COMMISSION STAFF WORKING DOCUMENT Country Report Denmark 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011
Date: 2020-02-26
Institutions: European Commission, Secretariat-General
Subjects: Denmark, economic situation, green economy, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 26.2.2020  SWD(2020) 503 final  COMMISSION STAFF WORKING DOCUMENT Country Report Denmark 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2020) 150 final}  
 
 
CONTENTS 

Executive summary 

1. 

2. 

3. 

Economic situation and outlook 

Progress with country-specific recommendations 

Reform priorities 

Financial sector 

Public finances and taxation 

3.1 
3.2. 
3.3. 
3.4.  Competitiveness, reforms and investment 
3.5.  Environmental sustainability 

Labour market, education and social policies 

A.  Overview table 

B.  Commission debt sustainability analysis and fiscal risks 

C. 

Standard tables 

D. 

E. 

Investment guidance on Just Transition Fund 2021-2027 for Denmark 

Progress towards the Sustainable Development Goals (SDGs) 

References 

LIST OF TABLES 

Financial market indicators 

Headline Social Scoreboard indicators 

3.2.1.  Financial soundness indicators, all banks in Denmark 
3.4.1.  Selected indicators on digitisation of businesses, 2019 (% of enterprises) 
C.1. 
C.2. 
C.3. 
C.4. 
C.5. 
C.6.  Green growth 

Product market performance and policy indicators 

Labour market and education indicators 

Social inclusion and health indicators 

LIST OF GRAPHS 

Contributions to potential growth 

1.1.  GDP growth and contributions 
1.2. 
1.3.  Goods and services inflation 
1.4. 

Contribution to export growth 

1 

3 

7 

15 

19 

19 
22 
27 
36 
45 

50 

55 

56 

62 

64 

69 

23 
42 
56 
56 
57 
58 
59 
60 

7 
8 
9 
10 

 
 
 
11 
11 
12 
15 
22 
23 
24 
25 
27 

29 
30 
33 
34 
36 
37 
37 
38 
38 
47 
48 
48 
49 

18 
21 
44 
46 

Primary income (% of GDP) 

Breakdown of unit labour cost rate of change 

Level of implementation today of 2011-2019 CSRs 

Pension yield tax revenues and 10-year DK government bond yields 

1.5. 
1.6. 
1.7. 
2.1. 
3.2.1.  Credit growth 
3.2.2.  Household debt 
3.2.3.  Nominal real estate prices 
3.2.4.  Mortgage loans by type of loan 
3.3.1.  Real compensation per employee (GDP deflator, National Currency) 
3.3.2.  Youth: in education and training, employment rate, unemployment rate, unemployment-

to-population ratio, NEET 

3.3.3.  At-risk-of-poverty or social exclusion rate, age groups 
3.3.4.  Underachievers in reading by socio-economic status (ESCS 2018) 
3.3.5.  People holding tertiary education degree 
3.4.1.  Current account developments 
3.4.2. 
Terms of trade development 
3.4.3.  Sectoral labour productivity 
3.4.4.  Job destruction per sector 
3.4.5.  Contribution of intangible capital growth to productivity growth 
3.5.1.  Greenhouse gas emissions per sector 
3.5.2.  Energy efficiency: Primary and final energy consumption 
3.5.3.  Renewable energy: Share in gross final energy consumption 
3.5.4.  Revenues from environmental taxes (% of total tax revenues) 

LIST OF BOXES 

2.1. 

EU funds and programmes to address structural challanges and foster growth and 

competitiveness in Denmark 

3.1.1.  Revenue neutral tax reform within the general personal income tax system 
3.4.1. 
3.5.1. 

Investment challenges and reforms in Denmark 

Transition to a low-carbon economy 

2 

 
 
 
 
 
EXECUTIVE SUMMARY 

Denmark  has  benefited  from  a  prolonged 
period  of  sustained  and  balanced  economic 
growth, but challenges remain. Additional public 
funding has been allocated for education, research 
and  transport  to  improve  productivity  and  bolster 
long-term 
anti-money-
competitiveness.  The 
laundering  framework  has  been  strengthened,  but 
further  measures  will  be  necessary  to  regain  trust 
in the integrity and anti-money laundering defence 
institutions. 
capabilities  of  Danish 
Despite  recent  measures, 
level  of 
household  debt  combined  with  high  house  price 
levels  and  risky  loan  taking  remains  a  potential 
financial stability risk. Denmark’s ambitious target 
for reducing greenhouse gas emissions will require 
significant  investments  and  reforms  across  the 
economy(1). 

