  expectancy.  Attention  now  needs  to  be 
given to other areas such as reforms of the disability pension and subsidised employment 
(flex-job)  schemes.  These  schemes  include  approximately  10 %  of  the  working-age 
population, which constitutes a significant labour supply potential. There is also potential 
for  increasing  the  labour  market  participation  of  immigrants,  especially  female 
immigrants  from  countries  outside  the  EU  for  whom  the  employment  rate  was  only 
50.2 % in 2010. 

Another  key  challenge  is  slow  productivity  growth.  Addressing  the  low  level  of 
competition in specific sectors could improve productivity growth. The problem of low 
productivity growth is especially evident in the services and construction sectors, which 
are  also  significantly  less  innovative  and  where  the  problem  of  weak  competition  is 
greater.  Furthermore,  there  are  still  significant  barriers  to  entry  into  the  services  sector 
and  public  procurement  in  municipalities  and  regions  ought  to  be  increased.  In  this 
context,  it  is  important  to  ensure  that  competition  law  sanctions  are  a  sufficientl 
deterrent. 

Yet  another  challenge  related  to  Denmark’s  poor  productivity  performance,  is  the 
education  system.  Despite  Denmark’s  generous  spending  on  its  education  system, 
educational  outcomes  are  only  average  in  some  key  areas.  The  upper  secondary 
completion  rate  is  low  largely  due  to  high  early  drop-out  rates  from  vocational  youth 
education.  Moreover,  Danish  students  complete 
late. 
Addressing the educational challenges should also be seen in the context of future skills 
needs and possible labour shortages. Improving overall education levels and educational 
quality could have a positive impact on the labour supply and productivity growth. 

their  education  relatively 

Furthermore,  the  build-up  of  debt  levels,  which  has  been  fuelled  by  the  housing  boom 
between  2004  and  2007,  creates  higher  potential  risks  for  the  economy  and  financial 
stability,  although  these  risks  are  mitigated  by  the  characteristics  of  Denmark’s 
sophisticated mortgage-backed  bond market  and a globally robust financial situation of 

6 

 
 
the  majority  of  households  with  assets  considerably  in  excess  of  liabilities.  Still,  only 
limited  measures  to  dampen  pro-cyclical  fluctuations  of  house  prices  have  been 
introduced in the aftermath of the house price correction. 

Box  1.  Summary  of  the  results  of  the  in-depth  review  under  the  macroeconomic 
imbalances procedure 

The main observations of this review are:  

Certain  macroeconomic  developments  notably  in  the  areas  of  competitiveness  and 
household debt deserve to be monitored and to feature in economic policy considerations 
so as to reduce the risk of adverse effects on the functioning of the economy. 

Denmark has lost considerable market shares in goods exports due to a deterioration in 
the  country's  competitive  performance.  Furthermore,  lower  growth  among  Denmark's 
trading partners than among those of the EU suggests that Danish exports would benefit 
from being better represented in high-growth emerging markets. 

The deterioration in Denmark's competitive performance seems to be linked to a rise in 
relative  unit  labour  costs,  reflecting  in  particular  relatively  higher  wages  and  weaker 
productivity growth in Denmark than abroad. While the effect of high unit labour costs 
has  been  attenuated  to  some  extent  by  favourable  terms-of-trade  developments,  an 
adjustment  in  unit  labour  costs  is  warranted,  either  via  lower  wage  growth  or  higher 
productivity growth. Possible areas for relevant policy responses to addressing the latter 
could  include  removing  obstacles  to  competition  and  improving  the  quality  of  the 
educational system. 

While the high household gross debt to some extent is a structural feature of the Danish 
economy,  with  household  assets  considerably  exceeding  liabilities,  concerns  are 
emerging  about  high  levels  of  household  debt,  as  developments  in  the  housing  market 
seem to have caused the debt to move beyond levels that can be explained by structural 
factors. This poses higher potential risks to financial and economic stability.   

Risks  in  terms  of  financial  stability  seem  small.  However,  to  get  a  clearer  view  of  the 
situation, more information on the distribution of the type of assets and liabilities across 
households is necessary. Risks in terms of economic stability seem more pronounced, as 
the consequences of excessive swings in house prices and high debt have already been 
exposed.  The  latter  have  contributed  to  large  fluctuations  in  private  consumption, 
currently constraining the economy's ability to recover as households are deleveraging.  

With a view to correcting the procyclical effects of and the debt bias in housing taxation, 
a realignment of the property value tax to actual market values could be considered or, as 
a  second  best  option,  a  further  reduction  in  the  tax  deductibility  of  interest  payments. 
Furthermore, removing the ceiling of the annual increase in the municipal land value tax 
could  prevent  procyclical  effects  of  lagged  tax  increases.  Such  changes  could  be 
introduced gradually, taking into account the current need for stabilisation in the housing 
market. 

7 

 
 
 
3.  ASSESSMENT OF POLICY AGENDA  

3.1. 

Fiscal policy and taxation 

Budgetary developments and debt dynamics 

The medium term budgetary strategy in Denmark's 2012 convergence programme aims 
to  bring  the  general  government  deficit  below  the  3%  reference  value  by  2013,  in  line 
with the deadline set by the Council, and achieve the Medium Term Objective (MTO) of 
at least a structurally balanced budget in 2020, i.e. outside the programme period. This 
MTO is unchanged from last year's convergence programme and adequately reflects the 
requirements of the Stability and Growth Pact. Furthermore, the structural deficit in the 
programme  remains  below  the  minimum  requirement  for  all  years  between  2013  and 
2020, in accordance with the Fiscal Compact's target of a structural budget balance of at 
least -0.5% of GDP. 

Contrary  to  last  year,  the  convergence  programme  builds  on  a  'no-policy-change 
assumption',  i.e.  only  the  effects  of  reforms  already  adopted  are  included  in  the 
programme. The main policy measures are the reform of the voluntary early retirement 
and  the  statutory  retirement  pension  schemes,  the  fiscal  bill  for  2012  (including  an 
investment-based  'kick-start'  stimulus  package),  tax  policy  measures  based  on  the  2010 
consolidation  agreement  and  the  2009  tax  reform  as  well  as  a  normalisation  of  public 
investment  from  2013  onwards.  On  the  basis  of  these  measures  and  an  annual  real 
growth  in  public  consumption  of  0.6%  in  2014-2020,  the  general  government  finances 
are projected to be in balance by 2020. 

Box 2. Recently released 2020 plan  

The  assessment  in  this  document  is  based  on  the  reform  agenda  as  specified  in  the 
national  reform  programme  and  the  convergence  programme  submitted  by  the  Danish 
government on 30 April 2012. On 8 May, the Danish government released its 2020 plan, 
a medium-term budgetary strategy specifying a number of planned reforms in addition to 
the  reforms  already  adopted  which  formed  the  basis  of  the  2012  convergence 
programme.  In  line  with  the  convergence  programme,  the  2020  plan  aims  to  bring  the 
general  government  deficit  below  the  3%  reference  value  by  2013  and  achieve  the 
Medium Term Objective (MTO) of at least a structurally balanced budget in 2020. The 
measures in the 2020 plan are intended to raise employment by 60 000 persons towards 
2020  compared  with  the  convergence  programme  and  increase  GDP  growth  by  ¼  of  a 
percentage  point  on  average  between  2014  and  2020.  On  the  basis  of  these  reforms, 
public consumption will grow by 0.8% on average from 2014 to 2020 instead of 0.6% as 
planned  in  the  convergence  programme,  while  the  MTO  is  still  expected  to  be  met  in 
2020. 

The  new  plan  includes  initiatives  to  increase  the  labour  supply  and  strengthen  public 
finances  by  lowering  taxes  on  income  as  part  of  a  fully-financed  tax  reform,  by 
reforming  the  disability  and  subsidised  employment  (so-called  'flex-job')  schemes,  by 
getting students through the educational system at an earlier stage and reforming the state 
education  grant  system.  Working  hours  will  be  increased  in  a  tripartite  agreement.  In 
order  to  raise  productivity  growth,  the  government  plans  a  number  of  initiatives  in  the 
areas of education (see section 3.3), competition, and R&D and innovation. 

The budgetary outcome in 2011 was significantly better than planned. The government 
deficit reached -1.8% of GDP instead of 3.8% as previously forecast. The difference can 

8 

 
 
 
mainly  be  attributed  to  significantly  higher  revenues  (3.2  percentage  points  (pps)  of 
GDP) primarily due to extraordinary higher revenue from pension yield taxation, a flat-
rate tax levied on pension fund returns. The higher revenues were related to lower-than-
expected  interest  rate  levels  implying  higher  returns  on  interest-sensitive  assets  in  the 
pension  fund  portfolios.  The  higher  revenues  were  partly  offset  by  expenditure  that 
exceeded  the  target  by  1.2  pps  of  GDP,  mainly  because  of  base  effects.  Accordingly, 
nominal  interest  rate  expenditure  growth  was  markedly  higher  than  planned  (7.7% 
instead  of  a  drop  of  2.4%)  whereas  nominal  primary  expenditure  growth  was  only 
slightly higher (2.0% instead of 1.6%).  

With regard to the budgetary projections for 2012, the 2012 convergence programme and 
the  Commission's  spring  forecast  are  broadly  in  line,  projecting  the  budget  deficit  to 
reach  4.0%  and  4.1%  of  GDP,  respectively.  The  widening  of  the  budget  deficit  from 
2011  to  2012  reflects  the  government's  'kick-start'  stimulus  package,  with  a  budgetary 
impact of 0.4% of GDP, and the lump sum reimbursement of voluntary early retirement 
pension  contributions  estimated  at  almost  1%  of  GDP.  The  latter  is  considered  to  be  a 
one-off. The increase in the projected budget deficit from 2011 to 2012 also reflects the 
absence of the extraordinary pension yield revenues that affected the government balance 
in 2011. 

The  budget  deficit  has  been  revised  downwards  for  2012  by  ½  a  percentage  point  but 
remains  broadly  unchanged  for  2013  compared  with  the  previous  programme.  The 
revision stems from higher oil price expectations and lower interest rates which have a 
positive impact on Denmark's public finances through higher revenues from oil and gas 
activities  in  the  North  Sea  as  well  as  higher  expected  revenues  from  the  pension  yield 
tax.  Furthermore,  the  2012  budget  bill  permanently  raised  revenues  from  taxes  and 
excise  duties.  These  positive  factors  more  than  offset  the  negative  budgetary  impact  of 
the  deterioration  in  the  growth  outlook  compared  with  last  year  and  the  government's 
'kick-start' stimulus package which was not part of the previous programme. On the other 
hand, headline budget deficits after 2013 have been revised upwards significantly in this 
year's programme due to the lower growth outlook and the fact that the positive effects of 
planned reforms (yet to be adopted) were included in last year's convergence programme 
as opposed to the 2012 convergence programme.   

Thus, the convergence programme expects the headline deficit to decline from -4.0% of 
GDP  in  2012  to  -1.8%  in  2013  and  then  to  remain  broadly  unchanged  until  2015.  The 
change from 2012 to 2013 is due to developments in the primary balance rather than in 
interest  rate  expenditures,  and  reflects  the  absence  of  the  one-off  measure  that  affected 
the government balance in 2012 as well as government consolidation measures.  

The consolidation strategy is largely expenditure based with a significant decline in the 
expenditure-to-GDP  ratio  of  2  pps  from  2012  to  2013.  A  large  part  of  the  fall  in 
expenditures is due to a normalisation in investment after 2012. As a consequence of the 
'kick-start',  investment  amounting  to  a  total  of  around  1%  of  GDP  has  been  brought 
forward to 2012 and 2013 from 2014 to 2020. However, only 0.4% of these investments 
have  a  direct  effect  on  the  general  government  budget  balance,  and  in  2012  only.  The 
remaining investments are secured from private institutions or entities and will therefore 
not  affect  the  general  government  balance.  Thus,  from  2013  and  onwards,  gross  fixed 
capital formation remains stable at 1.9% of GDP. 

