Recommendation for a COUNCIL RECOMMENDATION on the 2019 National Reform Programme of Denmark and delivering a Council opinion on the 2019 Convergence Programme of Denmark
Date: 2019-06-05
Institutions: European Commission, Secretariat-General
Subjects: Denmark, economic policy, economic reform, education policy, innovation, investment, money laundering, stability pact, stability programme, transport policy

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   EUROPEAN COMMISSION  Brussels, 5.6.2019  COM(2019) 504 final  Recommendation for a COUNCIL RECOMMENDATION on the 2019 National Reform Programme of Denmark and delivering a Council opinion on the 2019 Convergence Programme of Denmark    
 
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2019 National Reform Programme of Denmark and delivering a Council opinion 
on the 2019 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 Commission, 

Having regard to the resolutions of the European Parliament, 

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 21 November 2018, the Commission adopted the Annual Growth Survey, marking 
the start of the 2019 European Semester for 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  21  March 
2019.  On  21  November  2018,  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 2019 country report for Denmark2 was published on 27 February 2019. It assessed 
Denmark’s  progress  in  addressing  the  country-specific  recommendations  adopted  by 
the Council on 13 July 2018, the follow-up given to the recommendations adopted in 
previous years and Denmark's progress towards its national Europe 2020 targets.  

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OJ L 209, 2.8.1997, p. 1. 
SWD(2019) 1003 final. 

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On 15 March 2019, Denmark submitted its 2019 National Reform Programme and, on 
10  April  2019,  its  2019  Convergence  Programme.  In  order  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  ('ESI  Funds')  for  the  2014-2020 
period.  As  provided  for  in  Article  23  of  Regulation  (EU)  No  1303/2013  of  the 
European  Parliament  and  of  the  Council3,  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 ESI Funds to sound economic governance4.  

Denmark  is  currently  in  the  preventive  arm  of  the  Stability  and  Growth  Pact.  In  its 
2019  Convergence  Programme,  the  government  plans  a  headline  deficit  of  0.1%  of 
GDP  in  2019  and  2020.  Based  on  the  recalculated  structural  balance5,  the  medium-
term  budgetary  objective  —  a  structural  deficit  of  0.5%  of  GDP  —  continues  to  be 
overachieved  throughout  the  programme  period  until  2025.  According  to  the  2019 
Convergence  Programme,  the  general  government  debt-to-GDP  ratio  is  expected  to 
fall to 33.4% in 2019 and to remain stable in 2020, before rising to 37.8% of GDP by 
2025.  The  macroeconomic  scenario  underpinning  those  budgetary  projections  is 
plausible over the programme period. Based on the Commission 2019 spring forecast, 
the  structural  balance  is  forecast  to  register  a  surplus  of  0.9%  of  GDP  in  2019  and 
1.0%  of  GDP  in  2020,  above  the  medium-term  budgetary  objective.  Risks  relate  to 
revenue  shortfalls  from  volatile  components,  particularly  the  pension  yield  tax. 
Overall,  the  Council  is  of  the  opinion  that  Denmark  is  projected  to  comply  with  the 
provisions of the Stability and Growth Pact in 2019 and 2020. 

Denmark’s  research  and  innovation  system  is  characterised  by  high  levels  of 
investment,  a  strong  human  resources  base  and  scientific  excellence.  However,  the 
research  and  innovation  landscape  in  Denmark  is  concentrated  in  a  relatively  small 
number  of  players  such  as  large  firms  and  foundations  mostly  in  the  pharmaceutical 
and  biotechnology  sectors,  which  makes  the  research  and  innovation  system 
potentially  vulnerable  to  external  shocks.  Therefore,  there  appears  to  be  room  for 
improvement in investing in the scale-up of highly innovative companies.  

Ensuring the supply of labour in times of demographic and technological changes and 
addressing labour shortages, in particular of skilled workers and ICT specialists, is key 
to  fostering  sustainable  and  inclusive  growth  in  Denmark.  Reforms  and  investments 
improving  the  attractiveness  and  thereby  increasing  the  participation  rates  in 
vocational education and training is likely to have a positive impact on the supply of 
skilled  workers.  Continuous  investments  in  adult  and  life-long  learning  and  digital 
skills could also help in addressing this challenge. Furthermore, it would be beneficial 

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. 
Cyclically-adjusted  balance  net  of  one-off  and  temporary  measures,  recalculated  by  the  Commission 
using the commonly agreed methodology. 