the  high 

financial 

in 

Economic  growth  has  been  solid,  averaging 
2.4 %  since  2015,  well  above  the  euro  area 
average.  Consumption  and  investment  have  been 
this  period. 
the  main  drivers  of  growth 
Households  have  experienced  robust 
income 
growth,  which  they  have  used  for  both  consumer 
spending  and  debt  reduction.  Labour  market 
reforms  and  an  influx  of  mainly  EU  workers 
contributed  to  a  marked  increase  in  the  labour 
force.  This  supported  Denmark’s  prolonged 
an 
economic 
overheating  of  the  labour  market.  In  2018,  the 
reached  77.5 %,  markedly 
employment 
surpassing 
the 
unemployment  rate  declined  to  5.1 %.  Consumer 
price  inflation  remained  subdued,  reaching  0.7 % 
in 2019.  

long-term  average,  while 

expansion,  while 

avoiding 

rate 

the 

Investment  has  risen  strongly  since  2012. 
Business  investment  has  been  particularly  strong, 
and,  since  2015,  housing  construction  further 
added  to  the  growth  in  investment,  supported  by 
rising  housing  prices.  Investment  amounted  to 
22.0 % of GDP in 2018, well above  the  euro area 
average.  Public  investment  amounted  to  some 
3.5 % of GDP, a little down from its peak in 2014. 

(1)  This  report  assesses   Denmark’s  economy  in  light  of  the 
European  Commission’s  Annual  Sustainable  Growth 
Strategy,  published  on  17  December  2019.  In 
this 
document, the Commission sets out a new strategy on how 
to address not only the short-term economic challenges but 
also  the  economy's  longer-term  challenges.  This  new 
economic agenda of competitive sustainability rests on four 
dimensions:  environmental  sustainability,  productivity 
gains, fairness and macroeconomic stability. 

3 

The  current  account  surplus  is  estimated  to 
have jumped above 8 % of GDP in 2019 due to 
strong  goods  export  performance.  Danish 
exports  have  proven  resilient  to  an  economic 
slowdown  in  several  of  Denmark’s  trade  partner 
countries, suggesting that its export product mix is 
less sensitive to cyclical developments. Successful 
Danish multinational companies provide additional 
impetus  for  goods  exports  and  economic  growth. 
The  high  external  net  asset  position  implies  that 
Denmark receives capital income from abroad and 
provides significant support to the current account 
balance.  On  the  savings  side,  persistently  high 
household  savings  contribute  to  a  substantial 
current account surplus. 

to 

Real  GDP  growth  is  forecast  to  slow  down  to 
around 1.5 %, slightly below its potential level. 
Consumer  spending  is  projected  to  remain  the 
main  factor  driving  growth.  Labour  demand  is 
increase  at  a  slower  pace,  but 
expected 
companies  may  still  face  some  difficulties  with 
hiring skilled workers. Considering this, wages are 
expected 
than  productivity, 
faster 
weighing  on  competitiveness.  Investment  is  set  to 
remain  flat  amidst  slowing  global  economy  and  a 
cooling housing market.  

to  grow 

The  government  budget  surplus  in  2019  is 
estimated to have reached 2.2% of GDP, largely 
due  to  a  significant  hike  in  pension  yield  tax 
revenue.  The  budget  is  forecast  to  remain  in 
surplus in 2020 and to be close to balance in 2021, 
as the unexpectedly high pension yield tax revenue 
levels  off  and  public  expenditure,  notably  on 
education,  research  and  healthcare,  is  set  to 
increase. In addition,  the repayment in 2020-2022 
revenue 
collected  housing 
of  unduly 
(amounting  to  0.8%  of  GDP)  will  also  contribute 
to reducing the government surplus. 

tax 

Denmark  faces  significant  investment  needs. 
Although  it  has  an  investment-friendly  business 
environment,  some  factors  are  holding  back 
investment. Investment in research and innovation 
is  concentrated  in  a  small  number  of  large 
companies. Broadening this investment to a wider 
range  of  companies  would  promote  innovation 
diffusion. The growing productivity  gaps between 
large  and  small  companies  suggest  weaknesses  in 
this 
advances. 
Channelling  investments  to  vocational  education 
and  adult  and  lifelong  learning  is  also  key  to 

technological 

diffusion 

of 

 
                                                           
preventing  skills  mismatches  and  labour  market 
tensions.  Road  congestion  is  projected  to  increase 
around  the  larger  cities,  and  there  is  a  need  to 
decarbonise the transport sector. To deliver on the 
climate  and  energy  objectives  and  shape  a  new 
growth  model,  Denmark  needs 
identify 
investment  needs 
technologies  and 
in  green 
sustainable solutions, and secure adequate funding 
for these projects. 

to 

Denmark  has  made  some(2)  progress 
addressing 
the 
recommendation on investment.   

in 
country-specific 

2019 

There  has  been  some  progress  in  the  following 
areas: 

  Denmark  has 

to 
policy 

taken  measures 
economic 

focus 
investment-related 
on 
education and skills. The 2020 budget allocates 
more  funds  to  research  in  energy  and  climate 
technology,  but  without  specific  measures  to 
broaden  the  innovation  base.  The  government 
has presented a specific transport plan to tackle 
road congestion in key areas (Section 3.4).  