From 2013 to 2015, the almost unchanged government balance reflects a parallel fall in 
revenues and expenditures of -1.5 and -1.7 pps of GDP, respectively. The convergence 
programme  projects  a  decline  in  social  expenditure  due  to  the  continued  economic 

9 

 
 
recovery  and  the  government's  tighter  control  of  budgetary  execution.  Moreover, 
compensation to employees is to be reduced by ½ a pp of GDP over the period. Revenues 
are forecast to decline due to lower revenues from income and wealth taxes in line with 
the  2009  tax  reform,  and  a  further  decline  in  social  contributions  from  phasing  out  the 
voluntary early retirement pension scheme from 2012 and onwards. 

The  convergence  programme  projections  for  achieving  the  correction  of  the  excessive 
deficit  by  2013  are  based  on  the  financing  measures  of  the  2009  tax  reform,  the  2010 
consolidation  agreement,  the  2012  budget  bill  as  well  as  a  normalisation  of  public 
investment (see Box 3). Using a bottom-up approach, the programme estimates that these 
measures  account  for  a  total  budgetary  improvement  of  2.5%  of  GDP.  Adjusting  for 
other factors, e.g. lower oil revenues and higher pension expenditure due to demographic 
effects,  the  net  cumulative  contribution  is  1.8%  of  GDP  over  the  period  2011-2013,  in 
line with the EDP recommendation. 

When  adding  the  measures  bottom-up  based  on  the  calculations  in  the  programme,  the 
structural  balance  improved  by  0.8  pps  of GDP in 2011 and will decline  by 0.3 pps of 
GDP in 2012 before improving by 1.3 pps of GDP in 2013. The deterioration in 2012 is 
to be seen in the light of a lower-than-budgeted level of public spending in 2011 which, 
everything else being equal, implies a higher growth rate in public consumption in 2012. 
Furhermore, due to the fact that the 'kick-start' moves investments forward to 2012, the 
contribution to consolidation from the normalisation of public investment will not occur 
until  2013.  This  makes  the  consolidation  path  considerably  more  back-loaded  than 
previously planned. Moreover, the high level of public investment in 2012 increases the 
risk of spillover into 2013 which could jeopardise the achievement of the required fiscal 
effort in 2013. In the event of such spill-over, other investment projects for 2013 would 
have  to  be  reduced  or  additional  financing  would  have  to  be  found,  according  to  the 
convergence programme. 

In contrast to the calculation of the structural measures using a bottom-up approach, the 
recalculated structural balance1 shows a cumulated deterioration ('top-down')  of ½ a ppt 
of GDP in 2011-2013. This is based on the one-off measures reported in the convergence 
programme.  However,  the  definition  of  one-off  measures  applied  in  the  convergence 
programme  does  not  correspond  to  the  definition  applied  by  the  Commission. 
Nevertheless.  adjusting  the  (recalculated)  cyclically  adjusted  balance  for  one-offs  in 
accordance with the Commission's definition, instead of applying the one-offs specified 
in the programme, only affects the overall adjustment in 2011-2013 slightly.  

1  Cyclically  adjusted  balance  net  of  one-off  and  temporary  measures,  recalculated  by  the  Commission 
services  on  the  basis  of  the  information  provided  in  the  programme,  using  the  commonly  agreed 
methodology. 

10 

 
 
                                                 
Box 3. Main measures 

The main measures specified in the convergence programme consist of the 2009 tax reform, 
the 2010 consolidation agreement (which included a reduction in public consumption growth, 
a  shortening  of  the  unemployment  benefit  period  and  measures  to  tighten  expenditure 
control),  tax  elements  from  the  2012  budget  bill  and  a  normalisation  of  public  investment. 
Over the period 2011-2013, consolidation measures will yield a direct revenue impact of 2.5% 
of  GDP  according  to  the  programme.  Net  of  other  factors  affecting  public  finances,  the 
consolidation’s overall cumulative effect on the general budget balance is estimated at 1.8% 
of  GDP  (bottom-up)  corresponding  to  an  improvement  in  the  structural  budget  balance  of 
1.5% of GDP ('top-down') as calculated by the national methodology. 

Main budgetary measures 

  Revenue 

Expenditure

2011 

•  Financing  elements  of  the  2009  tax 

•  Moderate public consumption growth (-

reform (0.1% of GDP) 

0.6% of GDP) 

•  Financing  elements  of 
consolidation  agreement 
GDP) 

the  2010 
(0.3%  of 

•  Social  transfers  including  savings  due 
to  the  unemployment  benefit  reform  (-
0.2% of GDP) 

2012 

•  Financing  elements  of 
consolidation  agreement 
GDP) 

the  2010 
(0.1%  of 

•  Financing  elements  of  the  2012  budget 

bill (0.2% of GDP) 

•  Moderate  public  consumption  growth 

(0.2% of GDP) 

•  Public investment (0.1% of GDP) 

•  Social  transfers  including  savings  due 
to  the  unemployment  benefit  reform 
(0.1% of GDP)  

2013 

•  Financing  elements  of  the  2009  tax 

•  Moderate public consumption growth (-

reform (0.4% of GDP) 

0.2% of GDP) 

•  Financing  elements  of 
consolidation  agreement 
GDP) 

the  2010 
(0.1%  of 

•  Financing  elements  of  the  2012  budget 

bill (0.1% of GDP) 

•  Public investment (-0.5% of GDP) 

•  Social  transfers  including  savings  due 
to  the  unemployment  benefit  reform  (-
0.2% of GDP) 

  Note: The degree of detail  reflects the type of information made available in the stability or convergence 
programme and, where available, a multiannual budget. A positive sign implies that revenue/ expenditure 
increases as a result of this measure.  

Hence,  the  deterioration  in  the  (recalculated)  structural  balance  and  the  difference 
compared to the structural effort presented in the programme rather stems from the fact 

11 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
that the Commission's estimate of potential output growth is significantly lower (½ - ¾ of 
a pp) than the government's estimate implying a much faster closure of the output gap. 
As a result, the contribution from the economic cycle to the improvement of the budget 
balance, as estimated by the Commission, may be overstated.  

When  taking  the  discretionary  measures  as  specified  in  the  programme  into  account, 
expenditure  projections  seem  to  ensure  that  the  required  adjustment  of  the  excessive 
deficit will be made in 2013, i.e. a fiscal tightening of 1.5% over the 2011-2013 period. 
However, although there is little risk of falling short of the 3% reference value in 2013 
(in light of the Commission's projection of a budget deficit of 2.0% of GDP in 2013), a 
considerable effort is needed in 2013 to meet the required structural improvement. 

From 2013 onwards, expenditure projections, when assessed against the projected rate of 
medium-term  potential  output  growth  and  taking  into  account  discretionary  measures, 
seem  to  confirm  an  appropriate  adjustment  path  towards  the  MTO.  Although  the 
Commission's forecast shows that the growth rate of government expenditure exceeds the 
lower reference rate, the deviation against the applicable reference rate is not significant. 

Although  Denmark  is  operating  with  deficits,  its  gross  public  debt  is  projected  to  fall 
from 46.5% of GDP in 2011 to 42.1% in 2015. This is because part of the budget deficits 
will  be  financed  by  reducing  the  government's  account  with  Danmarks  Nationalbank 
which will affect the net but not the gross government debt. Since the debt-to-GDP ratio 
remains well below the reference rate, the debt reduction benchmark is not applicable. 

Long-term sustainability 

For Denmark, the long-term change in age-related expenditure is above the EU average. 
Under a no-policy change assumption, debt would fall to 42% of GDP by 2030. Recent 
reform measures in the field of pensions will contribute to improve fiscal sustainability. 
Ensuring  sufficient  primary  surpluses  over  the  medium-term,  as  planned  in  the 
programme, would improve the sustainability of public finances.  

Fiscal framework 

The  Danish  fiscal  framework  is  composed  of  a  medium-term  budgetary  framework 
(MTBF)  that  applies  to  all  levels  of  government,  i.e.  central,  regional  and  local,  and 
specifies  annual  growth  targets  for  real  public  consumption  expenditure  —  but  not 
income  transfers,  subsidies  or  investment  —  in  multi-annual  plans.  The  basic  rule  of 
budgetary policy is to achieve a structural general government balance or surplus in the 
medium  to  longer  term,  as  specified  by  the  MTBF.  The  MTBF  does  not  build  on 
constitutional  or  legal  acts  but  is  a  political  commitment  for  achieving  fiscal 
sustainability  over  the  longer  term.  Nevertheless,  the  multi-annual  plans  receive 
parliamentary  support  and  serve  as  an  anchor  for  fiscal  policy  planning  in  the  annual 
budget process. Regional (20 % of total expenditure) and local authorities (50 % of total 
expenditure) play an important role in administering public expenditure. The Ministry of 
Finance  and  the  Ministry  of  Economic  Affairs  and  the  Interior  function  as  monitoring 
and enforcing body at the same time. 

Although  the  track  record  of  Denmark’s  fiscal  framework  has  been  positive,  Denmark 
has  a  history  of  substantial  expenditure  overruns,  in  particular  at  regional  and  local 
levels. Hence, the 2010 Fiscal Consolidation Agreement and the fiscal bill for 2011 and 
2012 introduced sanctions and tighter budgetary control in order to improve expenditure 
control in the municipalities and regions, mechanisms that have proved effective. These 
sanctions have now been laid down in an ambitious budget law proposal put forward in 
March  2012  and  agreed  on  by  the  government  and  a  majority  in  parliament.  The  new 

12 

 
 
budget  law  implies  that  Parliament  sets  expenditure  ceilings  at  central,  regional  and 
municipal  level  for  periods  of  four  years  starting  from  2014.  The  expenditure  ceilings 
will have to be in accordance with a medium-term budgetary target of a zero structural 
balance in 2020 and an annual structural government balance of at least -0.5 % of GDP. 
The  ceilings  will  be  underpinned  by  sanctions  and  monitored  by  the  Danish  Economic 
Council  (DOR)  fully  in  line  with  the  country  specific  recommendation  in  the  area  of 
fiscal frameworks.  

The  new  spending  regime  entails  an  important  shift  towards  a  better  controlled 
expenditure policy since planned spending is now based on a scenario where only effects 
of  measures  for  which  there  is  a  majority  in  parliament  are  taken  into  account.  In 
previous  medium-term  plans,  it  was  normally  assumed  that  the  required  financing  for 
planned  spending  initiatives  could  be  found  in  the  future  from  unspecified  measures 
which often proved difficult to adopt. 

Tax system 

Denmark is characterised by the highest tax-to-GDP ratio in the EU, significantly higher 
than  the  average.  On  the  basis  of  typical  tax  performance  indicators,  the  tax  system 
appears to be well designed and tax compliance costs are low. Denmark’s performance is 
close to the EU average in terms of the share of ‘growth-friendly’ taxes and the implicit 
tax  rate  on  labour,  whereas  the  marginal  tax  rate  is  relatively  high  for  high-income 
earners. The tax burden on corporate income is similar to the EU average while revenue 
from indirect taxes is significantly higher. Furthermore, recurrent taxation on housing — 
considered among the least distortive types of tax — remains above the EU average.2 

The  ‘Spring  Package  2.0’  tax  reform  was  adopted  in  2009  and  will  be  implemented  in 
2010-2019,  reducing  the  high  marginal  tax  rates  on  personal  income  to  improve  work 
incentives  while  at  the  same  time  reducing  mortgage  interest  deductibility.  The  2012 
budget  act  introduces  measures  on  the  revenue  side,  targeted  especially  at  unhealthy 
products such as dietary fats, confectionery, soft and alcoholic drinks and cigarettes. The 
government  has  announced  its  intention  to  put  forward  a  proposal  for  yet  another  tax 
reform to increase the supply of labour by lowering the tax burden on labour further in a 
budgetary  neutral  manner  and  without  making  changes  to  housing  taxation  or  further 
changes to interest deductibility during the current electoral cycle. 