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to  focus  on  a  better  integration  of  marginalised  and  disadvantaged  groups  on  the 
labour  market.  This  relates  in  particular  to  young  people  with  low  educational 
attainment, people with a migrant background, people with reduced work capacity and 
disabilities.  In  addition,  the  educational  performance  of  children  with  a  migrant 
background remains a challenge.  

(8) 

Despite high quality roads, road congestion is increasing, particularly around the large 
cities. In addition, there is a need to decarbonise the transport sector, which points to 
investment opportunities in sustainable transport infrastructure in order to decarbonise 
the transport sector and tackle road congestion, including the rollout of alternative fuel 
infrastructure.  The  government  has  put  forward  a  plan  to  reduce  congestion  around 
larger  cities.  Adoption  of  the  plan,  which  allocates  DKK  112  billion  (almost  6%  of 
GDP) from 2020 to 2030, is pending. 

(9)  While the productivity level in the Danish economy remains among the highest in the 
EU,  productivity  growth  has  been  declining  for  decades.  Exporting  companies  show 
higher  productivity  growth  than  companies  shielded  from  competition  from  foreign 
companies.  While  Denmark  has  taken  measures  to  support  productivity  growth  of 
companies  in  domestically  oriented  services  sectors,  productivity  growth  and 
competition  in  these  sectors  is  still  lagging  behind.  Denmark  has  implemented 
measures  to  enhance  competition  in  the  financial  sector  and  has  continued  to 
implement the utilities strategy. 

(10)  Following several years of high growth, housing prices appear overvalued, particularly 
in  the  main  urban  areas.  Housing  price  increases  moderated,  however,  in  2018. 
Furthermore,  despite  a  continued  decline,  the  ratio  of  household  debt  to  disposable 
income  remains  the  highest  in  the  EU.  The  share  of  mortgage  loans  with  variable 
interest rates and deferred amortisation is gradually decreasing, but is still high. New 
macroprudential  measures  seem  to  have  curbed  the  increase  in  new  mortgage  loans 
with very high debt-to-income and loan-to-value ratios. The Danish authorities have in 
recent  years  also  activated  the  countercyclical  capital  buffer  and  implemented 
measures  to  increase  the  resilience  of  banks,  and  they  have  adopted  a  property  tax 
reform  (effective  from  2021)  to  put  an  end  to  the  procyclical  property  tax  system. 
Nevertheless, the combination of very high loan-to-income ratios, high debt with high 
interest  rate  sensitivity  and  overvalued  housing  prices  pose  risks  to  economic  and 
financial stability and thus continuous monitoring is warranted. 

(11)  Preventing  money  laundering  and  terrorism  financing  has  become  a  priority  for 
Denmark  against  the  background  of  a  large  money-laundering  scandal  involving  the 
largest financial institution in Denmark. The Danish Parliament has reached political 
agreements  to  strengthen  the  supervision  and  on  a  new  anti-money  laundering 
package,  encompassing  a  strategy  to  combat  money  laundering  and  terror  financing. 
The  strategy  rests  on  eight  pillars,  which  include  strengthening  cooperation  between 
supervisors,  the  financial  intelligence  unit  and  other  relevant  stakeholders.  However, 
challenges remain and the financial supervisor still needs to adopt additional measures 
and  guidelines  on  how  to  strengthen  supervision  in  these  areas.  Attention  should  be 
paid to the effective implementation of these measures, once adopted. 

(12)  The programming of EU funds for the period 2021-2027 could help address some of 
the  gaps  identified  in  the  recommendations,  in  particular  in  the  areas  covered  by 

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(13) 

Annex D to  the country  report6. This  would allow  Denmark to  make the best  use of 
those funds in respect of the identified sectors, taking into account regional disparities. 

In  the  context  of  the  2019  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Denmark’s  economic  policy  and  published  it  in  the  2019 
country  report.  It  has  also  assessed  the  2019  Convergence  Programme  and  the  2019 
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.  

(14) 

In  the  light  of  this  assessment,  the  Council  has  examined  the  2019  Convergence 
Programme  and  is  of  the  opinion7  that  Denmark  is  expected  to  comply  with  the 
Stability and Growth Pact. 

HEREBY RECOMMENDS that Denmark take action in 2019 and 2020 to: 

1. 

2. 

Focus  investment-related  economic  policy  on  education  and  skills,  research  and 
innovation  to  broaden  the  innovation  base  to  include  more  companies,  and  on 
sustainable transport to tackle road congestion.  

Ensure  effective  supervision  and  the  enforcement  of  the  anti-money  laundering 
framework. 

Done at Brussels, 

For the Council 
The President 

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SWD(2019) 1003 final. 
Under Article 9(2) of Regulation (EC) No 1466/97. 

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