the 

improved 

supervision 

  Denmark  took  several  significant  legislative 
and 
steps, 
laundering 
enforcement  of 
framework  and  increased  the  financial  and 
human  resources  dedicated 
to  anti-money 
laundering,  but  several  issues  remain  (Section 
3.2). 

its  anti-money 

Denmark  continues  to  perform  well  on  the 
indicators  of  the  Social  Scoreboard  supporting 
the  European  Pillar  of  Social  Rights. 
Employment  is  high,  the  gender  employment  gap 
is  narrow  and  long-term  unemployment  remains 
one  of  the  lowest  in  the  EU.  Unemployment  has 
further declined in recent years. On the other hand, 
the  proportion  of  young  people  who  drop  out  of 
education  and  training  (early  school  leavers)  has 
increased  in  recent  years,  and  reached  a  level 
slightly  above  the  Europe 2020  target  of  10 %  in 
2018.  This  is  likely  to  be  linked  to  the  fact  that 
there  is  a  higher  labour  demand,  which  makes  it 
easier  for  people  to  find  work.  In  terms  of 

(2)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  advice  in  each  respective  subpart  of  a 
country-specific  recommendation 
the 
overview table in the annex. 

is  presented 

in 

Executive summary 

education,  there  has  been  a  slight  increase  in  the 
overall  proportion  of  low  achievers,  with  the 
proportion  of  foreign-born  students  who  are  low 
achievers  in  reading  being  nearly  three  times  as 
high  as  the  proportion  of  low  achievers  among 
non-migrant students. 

research 

Denmark  has  made  good  progress  towards  its 
targets under the Europe 2020 strategy, notably in 
employment, 
development, 
greenhouse  gas  emissions,  renewable  energy  and 
tertiary education. However, Denmark is not likely 
to  achieve  its  target  of  reducing  the  number  of 
people at risk of poverty or social exclusion.  

and 

On  the  United  Nations  Sustainable  Development 
Goals,  Denmark  has  made  strong  progress  on 
climate  action 
is  an 
international leader. On the other hand, Denmark’s 
results  on  quality  education  (SDG4)  are  sliding, 
although the levels remain satisfactory (3). 

(SDG13),  where 

it 

The  key  structural 
analysed 
challenges  for  Denmark’s  economy,  are 
following: 

issues,  which  have  been 
to  particular 
the 

report,  point 

this 

in 

to  1990 

level)  will 

  Denmark’s  ambitious  target  for  reducing 
greenhouse  gas  emissions  by  70 %  by  2030 
(relative 
require 
significant  investments  and  reforms  across 
the  economy,  in  line  with  the  European 
Green  Deal.  Achieving  this  target  would  give 
the  country  an  opportunity 
improve 
economic  growth,  job  creation  and  health 
benefits.  Denmark’s  strong  position  as  regards 
SDG13  on  climate  action  is  a  good  starting 
point. The European Green Deal could support 
Denmark’s  efforts  through  such  channels  as 
green  investments  and  increasing  the  demand 
for  Danish  climate  technology.  To  reach  the 
2030  targets  for  greenhouse  gas  emissions  not 

to 

(3)  Within the scope of its legal basis, the European Semester 
can help drive national economic and employment policies 
towards the achievement of the United Nations Sustainable 
Development  Goals  (SDGs)  by  monitoring  progress  and 
ensuring  closer  coordination  of  national  efforts.  The 
present report contains reinforced analysis and monitoring 
on  the  SDGs.  A  new  annex  (ANNEX  E)  presents  a 
statistical  assessment  of  trends  in  relation  to  SDGs  in 
Denmark  during  the  past  five  years,  based  on  Eurostat’s 
EU SDG indicator set. 

4 

 
                                                           
                                                           
 
covered  by  the  EU  emissions  trading  system, 
Denmark  faces challenges to  reduce emissions 
from transport and agriculture.  

  The  Commission’s  proposal 

loan  facility  with 

for  a  Just 
Transition  Mechanism  under  the  next  multi-
annual  financial  framework  for  2021-2027, 
includes  a  Just  Transition  Fund,  a  dedicated 
just  transition  scheme  under  InvestEU,  and  a 
new  public  sector 
the 
European  Investment  Bank.  It  is  designed  to 
ensure  that  the  transition  towards  EU  climate 
neutrality  is  fair  by  helping  the  most  affected 
regions  in  Denmark  to  address  the  social  and 
economic  consequences.  Key  priorities  for 
support  by  the  Just  Transition  Fund,  set  up  as 
part  of  the  Just  Transition  Mechanism,  are 
identified in Annex D, building on the analysis 
of  the  transition  challenges  outlined  in  this 
report. 

  Energy  consumption  has  increased  for  four 
consecutive years, which highlights the need 
for additional policy and measures. Reducing 
total consumption may require additional steps, 
notably  in  energy  efficiency,  in  order  to  reach 
its ambitious decarbonisation target.  