One issue stands out in the area of taxation, which was also touched on in the 2011 CSR 
5 for Denmark. Since 2002, the property value tax has been set in nominal terms, leading 
to an erosion of revenue. With the highest overall tax burden in the EU, it is essential that 
the least distortive and most growth-friendly revenue sources are tapped in Denmark to 
ease the pressure on direct taxation of capital and labour. To that end and to stop further 
erosion of revenue as well as addressing the procyclical distortions in the housing market 
(see section 2.4), it will be necessary to link the property value tax to the market value 
again, at least in the medium term, while taking into account the current need to promote 
stabilisation of the housing market. 

Another  issue  is  how  to  move  towards  Denmark's  climate  and  energy  targets  in  a  cost 
efficient way. The coherence of the fiscal and regulatory measures addressing the climate 
and  energy  challenge  can  contribute  significantly  in  this  respect.  Although  Denmark  is 
not a special case within the EU, the pricing of greenhouse gas emissions varies across 

2  The  level  of  social  security  contributions  is  limited in Denmark, with personal income taxes on labour 
being relatively higher. As this represents different ways of taxing labour, it does not influence the growth-
friendliness of the tax structure. 

13 

 
 
                                                 
sectors: the tax price of emissions within the transport sector is significantly higher than 
the  ETS  carbon  price  while  GHG  emissions  in  agriculture  remain  largely  untaxed. 
Furthermore,  there  may  be  potential  for  making  overall  vehicle  taxation  more  efficient 
while  maintaining  revenue  and  the  current  system's  contribution  to  reducing  CO2 
emissions and other transport-related externalities3. 

3.2. 

Financial sector 

Banking 

The financial crisis caused some domestic banking problems, primarily linked to the real 
estate sector. Danish authorities introduced support measures such as a deposit guarantee 
and capital injections, as the global financial crisis exacerbated problems stemming from 
the reliance on money-market funding. The Financial Stability Company was established 
in October 2008 in order to secure financial stability in Denmark, including winding-up 
of distressed banks. A general government guarantee expired with Bank Rescue Package 
1 at the end of September 2010. However, more rescue packages have followed and there 
is  still  widespread  government  involvement  in  the  Danish  banking  sector,  e.g.  the 
individual government guarantees which will expire in 2012 and 2013. 

Danish banks are well capitalised, with limited exposure to the vulnerable EU Member 
States  in  southern  Europe,  and  should  generally  be  able  to  manage  the  transition  to  a 
situation  without  government  guarantees.  No  Danish  institution  fell  below  the  required 
5 % core Tier 1 capital, following the July 2011 EBA stress test, nor had to comply with 
the higher minimum core Tier 1 capital ratio of 9 % of risk-weighted assets, following the 
temporary recapitalisation plan decided by the European Council in October 2011. 

Housing and private sector indebtedness 

Household  indebtedness  in  Denmark  is  among  the  highest  in  the  EU  and  an  in-depth 
study  on  the  issue,  under  the  Macro  Economic  Imbalances  Procedure,  has  been  carried 
out. To some extent, high household debt is a structural feature of the Danish economy. 
Large contributions to private pension saving schemes, directly deducted from wages, a 
generous  social  safety  net  and  high  net  assets  in  general  provide  citizens  with  reliable 
financial  buffers.  Furthermore,  mortgage  interest  deductibility  may  have  provided 
incentives  for  the  accumulation  of  private  debt  in  a  high-tax  environment  such  as 
Denmark. 

The debt level increased rapidly in line with house prices during the boom years (2003–
2007).  The  introduction  of  innovative  financial  products  (instalment-free4  mortgages 
since 2004) and tax incentives (property tax freeze since 2002 and interest deductibility) 
may have contributed to the debt level propelling beyond levels that can be explained by 
the  structural  factors  mentioned  above.  This  higher  exposure  of  household  debt  to 
developments  in  the  real  estate  market  has  increased  the  economic  risks,  in  particular 
through the potential effect on private consumption (e.g. the need for deleveraging due to 
the erosion of asset values or a high debt-service burden) and the financial sector, as the 
share  of  instalment-free  loans  with  adjustable  rates  has  risen.  On  this  basis,  one  of  the 
CSRs made to Denmark last year called for preventive action. 

3 See e.g. Fosgerau, M. & Jensen, T. (2011), A green reform is not always green, Transportation Research. 

Part C: Emerging Technologies. 

4 Also called 'interest-only' mortgages. 

14 

 
 
                                                 
In  terms  of  financial  stability,  the  household  debt  level  does  not  seem  to  constitute  a 
severe  threat  to  the  economy.  Arrears  and  forced  sales  of  one-family  houses  have 
remained limited and, according to the Central Bank’s 2010 Financial Stability Review, 
only  3.2 %  of  total  household  debt  is  concentrated  among  financially  vulnerable 
households.  Nevertheless,  in  order  to  be  certain,  analyses  of  micro  data  on  the 
distribution  of  assets  and  liabilities  across  households,  including  the  type  of  loans,  are 
required.  A  study  being  undertaken  by  the  Ministry  of  Business  and  Growth  will  shed 
light  on  the  potential  vulnerability  of  households  in  the  event  of  various  shocks  to  the 
economy,  in  line  with  the  recommendation  given  to  Denmark  last  year  in  the  area  of 
economic  and  financial  stability.  The  Danish  National  Bank  is  carrying  out  a  similar 
study, with regard to financial stability. 

With  regard  to  economic  stability,  the  existence  and  subsequent  burst  of  the  housing 
bubble  and  the  simultaneous  rise  in  debt  seem  to  have  had  a  harmful  effect  on  the 
economy's  ability  to  get  back  on  track  after  the  crisis,  especially  as  households  are 
deleveraging. Measures to prevent pro-cyclical movements in the housing market in the 
medium term, preferably by realigning the property value tax with actual market values, 
are therefore warranted. Such measures should be taken without jeopardising the current 
need to stabilise the housing market, for instance in line with a recent suggestion by the 
Danish Economic Council.5  

Although the municipal land tax has not been subjected to a nominal tax freeze, which 
would  normally  be  counter-cyclical,  a  ceiling  imposed  on  the  annual  increase  in  land 
taxation makes this tax pro-cyclical at the current time, as increases in land prices during 
the boom are being phased in now. Land taxation has recently increased whereas prices 
have  fallen,  and  the  effect  is  thus  not  counter-cyclical.  The  municipal  land  tax  can 
therefore  not  be  considered  a  substitute  for  the  needed  countercyclical  element  of  the 
property tax. 

In relation to the larger share of adjustable-rate and instalment-free loans in the mortgage 
market, the mortgage institutes have taken appropriate measures by trying to spread the 
auctions  for  refinancing  adjustable-rate  loans  over  the  year  so  as  to  reduce  the 
refinancing  risk.  Furthermore,  the  mortgage  institutes  are  currently  taking  measures  to 
ensure  the  provision  of  additional  collateral  in  case  of  a  fall  in  house  prices.  These 
measures  will  effectively  limit  the  number  of  adjustable-rate  and  instalment-free 
mortgages. 

Denmark has therefore taken relevant measures in terms of reviewing the functioning of 
the  mortgage  system.  However,  preventive  action  to  strengthen  the  medium-term 
stability of the housing market, including reviewing the functioning of the property tax 
system,  has  not  been  taken  as  yet.  In  conclusion,  Denmark  has  taken  some  relevant 
measures but has only partially implemented CSR 5. 

Access to finance 

Banks  and  mortgage  banks  tightened  their  credit  standards  in  2011  for  both  retail  and 
corporate  customers,  including  SMEs  (see  also  section  3.4).  At  the  end  of  the  year, 
Denmark’s  National  Bank  took  measures  to  supplement  banks’  access  to  liquidity  and 
facilitate the transition when the individual government guarantees expire in 2012-13. In 
March,  a  majority  in  Parliament  agreed  on  a  financial  package  targeting  specialised 

5 Det Økonomiske Råd: ‘Dansk Økonomi, efterår 2011’. 

15 

 
 
                                                 
financial  institutions,  with  the  aim  of  enhancing  their  capabilities  vis-à-vis  SMEs.  In 
general,  Denmark  has  taken  relevant  measures  to  support  lending  activity,  in  line  with 
AGS priorities. 

3.3.  Labour market, education and social policies  

The Danish labour market is characterised by a high participation rate while the number 
of working hours is below the EU average. Employment has shrunk by almost 6 % (over 
the  period  2008-2011)  and  the  current  employment  rate  (for  20-  to  64-year  olds)  is 
75.7 % (2011). Unemployment more than doubled from a record low of 3.4 % in 2008 to 
7.6 %  in  2011.  This  is  still  well  below  the  EU  average.  Long-term  unemployment  and 
youth unemployment (among 15- to 24-year olds) have also increased during the crisis, 
but are still among the lowest in the EU. 

Denmark  is  facing  a  considerable  challenge  from  demographic  ageing,  and  increasing 
labour supply is therefore a key priority to ensure future welfare and fiscal sustainability. 
This challenge, identified in last year’s CSRs and highlighted in the AGS 2012 has been 
acknowledged  by  the  government.  The  national  reform  programme  sets  a  target  of 
increasing employment by 60 000 persons in 2020. 

The main issue in the area of labour supply and public finances addressed since last year  
has  been  the  implementation  of  the  reform  of  the  voluntary  early  retirement  pension 
scheme. The policy response to the CSR in this area has been relevant as the reform has 
now been adopted by the Danish Parliament. In order to actually realise the full labour 
supply potential of the reform, it is desirable to complement it with measures to promote 
senior friendly policies at work places which will ensure that older workers effectively 
will  stay  longer  at  the  labour  market.  Furthermore,  together  with  the  reform,  the 
government  has  introduced  a  ‘senior  disability  pension  scheme’  for  older  disabled 
workers. The number of workers eligible for this pension is hard to estimate, and is an 
issue for careful monitoring in order to avoid the new pension scheme becoming a large-
scale substitute for the voluntary early retirement pension scheme. 

Denmark  now  needs  to  look  at  other  policy  areas,  such  as  reforms  of  the  disability 
pension and subsidised employment (flex-job) schemes. The government has presented a 
relevant proposal for a reform of the disability pension and the subsidised employment 
scheme  which  can  increase  the  labour  supply  by  5  000  persons  in  2020  and  12  500 
persons in the long run according to government estimates.  

By adopting the reform of the voluntary early retirement pension, Denmark’s response to 
the CSR has been relevant, and the right steps have been taken to increase labour supply. 
These measures are expected to have an overall positive effect towards the Europe 2020 
targets, in particular the employment and poverty targets. However, the proposed reforms 
on  disability  pensions  and  the  subsidised  employment  scheme  have  not  yet  been 
implemented. If the reforms are implemented as planned, Denmark’s response can then 
be considered relevant for these areas of the CSR too. 

Furthermore, as mentioned, the government has announced its intentions to implement a 
tax reform with the aim of raising labour supply by at least 7 000 persons in 2020. The 
upcoming tripartite negotiations in 2012 between the government and the social partners 
are also anticipated to have an essential role in raising labour supply, although an official 
agenda of the negotiations is yet unknown. Overall, the government is planning to take 
relevant and ambitious measures in order to raise labour supply. 

Important steps have been taken to combat the rise in youth unemployment, in line with 
AGS priorities, including measures such as additional job-rotation possibilities for young 

16 

 
 
people and targeted programmes to ensure basic education. Careful monitoring of youth 
unemployment, including giving consideration to additional measures, remains an issue 
in Denmark. 

