Recommendation for a COUNCIL RECOMMENDATION on the 2018 National Reform Programme of Denmark and delivering a Council opinion on the 2018 Convergence Programme of Denmark
Date: 2018-05-23
Institutions: European Commission, Secretariat-General
Subjects: Denmark, budget deficit, competition policy, domestic market, economic policy, economic reform, integration into employment, real estate market, service industry, stability programme

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   EUROPEAN COMMISSION  Brussels, 23.5.2018 COM(2018) 404 final  Recommendation for a COUNCIL RECOMMENDATION on the 2018 National Reform Programme of Denmark  and delivering a Council opinion on the 2018 Convergence Programme of Denmark  
 
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2018 National Reform Programme of Denmark 

and delivering a Council opinion on the 2018 Convergence Programme of Denmark 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 9(2) thereof, 
Having regard to the recommendation of the European Commission2, 
Having regard to the resolutions of the European Parliament3, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

(2) 

On 22 November 2017, the Commission adopted the Annual Growth Survey, marking 
the start of the 2018 European Semester of economic policy coordination. It took due 
account  of  the  European  Pillar  of  Social  Rights,  proclaimed  by  the  European 
Parliament, the Council and the Commission on 17 November 2017. The priorities of 
the  Annual  Growth  Survey  were  endorsed  by  the  European  Council  on  22  March 
2018.  On  22  November  2017,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission  also  adopted  the  Alert  Mechanism  Report,  in  which  it  did  not  identify 
Denmark as one of the Member States for which an in-depth review would be carried 
out.  
The  2018  country  report  for  Denmark4  was  published  on  7  March  2018.  It  assessed 
Denmark’s  progress  in  addressing  the  country-specific  recommendations  adopted  by 
the Council on 11 July 2017, the follow-up given to the recommendations adopted in 
previous years and Denmark's progress towards its national Europe 2020 targets. 

1 
2 
3 
4 

OJ L 209, 2.8.1997, p. 1. 
COM(2018) 404 final. 
P8_TA(2018)0077 and P8_TA(2018)0078. 
SWD(2018) 203 final. 

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(3) 

(4) 

(5) 

(6) 

On 24 April 2018, Denmark submitted its 2018 National Reform Programme and its 
2018  Convergence  programme.  To  take  account  of  their  interlinkages,  the  two 
programmes have been assessed at the same time. 

Relevant country-specific recommendations have been addressed in the programming 
of  the  European  Structural  and  Investment  Funds  for  the  2014-2020  period.  As 
foreseen in Article 23 of Regulation (EU) No 1303/2013 of the European Parliament 
and  of  the  Council5,  where  it  is  necessary  to  support  the  implementation  of  relevant 
Council  recommendations,  the  Commission  may  request  a  Member  State  to  review 
and propose amendments to its Partnership Agreement and relevant programmes. The 
Commission has provided further details on how it would make use of that provision 
in  guidelines  on  the  application  of  the  measures  linking  the  effectiveness  of  the 
European Structural and Investment Funds to sound economic governance6.  

Denmark  is  currently  in  the  preventive  arm  of  the  Stability  and  Growth  Pact.  In  its 
2018 Convergence Programme, the government plans to achieve a headline deficit of 
0.7 % of GDP in 2018 and to continue to meet the medium-term budgetary objective 
—  a  structural  deficit  of  0.5  %  of  GDP  —  throughout  the  programme  period  until 
2025. According to the 2018 Convergence Programme, the general government debt-
to-GDP ratio is expected to fall to 35.6 % in 2018 and to continue declining to 34.2% 
in  2020,  before  rising  to  just  under  40  %  by  2025.  The  macroeconomic  scenario 
underpinning  those  budgetary  projections  is  plausible  over  the  programme  period. 
Based  on  the  Commission  2018  spring  forecast,  the  structural  balance  is  forecast  to 
reach a surplus of 0.3 % of GDP in 2018 and 0.9 % of GDP in 2019, somewhat above 
the target of the 2018 Convergence Programme and above the medium-term budgetary 
objective. Overall, the Council is of the opinion that Denmark is projected to comply 
with the provisions of the Stability and Growth Pact in 2018 and 2019. 