  Productivity growth has been sluggish for a 
prolonged  period  of  time.  However,  labour 
productivity  growth  has  picked  up  since  2015 
due 
the 
to 
remaining 
manufacturing 
moderate  in  the  domestically  oriented  services 
sector.  

the  strong  performance  of 
sector,  while 

  The  current  account  surplus  remains  high, 
but this is mainly due to high savings rather 
than  low  investment.  Declining  corporate 
saving is compensated by increasing household 
and  government  saving.  Corporate  investment, 
driven  by  large  companies,  is  well  above  the 
euro  area  average,  but  investment  by  smaller 
subdued. 
remains 
companies 
Increasing 
smaller 
investment  made 
companies and targeting more R&D investment 
towards  smaller  companies  could  help  sustain 
the recent positive trends. 

relatively 

in 

  Denmark has improved the supervision and 
enforcement  of  the  anti-money  laundering 
significant 
framework. 

several 

took 

It 

Executive summary 

legislative  steps  over  a  relatively  short  period, 
but these still have to prove their effectiveness. 
The  Financial  Action  Task  Force  has 
confirmed  the  improvements  in  Denmark’s 
anti-money  laundering supervision framework, 
but  further  progress  is  necessary,  for  instance 
on  the  supervision  of  both  financial  and  non-
entities.  The  government  has 
financial 
increased the budget and the number of staff at 
the  Money  Laundering  Secretariat  and  the 
Financial Supervisory Authority. 

  Although  housing  price  inflation  is  slowing, 
the  valuation  of  property  prices  still  seems 
on  the  high  side.  Housing  prices  have  been 
easing in all regions and housing categories. A 
forthcoming  new  property  taxation  system, 
strong  residential  construction  activity  and 
already  introduced  macroprudential4  measures 
are  expected  to  further  curb  housing  price 
inflation,  despite  mortgage  interest  rates  being 
at historical lows. 

  Households  continue  to  reduce  their  high 
debt. They have used the favourable economic 
environment  to  reduce  debt,  notably  through 
refinancing mortgage loans, thereby increasing 
resilience to adverse shocks and contributing to 
financial  stability.  Despite  the  positive  trends, 
however the proportion of variable-interest-rate 
and interest-only loans in the overall mortgage 
stock  remains  high,  and  Danish  households 
have  one  of  the  highest  spending  on  mortgage 
debt services in the EU. The debt level remains 
above  what 
is  warranted  by  economic 
fundamentals and represents a risk to financial 
stability.  Several  measures  have  been  put  in 
place  to  address  this,  but  it  will  take  time  for 
their positive effects to be visible in the overall 
mortgage  stock  and  for  overall  financial  risks 
to  be  effectively  reduced.  The  high  level  of 
household gross debt should be seen in relation 
to  significantly  higher,  albeit 
liquid, 
financial  assets,  notably  houses  and  pension 
savings. 

less 

  The  tax  deductibility  of  mortgage  interest 
payments  encourages  home  ownership  and 
indebtedness.  The  tax  deductibility  of  interest 

4   Macroprudential measures aim to reduce risky loan taking 
and mitigate risks to the financial system as a whole. 

5 

 
                                                           
Executive summary 

extension 

household 

payments adds a dimension of debt bias to the 
tax system, which fosters house ownership and 
by 
indebtedness. 
Abandoning  the  tax  deductibility  of  interest 
rates and compensating with an increase in the 
overall  personal  income  tax  allowance  would 
change  these  incentives  and  make  the  Danish 
tax  system  more  progressive  and  less  biased 
towards homeowners. 

and 

sector 

number 

  The  Danish  banking 
a 

is  well 
capitalised, 
of 
macroprudential  measures  contribute  to 
making 
it  more  resilient.  The  Danish 
Systemic  Risk  Council  has  recommended  to 
gradually  increase  the  countercyclical  capital 
buffer5 from 1 % to 2 % in 2021. Furthermore, 
a  number  of  macroprudential  and  conduct 
measures  are  in  place  to  mitigate  risks  in  the 
real estate sector. 

  Labour shortages persist, but the situation is 
improving. Reported numbers of  unsuccessful 
recruitments  are  declining  and  the  labour 
shortages seem to be specific to certain sectors 
and  geographic  regions.  However,  in  order  to 
increase  the  supply  of  skilled  workers,  it 
remains  crucial  to  incentivise  youth  to  choose 
vocational education and training and to reduce 
dropout rates. 

  A reform of the tax administration is under 
way.  The  reforms  are  a  reaction  to  a  series  of 
problems  encountered  by 
tax 
administration. Challenges remain, such as  the 
modernisation  of  the  property  tax  system, 
which  was  delayed  from  2021  to  2024  due  to 
delays in the readiness of IT systems. 

the  Danish 

5   A  variable  capital  requirement  that  aims  to  make  credit 
growth less cyclical and the financial system more resilient. 