Many  policy  initiatives  in  the  past  have  resulted  in  a  significant  decline  in  the 
unemployment  rates  of  third  country  nationals  during  the  last  decade.6  A  return  to  this 
positive development track via targeted well-tested policy measures could give a further 
boost to the overall labour supply and decrease the incidence of people at risk of poverty 
and social exclusion in general. With regard to the participation of immigrants, Denmark 
is one of the EU countries where the unemployment gap between nationals and non-EU 
nationals has widened the most over the last three years.7 A certain adjustment may have 
been  warranted  following  the  period  of overheating and  labour shortages in  2006-2007 
which  also  raised  job  opportunities  for  marginalised  groups.  Nevertheless,  tackling  the 
widening gap in employment outcomes between people with migrant background and the 
rest of the working population constitutes a significant labour supply potential. Efforts to 
this  effect  are  therefore  warranted.  One  particular  challenge  is  the  labour  market 
participation  of  female  immigrants  from  countries  outside  the  EU  whose  employment 
rate was only 50.6 % in 2010.  

The  financial  and  economic  crisis  has  affected  vulnerable  groups  —  especially  in 
socially  excluded  areas  —  more  than  the  population  in  general,  posing  the  additional 
threat of social exclusion to these groups. Ethnic minorities are among those at increased 
risk of poverty and social exclusion; this is linked to a deterioration in their position in 
the labour market. Furthermore, following the rise in unemployment from 2008 to 2010, 
the number of people in households with low work intensity has increased significantly 
(2008: 347 000; 2009: 360 000 and 2010: 433 000). 

The 2012 budget bill abolished some of the rules stipulating the conditions for receiving 
benefits and aiming to increase the incentives to work. While it is important and relevant 
to  ensure  adequate  social  security  systems  at  the  current  time  to  prevent  further  social 
marginalisation  in  line  with  the  AGS  priority  of  tackling  unemployment  and  the  social 
consequences of the crisis, maintaining strong incentives to work should continue to be 
emphasised, as work is one of the best ways to prevent social exclusion in the long run. 
This is also necessary if Denmark is to lift 22 000 people out of poverty for households 
with low work intensity, in line with its 2020 target. 

Denmark is the country that spends the most on education in the world, measured as a 
percentage of GDP, and in a number of areas the performance of the educational system 
is outstanding. For instance, this is the case for the headline target on tertiary completion, 
where Denmark is the second best performer in the EU, and on participation in lifelong 
learning,  where  Denmark  has  the  highest  participation  rate  in  the  EU,  more  than  three 
times the EU average. On the other hand, the quality of school education in some areas 
— for instance as measured by the OECD’s Pisa survey — are only average. 

To  address  the  challenges  relating  to  the  low  upper  secondary  completion  rate,  the  
government has confirmed the long-standing target, i.e. that 95% of a youth year group 

6 Research findings have confirmed the positive impact of subsidised and direct employment programmes 
for  increasing  employment  for  non-western  migrants:  Immigrants  Receiving  Social  Assistance  in 
Denmark, IZA DP No 5632, April 2011, http://ftp.iza.org/dp5632.pdf 

7  Between  2008Q2  and  2011Q2.  Source:  EU  Employment  and  Social  Situation,  Quarterly  Review 
December 2011 (p. 44). 

17 

 
 
                                                 
will complete upper secondary education in 2020, in its 2012 budget bill. To achieve the 
target,  the  government  has  announced  that  secondary  education  will  be  expanded:  It 
suggests,  among  other  things,  that  the  quality  of  vocational  education  will  be 
strengthened  e.g.  by  lowering  the  number  of  teachers'  non-teaching  work  activities;  an 
increased  number  of  apprenticeship  places  (10400  extra  places  in  2012);  a  flexible 
ceiling on the number of pupils in each class and more focus on teachers and their class-
leadership role. 

The  high  number  of  drop-outs  from  vocational  education  may  be  linked  to  lack  of 
apprenticeship  places.  To  increase  the  number  of  apprenticeships,  the  government  has 
suggested introducing social clauses under public procurement investments and making 
it  financially  beneficial  for  private  companies  to  offer  apprenticeships.  This  approach 
appears appropriate considering that the in-school alternative training has been criticised 
by  observers  for  not  providing  a  ‘real  workplace  experience’,  as  intended  by  the  dual 
Danish  apprenticeship  system.  However,  it  is essential  that the measures introduced  do 
not harm competition among firms. 

With  regard  to  compulsory  education,  the  government  has  proposed  enhancing  pupils’ 
competences  and  skills.  A  reform  proposal  will  advocate  that  teachers  teach  subjects 
corresponding  to  their  competences,  clear  achievement  goals  at  the  end  of  the  second 
year  of  compulsory  education,  and  strengthening  school  leadership  and  the  role  of 
municipalities. 

Overall,  the  plans  are  relevant  and  can  be  expected  to  be  effective.  However,  until 
specific  reforms  are  implemented,  concerns  raised  in  CSR  3  to  Denmark  still  partially 
apply.  Addressing  these  challenges  should  also  be  seen  in  the  context  of  future  skills 
needs and possible labour shortages. A rise in overall education levels, the possibility of 
getting  young  people  through  the  education  system  faster  and  enhancing  educational 
quality  —  not  least  by  improving  the  cost-effectiveness  of  investment  in  education  — 
could  have  a  positive  effect  on  the  labour  supply.  An  increase  in  apprenticeships 
available  could  address  the  rising  challenge  of  youth  unemployment  in  Denmark.  The 
measures should also be seen in the context of weak productivity growth. 

3.4. 

Structural measures promoting growth and competitiveness 

Internal market, liberalisation and competition 

While the Danish business environment is characterised by a wide range of competition-
friendly  regulations  (it  ranks  5th  out  of  183  economies  on  the  ‘ease  of  doing  business 
indicator’8),  labour  productivity9  growth  in  Denmark  has  slowed  down  over  recent 
decades, from an annual average of 2.5 % during 1990-1995 to 1.8 % in 1995-2000 and 
0.5% during 2000-2011. In both manufacturing and services, labour productivity growth 
between  2000-2010  is  among  the  lowest  in  the  EU  (ranking  21st  out  of  26).  The 
challenge  of  weak  productivity  growth  is  well  recognised  and  the  government  has 
appointed a Productivity Commission to address the issue and get a better understanding 
of the reasons behind the development. Nevertheless, studies point towards competition 
and education as possible drivers. 

8 Source: World Bank Doing Business survey 2012. 

9 Calculated as gross domestic product at 2005 market prices per person employed. 

18 

 
 
                                                 
While  evidence  suggests  that  competition  in  Denmark  is  not  always  as  effective  as  in 
other countries, this may be partly related to structural features of the Danish economy 
such  as  its  small  market  size,  a  large  public  sector,  the  dominance  of  services  and  a 
highly  regulated  environment.  While  for  some  of  these  issues,  further  changes  to  the 
Danish  competition  law  can  only  partly  address  the  bottleneck,  there  is  still  room  for 
improvement  in  a  number  of  areas.  Accordingly,  in  2011  Denmark  adopted  a 
Competition Package, mainly targeted at the construction sector, the retail sector, health 
services  and  public-sector  services.  The  liberalisation  of  shop  opening  hours  as  from 
October  2012  can  also  be  expected  to  have positive effects on the wholesale and retail 
markets. 

Although  Denmark  has  transposed  the  Services  Directive,  some  restrictions  remain  for 
cross-border service providers. Furthermore, competition for taxis and transport services, 
as well as liberalisation of pharmacies, are being examined before any measures will be 
implemented.  The  issue  of  increasing  public procurement in municipalities and regions 
will be dealt with in negotiations with regional and local governments and is difficult to 
assess  at  this  point.  In  addition,  in  April  2012  a  committee  set  up  by  the  previous 
government  recommended  that  the  competition  law  be  reinforced.  A  majority  of  the 
members of the committee found that the fines for infringements of the competition law 
should be significantly increased and that prison terms be introduced for cartels. 

Even  though  awareness  of  the  problem  and  the  level  of  ambition  can  be  regarded  as 
relatively  high,  it  is  difficult  to  assess  the  expected  effectiveness  of  measures  taken  in 
this  area.  Measures  for  some  sectors  have  still  not  been  implemented  and,  whereas  the 
introduction  of  the  Competition  Package  was  one  of  the  country’s  commitments  under 
the  EPP  and  also  relevant  in  terms  of  the  AGS  priority  of  promoting  growth  and 
competitiveness, only limited measures in this area have been taken since the CSR was 
given to Denmark. While the National Reform Programme mentions that the government 
will  put  forward  a  proposal  to  increase  competition,  the  National  Reform  Programme 
does not make any firm commitment to, for instance, increase the level of deterrence in 
line  with 
law 
enforcement.  Accordingly,  the  CSR  on  competition  can  not  be  regarded  as  fully 
addressed. 

the  abovementioned  recommendations 

to  strengthen  competition 

Research and innovation 

The  innovation  environment  for  firms  in  Denmark  is  well  above  the  EU  average  and 
Denmark  achieved  its  R&D  investment  target  of  3 %  in  2009.  However,  in  some  areas 
Denmark  is  lagging  behind  other  innovation  leaders,  in  particular  in  private  funding  to 
innovation, in some aspects of entrepreneurship and in the intensity of local competition. 
While Denmark has a relatively high rate of entrepreneurship compared to other Member 
States,  the  entrepreneurial  survival  rate  as  well  as  the  rate  of  economic  growth  for 
entrepreneurs  is  a  challenge.10  One  reason  for  this  seems  to  be  difficulties  for  new 
businesses in gaining access to finance. As of 2009, a number of smaller funds have been 
established  via  EU  structural  funds  to  assist  SME  innovation  and  development  in 
particular. This may enhance private financing of innovation and could improve SMEs’ 
competitiveness in relation to the Europe 2020 priorities. 

10  According  to  the  ‘Entrepreneurship  Index  2009’  from  the  then  Danish  Agency  for  Business  and 
Construction. 

19 

 
 
                                                 
Market mechanisms and indirect funding of R&D through tax incentives have played a 
larger  role  in  Denmark  than  direct  government  funding  of  business  R&D,  which 
distinguishes Denmark from the other Nordic countries. On the other hand, Denmark has 
a relative strength in public-private cooperation in the EU. Compared to other innovation 
leaders, Denmark has a higher share of SMEs in its firm structure and Danish SMEs are 
relatively  R&D-intensive.  However,  despite  the  high  quality  of  the  national  innovation 
system, output in terms of high-growth firms is below the EU average. 

Denmark  has  recently  launched  relevant  reforms  to  boost  innovation  and  is  currently 
formulating  a  new  broad  innovation  strategy.  There  is  a  good  opportunity  for  active 
supply-  and  demand-side  innovation  in  the  areas  where  Denmark  has  competitive 
advantages, 
such  as  wind  energy,  organic  chemistry,  pharmaceuticals  and 
biotechnologies. Given the low productivity growth in Denmark and the need to keep up 
the  change  towards  broader  innovation  activity  in  firms,  including  investments  in 
intangibles, Denmark would in particular benefit from combining the strategic focus of 
its innovation policy with increased effectiveness of public investments in R&D. 

Climate, energy transport and environment 

Denmark  has  committed  to  reduce  its  greenhouse  gas  emissions  by  20%  (compared  to 
2005 and only for emissions not covered by the EU Emission Trading System) by 2020. 
According  to  2011  projections  taking  into  account  existing  measures,  Denmark  is 
expected to fall short of its national target by 11 percentage points. To reach the target 
without  using  flexibility  mechanisms,  Denmark  will  therefore  have  to  adopt  and 
effectively implement such additional measures. 