Ensuring labour supply in times of demographic changes and addressing the emerging 
shortages of labour in certain sectors is a condition for sustainable growth in Denmark. 
Reforms  to  increase  participation  and  completion  rates  in  vocational  education  and 
training and  measures  to  better  develop  digital skills levels  are  likely  to  increase  the 
supply  of  skilled  workers.  Furthermore,  measures  to  better  include  marginalised  and 
disadvantaged  groups  on  the  labour  market  would  be  beneficial  in  this  respect.  This 
applies  to  young  people  with  low  educational  attainment,  people  with  reduced  work 
capacity  and  disabilities  and  people  with  a  migrant  background.  The  recent  job-
integration  measures  started  off  slowly  but  appear  to  be  improving  the  situation  for 
newly arrived refugees. The integration of children with a migrant background in the 
education system remains a key challenge, resulting in a lower education performance 
on average compared to other children. 

(7) 

High  productivity  growth  is  fundamental  to  support  economic  growth,  maintain  the 
relatively high level of welfare in Denmark and ensure the country's competitiveness. 
Although Denmark’s productivity level is high compared to other EU Member States, 
productivity growth has been declining for a long time and there is a  broad range of 
possible  impediments  to  productivity  growth  (also  identified  by  the  Danish 

5 

6 

Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 
laying  down  common  provisions  on  the  European  Regional  Development  Fund,  the  European  Social 
Fund, the  Cohesion Fund, the European Agricultural Fund for Rural Development and the European 
Maritime  and  Fisheries  Fund  and  laying  down  general  provisions  on  the  European  Regional 
Development  Fund,  the  European  Social  Fund,  the  Cohesion  Fund  and  the  European  Maritime  and 
Fisheries Fund and repealing Council Regulation (EC) No 1083/2006 (OJ L 347, 20.12.2013, p. 320). 
COM(2014) 494 final. 

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(8) 

(9) 

Productivity  Board  and  Competition  Authority).  Domestically  oriented  services  in 
particular  have  been  characterised  by  sluggish  productivity    where  the  government 
only took limited measures in 2017 to increase competition and where some parts, like 
mortgage banks, are not exposed to foreign competition. Weak competition in several 
domestically  oriented  services  sectors  (e.g.  in  retail,  finance,  distribution  of  utilities 
and network industries, transport and wholesale pharmaceuticals) is still weighing on 
productivity, investments and job creation.  

Following several years of substantial increases in housing prices, overvaluation risks 
are emerging, particularly in the main urban areas. The European Systemic Risk Board 
issued a warning to eight EU countries, including Denmark, pointing to medium-term 
vulnerabilities  in  the  residential  real  estate  sector  due  to  increasing  housing  prices 
combined  with  high  household  debt.  Households  continued  to  reduce  their  debt  in 
2017, but debt remains among the highest in the EU (as a % of GDP) and above what 
is  warranted  by  economic  fundamentals  and  prudential  thresholds,  according  to 
Commission estimates. Moreover, the proportion of mortgages with very high loan-to-
income  levels  has  been  increasing  strongly  since  2013,  particularly  in  and  around 
Copenhagen.  The  Danish  authorities  have  adopted  several  new  macro  prudential 
measures  to  further  restrict  risky  loan  taking  (effective  from  2018  and  2020)  and 
introduced a property tax reform (effective from 2021) to address regional imbalances 
in  housing  prices.  Nevertheless,  the  combination  of  very  high  loan-to-income  ratios, 
high debt with high interest rate sensitivity and potentially overvalued housing prices 
is  increasing  the  risk  of  a  price  correction  that  could  hurt  the  real  economy  and  the 
banking sector. 

In  the  context  of  the  2018  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Denmark’s  economic  policy  and  published  it  in  the  2018 
country  report.  It  has  also  assessed  the  2018  Convergence  Programme  and  the  2018 
National  Reform  Programme  and  the  follow-up  given  to  the  recommendations 
addressed  to  Denmark  in  previous  years.  It  has  taken  into  account  not  only  their 
relevance  for  sustainable  fiscal  and  socioeconomic  policy  in  Denmark  but  also  their 
compliance with Union rules and guidance, given the need to strengthen the Union’s 
overall  economic  governance  by  providing  Union-level  input  into  future  national 
decisions.  

(10) 

In  the  light  of  this  assessment,  the  Council  has  examined  the  2018  Convergence 
Programme  and  is  of  the  opinion  that  Denmark  is  expected  to  comply  with  the 
Stability and Growth Pact. 

HEREBY RECOMMENDS that Denmark take action in 2018 and 2019 to: 

1. 

Increase  competition  in  domestically  oriented  services  sectors,  for  instance  in  the 
distribution of utilities, network industries and in the financial sector. 

Done at Brussels, 

For the Council 
The President 

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