6 

 
                                                           
1.  ECONOMIC SITUATION AND OUTLOOK 

GDP growth 

Denmark  has  experienced  a  solid  upswing  in 
recent years, expanding above potential growth. 
The economy was slow to recover from the global 
financial crisis, which coincided with the burst of a 
housing  bubble,  but  economic  growth  accelerated 
from  2012  onwards.  The  Danish  economy  shifted 
into  a  higher  gear  from  2015,  growing  at  an 
estimated average rate of 2.4 % from 2015 to 2019 
period  (Graph  1.1),  well  above  the  euro  area 
average  of  1.6 %  during  the  same.  Denmark  has 
also  benefited  from  improving  terms  of  trade  and 
increasing returns on its  foreign assets,  which has 
increased  the  wealth  of  Danish  households  over 
the  last  10  years.  As  a  result,  Denmark  has 
experienced  a  robust  growth  in  its  gross  national 
income,  above  the  average  seen  in  the  euro  area 
and among peer countries (Section 3.4.1). 

Graph 1.1:  GDP growth and contributions 

Source: European Commission 

real 

rising 

Household  consumption  has  been  a  key  driver 
of  growth.  Private  consumption  has  been 
expanding steadily since 2015 by around 2.2 % per 
year  supported  by  a  strong  labour  market  and 
steadily 
incomes. 
disposable 
Nevertheless, household consumption as a share of 
disposable  income  is  lower  than  the  pre-crisis 
average.  After  the  crisis,  private  consumption 
growth  lagged  behind  disposable  income  growth, 
as households focussed on building up savings and 
their  debt.  Since  2015,  household 
reducing 
consumption 
remained 
relatively stable, while at the same time household 

to  disposable 

income 

indebtedness  continued  to  decrease  (see  Section 
3.2).    

contributions 

Investment growth has been particularly robust 
since  2012.  Investment  fosters  progress  towards 
SDG8  (decent  work  and  economic  growth).  In 
2018,  investment  accounted  for  22.0 %  of  GDP, 
which is above the euro area average of 20.8 % of 
GDP.  Business  investment  has  been  the  main 
driver reaching a historical high of 13.9 % of GDP 
in  2018,  with  highest 
from 
manufacturing,  transport  and  dwellings.  Public 
investment  remained  relatively  high  at  3.5 %  of 
GDP in 2018, a little down from the peak of 3.9 % 
of GDP in 2014. Household investment contracted 
the  crisis,  but  has  been 
sharply 
increasing  robustly  since  2015,  in  line  with  the 
rising  housing  prices.  Overall 
is 
projected  to  decline  in  2019  partly  due  to  the 
negative base effect of a large acquisition in 2018 
that raised investment, but high capacity utilisation 
rates suggest a steady, but moderate growth in the 
coming years.  

investment 

following 

Danish  goods  export  growth  and  industrial 
production  has  decoupled  from  the  other  peer 
countries until the third quarter of 2019. While 
Danish  industrial  production  rose  by  4.8 %,  it 
decreased by 1.7 % in the  euro area in September 
2019  compared  to  a  year  before.  Danish  goods 
export  is  estimated  to  have  increased  by  around 
9 %  in  2019,  the  largest  growth  in  the  last  25 
years.  Favourable  industrial  specialisation  and 
strong  sectoral  performance  provided  a  boost  for 
the  Danish  economy  (Section  3.4).  Nevertheless, 
impact  and 
the  global  slowdown  started 
investment 
industrial  production,  exports  and 
growth has been significantly slowing down since 
the last quarter of 2019. Following several years of 
strong  expansion,  real  GDP  growth  is  set  to 
moderate to around 1.5 % in both 2020 and 2021, 
slightly below to its potential level. 

to 

Consumption  is  projected  to  remain  robust. 
While  employment  growth  is  forecast  to  slow 
down,  dynamic  wage  growth  is  set  to  underpin 
solid  private  consumption  growth.  A  significant 
decline  in  interest  rates  led  to  a  record-high 
number  of  mortgage  loan  re-financings  in  2019. 
Mortgage refinancing is set to continue supporting 

7 

-4-3-2-11234562012201320142015201620172018201920202021ImportsExportsInvestmentGovernment consumptionPrivate consumptionGDP (y-o-y%)forecastpps.     
1. Economic situation and outlook 

behind  this  pick-up  was  capital  accumulation, 
reflecting  the  strong  investment  activity.  Total 
labour  productivity  contribution  was  solid  until 
2018,  but  is  forecast  to  level  off,  as  employment 
growth is set to moderate in the coming years. The 
contribution  of  total  factor  productivity,  which 
reflects  how  efficiently  labour  and  capital  inputs 
improve  and 
are  combined, 
compensate  moderating 
labour 
and 
contribution.  As  a  result,  potential  growth  rate  is 
set to remain stable (Graph 1.2). 