At the same time, Denmark faces the challenge of making the policies to move towards 
its climate and energy targets more efficient and consistent, just at many other Member 
States (see section 3.1). In particular, measures to promote emission reductions could be 
targeted  on  agriculture  and  transport.  While  comparatively  little  is  being  done  in  the 
agricultural  sector,  a  number  of  initiatives  have  been  taken  in  the  transport  sector  to 
promote a modal shift from private to public transport. These could be taken further in 
order to achieve the targeted emission reductions. Increasing competition in the taxi and 
public 
these  sectors  more  cost-efficient. 
Furthermore, Denmark has one of the lowest shares of electrified railway lines in the EU 
of  23.5 %  (EU-27  average:  52.2 %11)  and  more  emphasis  is  needed  on  replacement  of 
current  Danish  locomotives,  which  to  a  large  extent  are  diesel-driven  and  adversely 
affecting the environment. This should also be seen in the light of Denmark being among 
the Member States with the lowest total investments in transport, amounting to 0.62 % of 
GDP. 

transport  markets  could  help  render 

As regards energy, a new Energy Agreement 2012 – 2020 was achieved in March 2012 
with broad political support. This agreement confirms Denmark's high level of ambition 
with  regard  to  transforming  its  energy  system  and  sets  out  initiatives  that  will  help  to 
meet 2020 targets. Denmark stands out in the area of renewable energies which continue 
to  have  high  priority.  Nevertheless,  Denmark  needs  to  develop  more  renewable  energy 
sources to meet its renewable energy target of a 30 % share in total energy consumption 
by  2020,  with  a  10 %  share  for  transport;  40 %  for  heating  and  cooling  and  50 %  for 

11 EU Transport in Figures, 2011. 

20 

 
 
                                                 
electricity, as set out in the National Action Plan for Renewable Energy.12 The initiatives 
included  in  the  Energy  Agreement  2012  –  2020  from  March  2012  will  contribute  to 
meeting these targets.  

However,  Denmark  needs  to  step  up  its  efforts  to  use  renewable  energy  in  the 
transport  sector  in  particular  to  meet  its  target,  as  in  2009  only  0.26 % of transport 
used  renewable  energy.  It  could  also  make  progress  on  developing  intelligent 
demand solutions and investments in electricity grids in order to support more than 
50 %  renewables  in  electricity  in  2020.  Denmark  has  made  some  progress  on  the 
issue  as  a  report13  containing  a  series  of  specific  recommendations  to  inform  the 
government’s forthcoming Smart Grid Strategy was published in October 2011. The 
Energy Agreement 2012 – 2020 states that a comprehensive strategy for establishing 
smart grids in Denmark is to be drawn up, which is necessary. 

As  regards  energy  efficiency,  the  public  sector  is  committed  to  reducing  the  energy 
consumption  in  national  administration  buildings  by  10 %  in  2011  from  2006  levels 
which  represent  good  practice.  Energy-saving  measures  taken  in  the  public  sector  are 
disseminated  and  publicised  through  websites.  Voluntary  agreements  on  energy  saving 
activities have also been reached with local authorities and regions. 

Environmental  goals  have  been  achieved  in  several  policy  areas;  however,  challenges 
remain in water quality, biological diversity and waste prevention and treatment. These 
environmental goals and challenges should also be seen in the light of Denmark’s 2020 
target  for  GHG  reductions  in  the  ETS  sectors.  Another  significant  environmental 
challenge for Denmark is the sustainability of agriculture which remains a challenge for 
meeting  the  biological  diversity  goals  and  water  quality  goals  and  the  GHG  emissions 
reduction  target  for  the  non-ETS  sectors.  The  Danish  government  will  present  a  new 
nature  and  agriculture  action  plan  in  order  to  meet  the  environmental  challenges  for 
agriculture. 

3.5.  Modernisation of public administration 

The quality of the Danish public administration is generally rated among the best in the 
EU.14  The  quality  of  public  administration  is  generally  defined  by  issues  such  as 
government  efficiency,  the  use  of  eGovernment  in  the  public  administration  and  a 
modern  regulatory  system.  Among  the  central  efforts  to  achieve  a  high  quality  of  the 
Danish public administration are extenstive regulatory and eGovernment reforms. 

Regulatory  reform  has  been  a  priority  in  Denmark  for  a  long  time  and  many  efficient 
measures  have  been  implemented,  in  line  with  AGS  priorities.  Efforts  to  reduce 
administrative  burdens  for  businesses  and  internally  in  the  public  administration  have 
existed for several years. The target of reducing administrative burdens for business (by 
25 % from 2002 to 2010) was met in 2010 and in March 2012 the government launched 
its  strategy  for  reduction  of  administrative  burdens  which,  like  the  Commission’s 

12 See the Source: National Action Plan for Renewable Energy in Denmark, June 2010, to be found here: 
http://ec.europa.eu/energy/renewables/transparency_platform/doc/national_renewable_energy_action_
plan_denmark_en.pdf 

13 ‘Hovedrapport for Smart Grid Netværkets arbejde’, (Ministry for Climate, Energy and Buildings). 

14 'European semester 2012 – thematic fiche on the quality of Public Administration'. 

21 

 
 
                                                 
 
approach to burden reduction, is centred on the needs of businesses. The main elements 
of  the  new  strategy  are:  (1)  Setting  up  a  business  forum  for  simpler  rules  to  point  out 
areas with high perceived burdens and propose simplification measures. Ministries then 
have  to  comply  or  explain  why  they  choose  not  to  follow  the  proposals.  (2)  Continued 
efforts to reduce administrative burdens, ensuring that there will be fewer administrative 
burdens  in  2015  than  in  2011.  (3)  Simplifications  of  EU  regulations  have  to  be 
transposed  and  ‘gold  plating’  has  to  be  justified.  (4)  A  kick  start  of  the  process  by 
proposing  simplification  measures  targeting  administrative  and  other  burdens  that  are 
percived as irritating by companies. 

Denmark has been one of the leading countries regarding eGovernment for several years 
(in  Europe  and  worldwide)15  and  in  August  2011  a  new  eGovernment  strategy  was 
launched. With its new eGovernment plan the government has launched new targets for 
digital  communication  with  both  businesses  and  citizens.  Digital  portals  for 
communication with both citizens and business have existed for a number of years and 
the  new  strategy  takes  the  digital  communication  further  by  introducing  mandatory 
digital communication between public authorities and businesses and citizens. It will be 
mandatory  for  citizens  to  use  digital  solutions  to  communicate  in  writing  with  public 
authorities by 2015. For businesses, all relevant communications will be in digital form 
by the end of 2012.  

Additionally, the eGovernment strategy introduces new targets and initiatives regarding 
use  of  IT  in  provision  of  welfare  services  (schools,  health  and  care  of  children,  the 
elderly and vulnerable groups) in order to free up resources and improve the quality of 
public service. 

15  Eurostat:  'Community  Survey  on  ICT  Use  in  Households  and  by  Individuals,  2011'  and  'The  UN  e-Government 

Development Index, 2012'. 

22 

 
 
                                                 
4.  OVERVIEW  

2011 commitments 

Summary assessment 

Country-specific recommendations (CSRs) 

CSR 1: Implement fiscal consolidation measures in 2011, 2012 and 
2013 and ensure an average annual fiscal effort of 0.5 % of GDP over 
the period 2011-2013 as planned and correct the excessive deficit by 
2013 in line with the Council recommendation under the EDP. 
Thereafter ensure, as planned, an appropriate adjustment path towards 
the medium-term objective. Accelerate the reduction of the general 
government deficit if economic conditions turn out better than 
currently expected. Strengthen expenditure control by adopting 
binding multiannual spending ceilings for local, regional and central 
government which are consistent with the overall medium-term 
general budget targets. 

programme 

When taking discretionary measures as specified in 
expenditure 
the 
projections seem to ensure the required adjustment 
of  the  excessive  deficit  in  2013,  i.e.  a  fiscal 
tightening over the horizon 2011-2013 of 1½%.  

account, 

into 

in  Denmark  has 

The second part of the recommendation, regarding 
expenditure  control,  has  been  fully  implemented. 
An  agreement  on  a  national  Budget  Act  with  the 
aim  of  strengthening  management  of  public 
recently  been 
expenditure 
concluded,  including  the  establishment  of  four-
year 
legally  binding  expenditure  ceilings  at 
national,  municipal  and  regional  levels  to  be 
the  Danish  Parliament.  The 
adopted 
independent  Danish  Economic  Council  will  be 
give 
long-term 
sustainability of public finances, the medium-term 
development  of  the  budget  balance  and  whether 
the  expenditure  ceilings  are  aligned  with  fiscal 
targets.  The  Budget  Act  will  also  enshrine  the 
central provisions in the Fiscal Compact in Danish 
national  law  (the  balanced  budget  rule  and  the 
correction mechanism).  

task  of  assessing 

the 

the 

by 

CSR 2: In order to strengthen employment and the sustainability of public 
finances,  take  further  steps  to  increase  long-term  labour  supply,  by 
implementing  the  recently  concluded  reform  on  the  voluntary  early 
retirement  pension  scheme,  reforming  the  disability  pension  and  better 
targeting subsidised employment schemes (the ‘flex-job’ system) towards 
the most vulnerable groups. 

Denmark  has  so  far  partially  implemented  this 
CSR. The reform of the voluntary early retirement 
scheme has been adopted in line with CSR 2 and a 
proposal to reform the disability pension and flex-
job  scheme  has  been  put  forward.  The  proposal 
heads  in  the  right  direction  when  it  comes  to 
implementing  the  recommendation  but  no  reform 
has yet been adopted. 

CSR 3: Speed up the implementation of reforms to improve the quality of 
the education system. Reduce drop-out rates, particularly in the vocational 
education  sector,  and  increase  the  number  of  apprenticeship  places 
available. 

This  CSR  is  considered  to  be  only  partially 
implemented.  Denmark  has  set  out  a  number  of 
targets  and  plans  for  education  and  intends  to  put 
forward  a  range  of  initiatives  aimed  at  preventing 
drop-outs from youth education and increasing the 
number  of  apprenticeships  available.  The  2012 
budget  bill  provides  funding  for  10 400  additional 
apprenticeship  slots,  creates  1 500  extra  in-school 
training  places,  allocates  additional  resources  to 
boost  the  quality  of  teaching  and  increases  the 
grants 
apprentices. 
Nevertheless, Denmark still faces some challenges 
in the upper secondary educational system. 

in-school 

offered 

to 

CSR 4: Take steps to remove obstacles to competition, in particular in 
local  services  and  the  retail  sector,  by  reviewing  legislation  on  land 
use and opening up procurement in municipalities and regions. 

This  CSR  can  be  regarded  as  only  partially 
addressed, as measures for some sectors have still 
not been implemented. Significant barriers to entry 
in 
to  some  extent 
addressed  by  a  Competition  Package  adopted  in 

the  services  sector  were 

23 

 
 
 
 
2011.  The  Competition  Package 
is  mainly 
targeting  the  construction  sector,  the  retail  sector, 
services. 
health 
liberalisation  of 
Competition 
pharmacies 
investigated  before  any 
is  being 
measures will be taken. 

and  public-sector 
taxis  and 

services 
for 

CSR  5:  While  supporting  the  ongoing  stabilisation  of  the  real-estate 
market following the recent price correction, consider preventive action to 
strengthen  the  medium-term  stability  of  the  housing  market  and  the 
financial system including reviewing the functioning of the mortgage and 
property tax systems. 

Liberalisation  of  shop  opening  hours will be fully 
implemented  in  October  2012.  Establishment  of 
hypermarkets  was  submitted  for  consideration  by 
the 

broadly  composed  Retail  Trade  Forum.  The 
majority 

of  the  Retail  Trade  Forum  members  does  not 
recommend  to  relax  the  Danish  Planning  Act  to 
allow for establishment of more hypermarkets. The 
government  will  discuss  the  recommendations  in 
spring  2012.  The  matter  of  public  procurement  is 
to  be  dealt  with  in  negotiations  with  regional  and 
local governments.  