to 
capital 

is  expected 

Graph 1.2:  Contributions to potential growth 

Source: European Commission 

Following  prolonged  sluggishness,  productivity 
growth has picked up since 2015, but it has not 
accelerated  enough  to  close  the  accumulated 
gap with peer countries. Total factor productivity 
has  been  growing  in  line  with  the  peer  countries 
since  2013  and  is  therefore  insufficient  to  reduce 
the productivity gap vis-à-vis them that opened in 
2006.  Labour  productivity  developments  have  a 
clear  sectoral  dimension,  with  labour  productivity 
increasing by 70 % in manufacturing and by mere 
18 %  in  services  since  2000.  In  view  of  the 
increasing role of  services in  the economy, this  is 
dragging  aggregate  productivity  down.  Positive 
the 
labour 
manufacturing  sector  benefitted  in  particular  from 
the  strong  performance  of  the  pharmaceutical 
sector (Section 3.4.1).  

developments 

productivity 

in 

from  higher  disposable 

households’  consumption  by  lowering  their  debt 
service(6). Households have shifted towards longer 
fixation of interest rates and thus more predictable 
(Section  3.2),  while  also 
payment  patterns 
benefiting 
income 
(Nationalbanken 2019a). Private consumption will 
be  further  supported  by  a  one-off  repayment  of 
excessively collected property taxes to households 
being  repaid  from  the  end  of  2020  until  2022 
(Section  3.1).  Government  consumption  is  set  to 
expand  at  a  more  dynamic  pace  due  to  increased 
spending  on  healthcare,  education  and  transport 
infrastructure.  

On  the  other  hand,  investment  is  expected  to 
remain  weak  in  the  coming  years.  Easing 
housing  market  dynamics  suggest  moderate 
housing  construction  dynamics  ahead.  Equipment 
investment  growth  is  projected  to  remain  modest 
due to the uncertain global economic outlook. Both 
exports and imports are forecast to resume  around 
their trend growth and net export’s contribution to 
real GDP growth is expected to be marginal.  

Denmark’s  commitment  to  become  carbon 
neutral  by  2050  at  the  latest  will  require 
substantial  investments.  Denmark’s  ambitious 
climate  target  will  require  public  and  private 
investments  across  the  economy,  with  the  energy, 
transport,  agriculture  and  some  other  sectors 
particularly prominent. Denmark is already among 
the  best  performing  EU  countries  as  regards 
environmental 
developing 
technologies.  Danish  “green  enterprises”  on 
average are larger, more export intensive and more 
productive  than  the  rest  of  enterprises,  placing 
Denmark in a strong position to also economically 
benefit  from  the  green  transition.  The  green 
transition could thus provide additional impetus to 
economic growth  (Section 3.5). 

taking-up 

and 

Potential growth  

growth(7)  has  been 
Potential 
gradually 
strengthening  and  is  now  stabilising.  Since  its 
low  of  0.8 %  between  2010  and  2012,  potential 
growth  rose  to  1.8 %  in  2018.  The  main  driver 

(6)  The  debt  service  ratio  declined  from  22.9 %  in  2009  to 
15 %  in  2019  corresponding  to  almost  10 %  of  the  total 
consumption. 

(7)  Potential growth is an estimate of the economic growth rate 
compatible with labour, capital and productivity growth at 
which wage and price developments would be stable. 

8 

-0,50,00,51,01,52,02006200720082009201020112012201320142015201620172018201920202021Capital Accumulation ContributionTFP ContributionTotal Labour (Hours) ContributionPF Potential Growthy-o-y % change                                                           
          
1. Economic situation and outlook 

Inflation 

Consumer  price  inflation  remains  moderate. 
The Harmonised Index of Consumer Prices (HICP) 
headline  inflation  was  0.7 %  both  in  2018  and  in 
2019.  Danish  inflation  has  been  below  the  euro 
area  rate  since  2016  mainly  reflecting  lower  food 
price  inflation.  While  goods  prices  have  been  flat 
since  2017,  services  prices  continue  decelerating 
despite  solid  labour  wage  growth  (Graph  1.3). 
Inflation  is  expected  to  increase  moderately  to 
1.4 %  in  2020  and  to  1.5 %  in  2021,  helped  by 
announced hikes in duties on tobacco. 

Graph 1.3:  Goods and services inflation 

the  private  sector,  in  particular  the  services  and 
construction sectors. 

long-term 
in  2018,  Denmark's 
At  1.1 % 
unemployment  rate  is  among  the  lowest  in  the 
EU.  Unemployment  fell  to  5.1 %  in  2018,  the 
lowest  level  since  2008,  but  the  gap  to  the  EU 
average  (1.1  pps  below  EU  average  in  2018)  has 
narrowed  in  recent  years.  Lower  than  average 
employment  rates  can  be  observed  for  youth, 
migrants  and  people  with  disabilities.  Improving 
the  employment  rates  of  youth  and  vulnerable 
groups  remains  a  challenge.  While  the  total 
number of marginalised persons has decreased, the 
remaining  are  even  more  marginalised  and  more 
difficult  to  integrate  applying  standard  policy 
tools. 