Overall,  the  CSR  has  been  partially  implemented. 
Closer  oversight  of  the  debt  level  and  different 
mortgage  types  is  planned.  The  Ministry  of 
Business and Growth is producing a report on the 
counselling  provided  by  banks  and  mortgage 
institutes  to  customers  as  well  as  analyses  of  the 
risks  associated  with  household  indebtedness  and 
the socio-economic distribution of mortgage loans. 
Although  risks  in  terms  of  financial  stability  are 
not  clear,  measures  to  prevent  future  housing 
bubbles,  in  particular unfreezing property taxes in 
nominal  terms,  are  relevant.  The  government  has 
ruled  out  any  changes  to  property  taxation  during 
its current four-year term.  

Euro Plus Pact (national commitments and progress) 

In order to strengthen labour supply, employment and public finances, 
Denmark has announced the following initiatives: 

•  Agreement  on  retirement  reform  which  strengthens  the 

structural balance by 1 per cent of GDP. 

•  Faster completion of education. 

•  Targeting of the flex-job scheme. 

In  order 
committed to: 

to  strengthen  public  expenditure  control,  Denmark 

Strengthen  the  legislation  on  sanctions  concerning  expenditure 
control in local municipalities.  

The  commitment  on  the  retirement  reform  has 
been  fully  implemented,  as  it  was  adopted  by 
Parliament at the end of 2011. 

The  commitment  to  get  students  through  the 
education  system  faster  has  not  been  achieved,  as 
no concrete measures have been taken. 

The commitment on targeting the flex-job scheme 
has  been  partially  achieved,  as  a  proposal  in  this 
regard has been put forward. 

The  commitment  to  strengthen  the  legislation  on 
sanctions has been partially achieved, as a proposal 
for  a  national  Budget  Act  with  the  aim  of 
strengthening  management  of  public  expenditure 
in Denmark, including permanent strengthening of 
the sanctions legislation, has been put forward and 
agreed on among the government and a majority in 
parliament.  

In  order 
government committed to: 

to  strengthen  competitiveness  and  productivity 

the 

This  commitment  has  been  fully  achieved,  as  the 
Competition Package has been implemented.  

A Competition Package with concrete measures focused primarily on 
construction and service sectors. 

24 

 
 
Employment rate target: 80 % 

Employment  rate  (%)  in  2009,  2010  and  2011: 
77.5, 75.8, 75.7. 

Europe 2020 (national targets and progress) 

Improvements  have  been  made  towards  the  target 
such as adoption of the voluntary early retirement 
pension  reform  and  the  reform  proposals  on 
disability  pensions  and  the  flex-job  scheme.  The 
impact is yet to be seen. However, the government 
estimates 
the 
employment rate to 80% in 2020. 

reforms  will 

these 

that 

lift 

R&D investment target: 3 % of GDP 

Greenhouse gas emissions target: -20 % (compared to 2005 emissions, 
ETS emissions are not covered by this national target) 

Renewable energy: 30 % 

Energy efficiency- reduction in primary energy consumption by 2020 
(in Mtoe) 

0.83 Mtoe 

Early school leaving target: 10 % 

25 

Gross  domestic  expenditure  on  R&D  (as  %  of 
GDP) in 2009, 2010: 3.06 %, 3.06 %e 

Denmark  reached  its  target  for  R&D  investments 
in 2009. 

Change  in  non-ETS  greenhouse  gas  emissions 
between  2005  and  2010:  -4%  (this  estimate 
corresponds to the current ETS scope) 

Several measures to give priority to the rail system 
and other public transport have been adopted. 

The  tax  exemption  for  electric  cars  was  extended 
up to and including 2015. 

The  share  of  renewable  energy  in  gross  final 
in  2009 
energy  consumption  was  19.9 % 
(EUROSTAT)  and  21.8 %  in  2010  (National  RES 
Progress  Report).  Denmark  has  already  achieved 
its  2011/2012  interim  target.  However,  progress 
towards the target of 10 % renewable energy in the 
transport  sector  by  2020  is  insufficient.  Denmark 
used  less  than  1 %  renewable  energy  in  the 
transport  sector  in  2010,  among  the  lowest  in  the 
EU. 

NA. 

The  method  of  assessment  of  national  progress  in 
energy  efficiency  is  currently  under  discussion 
between  the  institutions  in  the  context  of  the 
proposed Energy Efficiency Directive 

leavers 

from  education  and 

Early 
training 
(percentage  of  the  population  aged  18-24  with  at 
most lower secondary education and not in further 
education  or  training)  in  2009,  2010:  10.6 %, 
10.7 %. 

Denmark is performing better than the EU average 
as  regards  early  school–leaving,  with  a  rate  of 
10.7 %  compared  to  the  EU  average  of  14.1 %  in 
2010,  although 
the  rate  has  decreased  only 
moderately  over  the  last  decade  (from  11.7 %  in 
2000).  Denmark  has  set  a  national  target  of  10 % 
early school leavers in 2020, which seems broadly 
in  line  with  the  developments  between  2000  and 
2010. 
that  while  Denmark’s 
performance on the early school leaver indicator is 
good, performance on upper secondary completion 
is  relatively  poor.  The  reason  is  that  a  relatively 

is  notable 

It 

 
 
Tertiary education target: 40 %16 

large  share  of  18–  to  24-year  olds  take  part  in 
educational  activities  (i.e.  do  not  come  under  the 
leavers)  without 
definition  of  early  school 
obtaining  an  upper  secondary  education  before 
they turn 24. 

Tertiary  educational  attainment  in  2009,  2010: 
48.1 %, 47.0 %. 

As  regards  higher  education  attainment,  Denmark 
has  progressed  significantly,  from  33.1 %  in  2000 
to  the  current  rate  of  47 %  (2010),  which  is  well 
above the EU average of 33.6 %. 

Target  on  the  reduction  of  population  at  risk  of  poverty  or  social 
exclusion in number of persons: 

People  at  risk  of  poverty  or  social  exclusion  in 
2009, 2010: 360 000, 433 000 

-22 000 people in households with low work intensity 

No progress has been made towards achieving this 
target so far. 

16  The  Danish  national  targets  are  calculated  according  to  a  different  method  than  the  EU  targets. 
Therefore,  it  is  not  possible  to  compare  the  Danish  reporting  under  the  2020  targets  with  the  reporting 
under the Danish national targets. 

26 

 
 
 
 
 
                                                 
ANNEX 

Table I. Macroeconomic indicators 

Core indicators
GDP growth rate
Output gap 1
HICP (annual % change)
Domestic demand (annual % change) 2
Unemployment rate (% of labour force) 3
Gross fixed capital formation (% of GDP)
Gross national saving (% of GDP)
General government (%  of GDP)
Net lending (+) or net borrowing (-)
Gross debt
Net financial assets 
Total revenue 
Total expenditure
  of which: Interest
Corporations (%  of GDP)
Net lending (+) or net borrowing (-)

1995-
1999

2000-
2004

2005-
2008

2009

2010

2011

2012

2013

2,8
0,5
1,9
2,9
5,7
19,4
21,0

-0,9
65,4
-32,5
56,5
57,3
5,0

1,5
0,5
2,1
1,9
4,9
19,6
23,1

1,3
48,8
-18,9
55,5
54,3
3,0

1,7
2,3
2,2
2,5
4,0
21,0
25,2

4,6
32,7
-0,6
56,2
51,6
1,6

-5,8
-5,0
1,1
-6,7
6,0
18,6
20,9

-2,7
40,6
4,5
55,2
57,8
1,8

1,3
-4,0
2,2
1,3
7,5
17,2
22,7

-2,5
42,9
1,7
55,1
57,6
1,7

1,0
-3,1
2,7
-0,1
7,6
17,2
24,0

-1,8
46,5
n.a
56,0
57,8
1,8

1,1
-2,3
2,6
1,9
7,7
17,5
23,0

-4,1
40,9
n.a
54,5
58,6
1,5

1,4
-1,4
1,5
1,5
7,6
17,8
23,0

-2,0
42,1
n.a
54,7
56,6
1,5

3,6

2,8

2,4

7,0

8,8

9,8

9,4

8,4

n.a
n.a
10,5
20,8

n.a
n.a
10,5
21,6

-94,6
1,2
10,0
21,0

-89,3
0,3
10,2
18,0

-61,6
-6,1
13,5
20,6

-60,3
-2,9
13,5
20,1

-84,9
-12,4
14,0
20,5

-1,2
n.a
49,6
1,3
23,7
3,6

-4,0
95,6
49,2
1,5
20,7
2,3

-1,1
73,2
49,6
1,2
21,3
4,1

-1,0
88,8
52,8
0,0
22,8
4,3

-1,8
73,3
49,5
1,6
22,0
3,2

-0,5
102,1
50,0
1,7
23,1
4,2

Net financial assets non-financial corporations
Net financial assets financial corporations
Gross capital formation
Gross operating surplus
Households and NPISH (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Gross wages and salaries
Net property income
Current transfers received
Gross saving
Rest of the world (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Net exports of goods and services
Net primary income from the rest of the world
Net capital transactions 
Tradable sector
Non-tradable sector
  of which: Building and construction sector
Real effective exchange rate (index, 2000=100)
Terms of trade in goods and services (index, 2000=100)
Market performance of exports (index, 2000=100)
Notes:
1 The output gap constitutes the gap between actual and potential gross domestic product at 2000 market prices.
2 The indicator for domestic demand includes stocks.
3  Unemployed persons are all persons who were not employed, had actively sought work and were ready to begin working immediately or within two 
weeks. The labour force is the total number of people employed and unemployed. The unemployment rate covers the age group 15-74.

3,3
-2,9
3,8
1,6
0,0
34,7
51,3
4,6
130,6
106,6
97,9

2,9
3,0
3,4
1,5
0,1
38,6
46,2
4,8
119,1
105,5
95,2

0,9
22,9
4,0
-1,1
0,1
40,8
44,8
4,3
106,3
98,7
100,0

2,7
13,9
5,9
-1,0
0,0
40,2
45,5
4,5
107,2
101,4
100,4

4,9
n.a
4,6
2,4
-0,3
n.a
n.a
n.a
120,0
107,7
94,3

6,7
n.a
5,3
3,2
0,2
36,6
49,3
4,1
123,4
107,7
93,1

5,6
-8,6
5,3
2,3
0,0
36,6
49,5
4,0
125,1
110,0
91,2

-0,3
n.a
48,9
0,7
24,0
3,7

n.a
n.a
11,2
21,9

-1,6
n.a
48,5
0,7
24,0
3,3

4,7
n.a
4,5
2,2
-0,2
n.a
n.a
n.a
119,0
107,8
94,8

Source :
Commission services' spring 2012 forecast

27 

 
 
 
 
Table II. Comparison of macroeconomic developments and forecasts 

Real GDP (% change)
Private consumption (% change)
Gross fixed capital formation (% change)
Exports of goods and services (% change)
Imports of goods and services (% change)
Contributions to real GDP growth:
- Final domestic demand
- Change in inventories
- Net exports
Output gap1
Employment (% change)
Unemployment rate (%)
Labour productivity (% change)
HICP inflation (%)
GDP deflator (% change)
Comp. of employees (per head, % change)
Net lending/borrowing vis-à-vis the rest of the 
world (% of GDP)

2011
COM CP
1,0
-0,5
0,4
6,8
5,2

1,0
-0,5
0,4
6,8
5,2

2012
COM CP
1,2
0,8
3,9
1,9
2,5

1,1
1,4
4,6
3,2
5,0

2013
COM CP
1,5
2,0
2,0
3,3
3,4

1,4
1,6
3,2
4,9
5,4

-0,5
0,4
1,1
-3,1
-0,5
7,6
1,5
2,7
0,8
1,7
6,7

-0,5
0,4
1,1
-3,3
-0,4
7,7
1,4
2,7
0,8
1,6
6,5

1,8
0,0
-0,7
-2,3
0,1
7,7
1,0
2,6
2,0
1,7
4,9

1,4
0,0
-0,2
-2,6
-0,1
7,6
1,3
2,6
1,9
2,1
5,3

1,4
0,0
0,0
-1,4
0,3
7,6
1,1
1,5
1,5
1,6
4,7

1,4
0,0
0,1
-1,9
0,1
7,4
1,4
1,5
1,5
2,1
5,0

2014
CP
1,8
2,3
4,9
5,0
6,2

2,2
0,0
-0,4
-1,2
0,7
7,0
1,1
2,0
2,0
2,2
3,9

2015
CP
2,2
2,4
4,9
5,7
6,2

2,3
0,0
0,0
-0,2
0,7
6,6
1,6
2,0
2,0
2,5
3,7

Note:
1In percent of potential GDP, with potential GDP growth according to the programme as recalculated by the Commission.