Denmark is facing continuous labour shortages 
in  certain  sectors,  but  the  situation  appears  to 
be  stabilising.  Firms  report  a  lack  of  workers  in 
construction,  agriculture  and  services,  which 
reflects  continuous 
tightness. 
Labour  market bottlenecks are  expected to reduce 
along  with  more  moderate  real  GDP  growth  in 
2020  and  2021.  While  higher  numbers  of 
vocational education and training (VET) graduates 
would 
needs, 
participation in such schemes remains low. 

labour  market 

labour  market 

help  meet 

Source: Eurostat 

Labour market and social developments 

Employment  continues growing and the labour 
force  has  increased.  Employment  grew  by  1.4 % 
in 2018. As a result, the employment rate reached 
78.2 %,  approaching  the  national  2020  target  of 
80 %,  and  going  well  above  the  EU  average  of 
73.2 %. Recent years’ growth in the labour force is 
mainly  driven  by  inflows  of  foreign  workers, 
accounting  for  approximately  one  third  of  the 
growth  in  the  period  2013-2018,  as  well  as  older 
workers staying longer on the labour market due to 
pension  reform  related  increases  in  the  retirement 
age.  The  expansion  of  the  labour  force  helped 
sustain  the  economic  upswing:  without  the  labour 
market reforms and access to international labour, 
GDP  growth  would  have  been  one  percentage 
point  (pps)  lower  (Danish  Nationalbank  2018a).  
The strongest employment growth has occurred in 

The  labour  force  is  projected  to  continue 
growing,  but  unevenly  distributed  among 
different sectors, which may increase the risk of 
skills mismatches. Skills gaps could become more 
severe  with  the  current  low  unemployment  rate. 
Ensuring  supply  of  the  right  skills  is  crucial  to 
boost  productivity  through  better  utilisation  of 
advanced technology. However, the flexible labour 
market,  some  growth  in  labour  supply  and  strong 
policies  for  reskilling  of  job  seekers  provide  a 
strong basis to facilitate the needed reallocation of 
workers across sectors. Denmark has taken further 
measures  to  focus  investment-related  economic 
policy on education and skills (Section 2). 

Participation  in  adult  learning  has  decreased 
significantly in recent  years, albeit  from a high 
level. Despite this rate being more than double that 
of the EU average (11.1 % in 2018), the relatively 
sharp  decline  from  31.3 %  in  2015  to  23.5 %  in 
2018  is,  however,  of  concern.  The  exact  drivers 
behind  this  trend  remain  unclear,  but  along  with 
high  economic  activity  and  the  need  to  ensure 

9 

-2-101234nov-2013mars-2014juil-2014nov-2014mars-2015juil-2015nov-2015mars-2016juil-2016nov-2016mars-2017juil-2017nov-2017mars-2018juil-2018nov-2018mars-2019juil-2019nov-2019GoodsServicesy-o-y % change   
1. Economic situation and outlook 

current account surplus. Just five large industrial 
groups  were  responsible  for  almost  the  entire 
current account  surplus  in 2018 (Christensen et al 
2019).  The  surplus  is  to  a  large  extent  driven  by 
exports  of  goods,  an  increasing  proportion  of 
which  never  cross  the  Danish  border  because  the 
goods are produced in foreign subsidiaries (Section 
3.4).  The  current  account  surplus  remains  well 
economic 
above 
level  warranted  by 
fundamentals 
pension 
savings (9). 

supported 

high 

the 

by 

Denmark’s  share  in  world  exports  has  been 
relatively  stable  since  2012.  This  is  in  line  with 
the performance of Sweden or the Netherlands, but 
falls  behind  Germany’s  robust  export  growth. 
Since 2015, two sectors have been responsible for 
more than 70 % of Denmark's export growth since 
2015  (Graph  1.4),  namely  chemical  products 
(including 
and  machinery 
(including  wind  turbines).  This  changing  export 
mix  has  so  far  proven  to  be  less  sensitive  to  the 
general slowdown in the main trading partners and 
provided a boost to real GDP growth in 2019.  

pharmaceuticals) 

Graph 1.4:  Contribution to export growth 

Source: Statistics Denmark 

Continued high current account surpluses have 
the  net 
contributed 

increase 

the 

to 

in 

(9)  The  benchmark  is  derived  from  reduced-form  regressions 
capturing  the  main  determinants  of  the  saving-investment 
(e.g. 
balance, 
demography, resources), policy factors and global financial 
conditions. See also Coutinho, Turrini and Zeugner (2018). 

fundamental  determinants 

including 

business  continuity,  employers  may  be  more 
reluctant to allow workers to take part in trainings. 