Source :

Commission spring 2012 forecasts (COM); Convergence programme (CP).

28 

 
 
 
Table III. Composition of the budgetary adjustment 

(% of GDP)

2011

2012

2013

2014

2015

Change: 
2011-2015

Revenue
of which:
- Taxes on production and imports
- Current taxes on income, wealth, etc.
- Social contributions
- Other (residual)
Expenditure
of which:
- Primary expenditure

of which:

COM
56,0

COM
54,5

16,9
29,9
2,0
7,2
57,8

17,0
29,0
1,9
6,6
58,6

CP
53,4

17,2
29,3
1,0
6,0
57,4

COM
54,7

17,2
29,4
1,7
6,4
56,6

CP
53,6

17,4
29,6
0,9
5,8
55,4

CP
52,6

17,3
29,0
0,8
5,6
54,5

CP
52,1

17,3
28,6
0,8
5,4
53,7

56,1

57,1

55,9

55,2

53,9

53,0

52,1

CP
-3,9

0,4
-1,4
-1,2
-1,8
-4,1

-4,0

3

2,9

0,2

1,9

0,2

-2,3

-1,2

-1,4

-0,6

-1,0

-1,9

-3,1

-2,6

-0,2

-1,5

-1,1

-2,3

-2,6

-1,0
0,6

-1,7
-1,8

-0,9
-1,1

-0,9
-0,2
0,0
-0,3
-0,3
-2,4
-0,1
0,2
0,1
-0,5
0,7

18,2
9,9
19,2
2,6
1,9
2,0
1,5
-1,8
-0,3
-0,3
-1,5

18,5
9,9
18,7
2,6
2,1
4,2
1,8
-1,8
-0,1
0,0
-1,8

17,7
9,7
18,7
2,3
1,9
1,8
1,7
-1,7
0,0
-0,5
-1,2

18,0
9,8
19,0
2,4
1,9
2,0
1,6
-1,9
-0,3
-0,4
-1,5

18,1
9,7
19,1
2,6
1,9
3,7
1,5
-2,0
-0,5
0,0
-2,0

18,4
10,0
19,3
2,7
2,4
3,1
1,5
-4,0
-2,4
-1,4
-2,6

18,3
10,0
19,2
2,7
2,4
4,6
1,5
-4,1
-2,6
-0,9
-3,2

Compensation of employees
Intermediate consumption
Social payments
Subsidies
Gross fixed capital formation
Other (residual)
- Interest expenditure
General government balance (GGB)
Primary balance
One-off and other temporary measures
GGB excl. one-offs
Output gap2
Cyclically-adjusted balance2
Structural balance
Change in structural balance
Structural primary balance3
Change in structural primary balance
Expenditure benchmark
Public expenditure growth4 (real)
Reference rate5,6
Lower reference rate5,7
Deviation in % GDP 
   against applicable reference rate
Two-year average deviation in % GDP 
   against applicable reference rate
Notes:
1On a no-policy-change basis.
2Output gap (in % of potential GDP) and cyclically-adjusted balance according to the programme as recalculated by Commission services on 
the basis of the information in the programme.
3Structural (primary) balance = cyclically-adjusted (primary) balance excluding one-off and other temporary measures.
4M odified expenditure aggregate used for the expenditure benchmark, growth rates net of non-discretionary changes in unemployment benefit 
and of discretionary measures.
5The reference rates applicable to 2014 onwards will be available from mid-2012. For illustrative purposes, the current reference rates have 
also been applied to the years 2014 onwards.
6The (standard) reference rate applies starting in the year following which the country has reached its M TO.
7The lower reference rate applies as long as the country is adjusting towards its M TO, including the year in which it reaches the M TO.

-0,02
0,21

-0,02
0,29

-0,02
-1,33

-0,02
-1,13

-0,02
0,36

-0,02
0,62

-0,1
-2,1

-1,0
-0,3

-0,7
-0,4

0,6
-1,3

0,8
-0,4

0,6
-0,2

-0,3
0,6

1,2
0,6

0,4
0,6

-0,56

-2,44

-0,36

-2,03

-0,38

0,86

0,86

0,25

0,86

0,53

0,86

2,00

1,52

0,37

0,86

0,86

-1,2

-1,3

-1,7

n.a.

n.a.

-
-

-

-

-

Source :
Convergence programme (CP); Commission services’ spring 2012 forecasts (COM); Commission services’ calculations.

29 

 
 
 
Table IV. Debt dynamics 

Average 
2006-10

35,3
1,0

-3,2
0,7

1,6
0,0
-0,9
3,5

2011

46,5
3,6

0,1
1,0

1,8
-0,4
-0,3
2,5

2012

2013

COM

40,9
-5,6

2,6
0,1

1,5
-0,5
-0,9
-8,2

CP

40,5
-6,0

2,4
0,2

1,5
-0,5
-0,8
-8,6

COM

42,1
1,1

0,5
0,3

1,5
-0,6
-0,6
0,3

CP

41,4
0,9

0,3
0,4

1,5
-0,6
-0,6
0,3

2014
CP

41,2
-0,2

0,3
0,0

1,6
-0,7
-0,8
-0,6

2015
CP

42,1
0,9

0,0
0,0

1,7
-0,9
-0,8
0,9

(% of GDP)

Gross debt ratio1
Change in the ratio
Contributions 2 :

1. Primary balance
2. 'S nowball' effect

Of which:
Interest expenditure
Growth effect
Inflation effect

3. S tock-flow adjustment

Of which:
Cash/accruals diff.
Accum. financial assets

Privatisation

Val. & residual effects

Notes:
1End of period.
2The snowball effect captures the impact of interest expenditure on accumulated debt, as well as the impact of real GDP 
growth and inflation on the debt ratio (through the denominator). The stock-flow adjustment includes differences in cash 
and accrual accounting, the accumulation of financial assets, and valuation and other residual effects. 

Source :
Convergence programme (CP); Commission services’ spring 2012 forecasts (COM); Commission services’ calculations.

30 

 
 
 
Table V. Long-term sustainability indicators 

DK

EU27

No-policy 
change 
scenario 

Convergence 
programme 
scenario

No-policy 
change 
scenario 

SCP 
scenario

S2
of which:

Initial budgetary position (IBP)
Long-term change in the primary balance (LTC)
 of which:

pensions
health care and long-term care
other

S1 (required adjustment)*

3,3

0,5
2,9

-0,2
3,2
-0,2
-0,6

3,4

0,7
2,6

-0,3
3,1
-0,2
-1,2

2,9

0,7
2,3

1,1
1,5
-0,3
2,2

0,7

-1,6
2,4

1,2
1,5
-0,3
-0,1

Debt, % of GDP (2011)
Age-related expenditure, % of GDP (2011)

46,5
30,7

82,8
25,8

Source : Commission, 2012 stability and convergence programmes. 
Note: The ‘no policy change’ scenario depicts the sustainability gap under the assumption that the budgetary position evolves 
according to the spring 2012 forecast until 2013. The ‘stability programme’ scenario depicts the sustainability gap under the 
assumption that the budgetary plans in the programme are fully implemented 
* The required adjustment of the primary balance until 2020 to reach a public debt of 60% of GDP by 2030.

Table VI. Taxation 

Total tax revenues (incl. actual compulsory social contributions, % of GDP)
Decomposition by economic function (% of GDP)1
     Consumption
              of which:
              - VAT

             - excise duties on tobacco and alcohol
             - energy
             - other (residual)

     Labour employed
     Labour non-employed
     Capital and business income

     Stocks of capital/wealth
     p.m.  Environmental taxes2
VAT efficiency3
     Acctual VAT revenues as % of theoretical revenues at standard rate

Note: 

2001

48,5

15,7

9,6

0,9
2,7
2,5

22,1
4,8
3,4

2,6

4,7

2005

50,8

16,2

10,1

0,7
2,3
3,1

20,0
4,8
7,3

2,8

4,9

2007

48,9

2008

47,8

2009

47,7

2010

47,6

16,1

10,4

0,6
2,1
3,0

20,3
4,7
5,2

2,7

4,6

15,4

10,1

0,6
2,1
2,6

20,6
4,8
4,2

2,9

4,2

15,1

10,1

0,6
2,2
2,2

20,7
6,3
2,9

2,9

3,9

15,0

9,9

0,6
2,3
2,2

19,5
5,1
5,3

2,8

4,0

60,8

62,7

65,0

62,4

59,2

58,3

1 Tax revenues are broken down by economic function, i.e. according to whether taxes are raised on consumption, labour or capital. See European Commission (2012), Taxation trends in the 

European Union, for a more detailed explanation.

2 This category comprises taxes on energy, transport and pollution and resources included in taxes on consumption and capital.

3 The VAT efficency is measured via the VAT revenue ratio. The VAT revenue ratio is defined as the ratio between the actual VAT revenue collected and the revenue that would theoretically be 

raised if VAT was applied at the standard rate to all final consumption. A low ratio can indicate a reduction of the tax base due to large exemptions or the application of reduced rates to a wide range 

of goods and services ('policy gap') or a failure to collect all tax due to e.g. fraud ('collection gap'). See European Commission (2011), Tax reforms in EU Member States, European Economy 5/2011, 

for a more detailed explanation.

Source: Commission services

31 

 
 
 
 
 
Table VII. Financial market indicators 

2007

2008

2009

2010

2011

479,7
64,4
…

463,8
66,0
17,6

493,1
64,0
19,9

426,8
64,2
19,5

1,2
12,4
7,0
11,1
5,7
307,8
5,5
8,7
218,4

0,6
10,6
16,1
13,5
9,9
300,2
3,6
7,1
204,3

Total assets of the banking sector (% of GDP)
Share of assets of the five largest banks (% of total assets)
Foreign ownership of banking system (% of total assets)
Financial soundness indicators:
              - non-performing loans (% of total loans) 1)
              - capital adequacy ratio (%) 1), 2) 
              - return on equity (%) 1), 3)
Bank loans to the private sector (y-o-y % change)
Lending for house purchase (y-o-y % change)
Loan to deposit ratio
CB liquidity as % of liabilities
Banks' exposure to countries beneficiary of official financial assistance  (% of GDP)4)
Private debt (% of GDP)
Gross external debt (% of GDP) 5)
            - Public
            - Private
Long term interest rates spread versus Bund (basis points)*
Credit default swap spreads for sovereign securities (5-year)*
Notes: 
1) Latest avaiable September 2011.
2) The capital adequacy ratio is defined as total capital devided by risk weigthed assets.
3) Net income to equity ratio. Tier 1 capital.
4) Covered countries are IE, EL, PT, RO, LV and HU.
5) Latest data 2011Q3.
* Measured in basis points.
Source :
Bank for International Settlements and Eurostat (exposure to macro-financially vulnerable countries), IMF (financial soundness indicators), 
Commission services (long-term interest rates), World Bank (gross external debt) and ECB (all other indicators).

3,3
16,1
-3,2
-1,9
5,2
304,3
1,9
6,5
226,3

4,1
16,0
0,0
1,3
2,6
305,4
0,6
5,7
218,3

14,6
44,0
30,2
116,3

15,9
46,4
18,4
29,0

15,5
45,5
36,5
58,1

10,9
38,1
7,0
…

474,8
…
…

3,5
17,0
-0,2
-1,4
1,8
306,3
0,0
4,5
…

21,4
38,9
12,2
64,0

32 

 
 
 
Table VIII. Labour market and social 
indicators
2006

2007

2008

2009

2010

2011

Labour market indicators
Employment rate 
(% of population aged 20-64)
Employment growth 
(% change from previous year)
Employment rate of women 
(% of female population aged 20-64)
Employment rate of men 
(% of male population aged 20-64)
Employment rate of older workers 
(% of population aged 55-64)
Part-time employment 
(% of total employment)
Part-time employment of women  
(% of women employment)
Part-time employment of men  
(% of men employment)
Fixed term employment 
(% of employees with a fixed term contract)
Unemployment rate1 (% of labour force)
Long-term unemployment2  (% of labour force)
Youth unemployment rate 
(% of youth labour force aged 15-24)

Youth NEET3 rate (% of population aged 15-24)

Early leavers from education and training (% of 
pop. 18-24 with at most lower sec. educ. and not 
in further education or training)
Tertiary educational attainment (% of population 
30-34 having successfully completed tertiary 
education)
Labour productivity per person employed 
(annual % change )
Hours worked per person employed  (annual % 
change)
Labour productivity per hour worked (annual % 
change; constant prices)
Compensation per employee (annual % change; 
constant prices)
Nominal unit labour cost growth (annual % 
change)

79,4

79,0

79,7

77,5

75,8

75,7

1,9

-0,1

1,8

-2,9

-2,3

-0,1

74,8

74,7

75,5

74,5

73,0

72,4

83,8

83,2

83,9

80,5

78,6

79,0

60,7

58,9

58,4

58,2

58,4

59,5

23,9

24,0

24,8

26,3

26,8

26,5

35,6

35,8

36,3

37,9

38,9

38,2

13,6

13,6

14,6

15,7

15,5

15,8

8,9

3,9

0,8

7,7

3,6

9,1

3,8

0,6

7,5

4,3

8,5

3,4

0,5

8,0

4,1

8,7

6,0

0,6

8,4

7,5

1,5

8,8

7,6

1,8

11,8

14,0

14,2

5,2

5,9

9,1

12,5

11,3

10,6

10,7

40,8

36,2

36,4

37,6

37,6

1,3

0,4

0,9

1,4

2,2

-1,1

-1,0

-0,2

1,3

4,8

2,4

-2,4

0,0

-2,5

-0,7

6,1

1,8

-2,7

-0,7

-2,0

1,8

5,7

4,6

3,6

0,0

3,6

-1,3

-1,0

-4,7

:

:

:

1,7

-2,3

4,1

0,8

0,3

-0,5

Real unit labour cost growth (annual % change)

0,1

Notes:

1 According to ILO definition, age group 15-74)
2 Share of persons in the labour force who have been unemployed for at least 12 months.
3 NEET are persons that are neither in employment nor in any education or training.

Sources: 
Commission (EU Labour Force Survey and European National Accounts) 

33 

 
 
 
 
Table VIII. Labour market and social indicators (continued) 

Expenditure on social protection 
benefits (% of GDP)
Sickness/Health care
Invalidity
Old age and survivors
Family/Children
Unemployment
Housing and Social exclusion n.e.c.
Total
of which:  Means tested benefits
Social inclusion indicators
Risk-of-poverty or exclusion1 (% of total 
population)
Risk-of-poverty or exclusion of children (% of 
people aged 0-17)
Risk-of-poverty or exclusion of elderly (% of 
people aged 65+)
At-risk-of-poverty rate2 (% of total population)
Value of relative poverty threshold (single 
household per year) - in PPS
Severe material deprivation3  (% of total 
population)
Share of people living in low work intensity 
households 4 (% of people aged 0-59 not 
student)
In-work at-risk-of poverty rate (% of persons 
employed)

Notes:

2005

2006

2007

2008

2009

6,09
4,24
11,03
3,80
2,52
0,71
30,2
0,90

2006

6,14
4,24
10,77
3,74
2,05
0,66
29,2
0,85

2007

6,44
4,20
10,67
3,67
1,58
0,69
28,8
0,89

2008

6,72
4,38
11,07
3,80
1,40
0,71
29,6
0,92

2009

7,57
4,91
12,08
4,20
2,15
0,75
33,4
1,00

2010

16,7

16,8

16,3

17,6

18,3

14,5

14,2

12,7

14,0

15,1

18,3

11,7

18,3

11,7

18,6

11,8

20,6

13,1

18,4

13,3

9688

10121

10561

10750

10713

3,1

3,3

2,0

2,3

2,7

9,3

4,5

9,9

4,2

8,3

5,1

8,5

10,3

5,9

6,6

1 People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) 
and/or suffering from severe material deprivation (SM D) and/or living in households with zero or very low 
work intensity (LWI).

2 At-risk-of poverty rate: share of people with an equivalised disposable income below 60% of the national 
equivalised median income. 

3 Share of people who experience at least 4 out of 9 deprivations: people cannot afford to i) pay their rent or 
utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish, or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have 
a washing machine, viii) have a colour TV, or ix) have a telephone.

4 People living in households with very low work intensity: share of people aged 0-59 living in households 
where the adults work less than 20% of their total work-time potential during the previous 12 months.

Sources: 
For expenditure on social protection benefits ESSPROS; for social inclusion EU-SILC.

34 

 
 
 
 
Table IX: Product market performance and policy indicators 

Performance indicators

Labour productivity1 total economy (annual growth in 
%)
Labour productivity1 in manufacturing (annual 
growth in %)
Labour productivity1 in electricity, gas, water (annual 
growth in %)
Labour productivity1 in the construction sector 
(annual growth in %)
Patent intensity in manufacturing2 (patents of the 
EPO divided by gross value added of the sector)

Policy indicators

Enforcing contracts3 (days)
Time to start a business3 (days)
R&D expenditure (% of GDP)
Tertiary educational attainment 
(% of 30-34 years old population)
Total public expenditure on education 
(% of GDP)

2002-
2006

1,5

3,2

0,1

4,3

2002-
2006
n.a.

n.a.
2,5

40,0

2007

2008

2009

2010

2011

-1,2

-2,9

-2,3

3,9

1,6

0,8

2,4

1,9

-2,7

10,3

n.a.

-10,0

n.a.

n.a.

-1,6

-3,4

-6,5

-7,0

-3,8

-2,7

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

2007

2008

2009

2010

2011

380

6
2,6

380

6
2,9

380

6
3,1

410

6
3,1

42,5

45,4

48,1

47,0

410

6
n.a.

n.a.

n.a.

8,3

7,8

7,8

n.a.

n.a.

Product market regulation4, Overall
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Retail
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Network Industries5
(Index; 0=not regulated; 6=most regulated)

2005

2006

2008

2009

2010

2011

n.a.

n.a.

n.a.

n.a.

1,1

2,9

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

1,2

1,2

1.2*

n.a.

n.a.

n.a.

Notes:
1Labour productivity is defined as gross value added (in constant prices) divided by the number of persons employed.
2Patent data refer to applications designated to the European Patent Office (EPO). They are counted according to the year in 
which they were filed at the EPO. They are broken down according to the inventor's place of residence, using fractional counting 
if multiple inventors or IPC classes are provided to avoid double counting. 
3 The methodologies, including the assumptions, of this indicator is presented in detail at the website 
http://www.doingbusiness.org/methodology. 
4 The methodologies of the Product market regulation indicators are presented in detail at the website 
http://www.oecd.org/document/1/0,3746,en_2649_34323_2367297_1_1_1_1,00.html. The latest available product market 
regulation indicators refer to 2003 and 2008, except for Network Industries.
5 Aggregate ETCR.
*figure for 2007.

Source :

Commission services, World Bank Doing Business (for enforcing contracts and time to start a business) and OECD (for the 
product market regulation indicators). 

35 

 
 
 
 
Table X. Indicators on green growth 

2006

2007

2008

2009

2010

Denmark

Green Growth performance

Macroeconomic
Energy intensity 
Carbon intensity 
Resource intensity (reciprocal of resource productivity)
Waste intensity 
Energy balance of trade 
Energy weight in HICP
Difference between change energy price and inflation 
Environmental taxes over labour taxes
Environmental taxes over total taxes

Sectoral 

Industry energy intensity 
Share of energy-intensive industries in the economy
Electricity prices for medium-sized industrial users 
Public R&D for energy 
Public R&D for the environment
Recycling rate of municipal waste
Share of GHG emissions covered by ETS
Transport energy intensity
Transport carbon intensity
Change in the ratio of passenger transport and GDP

Security of energy supply
Energy import dependency
Diversification of oil import sources 
Diversification of energy mix
Share of renewable energy in energy mix

kgoe / €
kg / €
kg / €
kg / €
% GDP
%
%
ratio
ratio

kgoe / € 
% GDP
€ / kWh
% GDP
% GDP
ratio
%
kgoe / €
kg / €
%

%
HHI
HHI
%

2001-
2005

0,11
0,39
0,76
n.a.
1,0%
11
1,08
21,3%
11,2%

0,09

10,5

0,06
n.a.
n.a.
94,5%
n.a.
0,37
0,94
-1,3%

0,11
0,37
0,84
0,08
2,1%
11
3,3
25,1%
12,4%

0,08
7,4
0,07
0,02%
0,02%
95,0%
47,8%
0,38
0,97
-1,6%

0,11
0,34
0,81
0,08
1,9%
11
-1,6
23,5%
12,0%

0,07
6,9
0,06
0,03%
0,02%
95,0%
43,9%
0,37
0,95
0,4%

0,10
0,33
0,77
0,08
1,7%
11
4,1
22,4%
11,9%

0,07
7,2
0,08
0,03%
0,02%
95,9%
41,7%
0,37
0,94
1,3%

0,11
0,34
0,67
n.a.
1,1%
10
-3,8
17,7%
10,0%

0,07
6,5
0,07
0,04%
0,03%
96,1%
41,7%
0,43
1,10
n.a.

-40,1% -35,9% -24,7% -21,7% -18,8%
0,94
0,28
15,6%

0,76
0,27
16,7%

n.a.
0,30
12,0%

1,00
0,29
13,7%

0,99
0,28
16,0%

0,10
n.a.
n.a.
n.a.
1,1%
11
5,1
n.a.
n.a.

n.a.

n.a.
0,08
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.

n.a.
n.a.
n.a.
n.a.

Country-specific notes: 
The year 2011 is not included in the table due to lack of data.
General explanation of the table items:
Source: Eurostat unless indicated otherwise; ECFIN explanations given below
All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2000 prices)
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)
          Carbon intensity: Greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)
          Resource intensity: Domestic M aterial Consumption (in kg) divided by GDP (in EUR)
          Waste intensity: waste (in kg) divided by GDP (in EUR)
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP  
Energy weight in HICP: the share of the "energy" items in the consumption basket used in the construction of the HICP
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual %-change)
Environmental taxes over labour or total taxes: from DG TAXUD's database "Taxation trends in the European Union"
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in EUR) 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP
Recycling rate of municipal waste: ratio of municipal waste recycled over total municipal waste
Public R&D for energy or for the environment: government spending on R&D (GBAORD) for these categories as % of GDP
Share of GHG emissions covered by ETS: based on greenhouse gas emissions as reported by M ember States to EEA (excl LULUCF)
Transport energy intensity: final energy consumption of transport (in kgoe) divided by gross value added of industry (in EUR) 
Transport carbon intensity:  greenhouse gas emissions in transport divided by gross value added of the transport sector
Passenger transport growth : measured in %-change in passenger kilometres
Energy import dependency: net energy imports divided by gross inland energy consumption incl. of international bunkers

Diversification of oil import sources: Herfindahl index (HHI), calculated as the sum of the squared market shares of countries of origin 

Diversification of the energy mix: Herfindahl Index over natural gas, total petrol products, nuclear heat, renewable energies and solid fuels

Share of renewable energy in energy mix: percentage-share in  gross inland energy consumption, expressed in tonne oil equivalents

36