In-work  poverty,  at  risk  of  poverty  or  social 
exclusion  (AROPE(8))  and  income  inequality 
remain  low.  At  17.4 %  in  2018,  the  AROPE  rate 
remains  above  the  2008  pre-crisis  level.  For 
foreign-born  adults,  this  rate  is  above  that  of  the 
EU  average  and  more  than  double  the  rate  of  the 
native-born  population.  In  2018,  in-work  poverty 
(5.4 %)  was  almost  half  that  of  the  EU  average 
(9.2 %),  reflecting  the  relatively  high  level  of 
compensation.  The  median  household  income 
(single  person)  has  increased  to  EUR  17,234  in 
2018,  which  is  among  the  highest  in  the  EU 
(average  of  EUR  15,310).  At  the  same  time, 
income  inequality  appears  to  have  stagnated  in 
recent years, below the EU average.  

The  employment  situation  of  recently  arrived 
migrants  (including  refugees)  remains  critical 
but  has  improved.  On  the  other  hand,  the 
situation  for  those  who  have  resided  in  Denmark 
longer  showed  no  sign  of  improvement.  This  is  a 
result  of  high  economic  activity  in  addition  to 
intensified  integration  measures  introduced  since 
2016,  e.g.  the  fast-track  Integration  Education 
(IGU)  programme.  On  the  other  hand,  further 
actions  would  be  needed  to  ensure  labour  market 
integration of those who have resided in Denmark 
for more than five years, in particular women. 

External position and competitiveness 

The  current  account  surplus  increased  further 
in 2019. Increasing savings are the main reason for 
the sustained high surplus. As business investment 
picked up, corporate saving has declined from 9 % 
of GDP in 2014 to 3.2 % of GDP in 2018. On the 
other  hand,  increasing  household  and  government 
savings have largely compensated for the declining 
corporate  savings  and  are  set  to  sustain  a  current 
account surplus above 8 % of GDP in the coming 
years.  

From  the  production  side,  successful  Danish 
the 
multinational  companies  are  driving 

(8)  The  at-risk-of-poverty  rate  is  the  share  of  people  with  an 
equalised  disposable  income  (after  social  transfers)  below 
the at-risk-of-poverty threshold, which is set at 60 % of the 
national  median  equalised  disposable  income  after  social 
transfers. 

10 

-6-4-20246810Q1-2015Q3-2015Q1-2016Q3-2016Q1-2017Q3-2017Q1-2018Q3-2018Q1-2019Q3-2019OtherMachinery (excl. Transport Equipment)Chemicals And Related ProductsTotal exports growthy-o-y % change, pps.                                                           
      
                                                           
1. Economic situation and outlook 

Graph 1.6: 

Breakdown of unit labour cost rate of change 

Source: European Commission 

at 

but 

this 

stage, 

Risks  from  the  domestic  market  appear  to  be 
contained 
several 
developments  warrant  continuous  monitoring. 
The  unemployment  rate  appears  close  to  its 
structural  level(10)  in  certain  sectors,  leading  to 
labour  constraints,  but  labour  shortages  appear  to 
have  eased  recently  (Section  3.3).  Wages  have 
been  increasing  above  productivity  since  2016 
although  the  impact  on  competitiveness  appear  to 
be limited at this stage (Section 3.4). House prices 
household 
are 
indebtedness  exceeds  prudential  and  fundamental 
benchmarks, though several policy measures  were 
introduced  to  increase  the  resilience  of  Danish 
financial sector and households (Section 3.2). 

overvalued 

slightly 

and 

Monetary policy 

The  central  bank  deposit  rate  has  been  almost 
continuously  negative  since  2012,  the  longest 
period among EU countries. Denmark is the only 
country in the ERM-II mechanism and maintains a 
central  rate  of  DKK 7.46038  to  the  euro  with  a 
narrow fluctuation band of ±2.25 %. Following the 
European Central Bank’s reduction of its monetary 
policy  rates  by  0.10  pp  in  September  2019, 
Danmarks  Nationalbank  (Denmark's  central  bank) 
has  also  reduced  the  interest  rate  on  deposits  by 
0.10  pps.  The  policy  spread  between  Danmarks 
Nationalbank  and 
remained 
unchanged at -0.25 pps since March 2016. The rate 

the  ECB  has 

(10)  As 

both 

the  Non-Accelerating  Wage  Rate 

of 
Unemployment  (NAWRU)  and the current unemployment 
rate are at 4.8 % of the labour force in 2019. 

the  NIIP 

international  investment  position  (NIIP).  The 
NIIP increased from close to balance in 2008 to an 
estimated  64 %  of  GDP  in  2018.  While  the 
financial  account  surplus  was  the  main  driver  of 
recent  NIIP  increases  for  instance  in  Germany  or 
the  Netherlands,  Denmark  mostly  benefited  from 
investment  income  and  valuation  effects.  A  large 
investment. 
is 
share  of 
Components  that  may  be  subject  to  default  or 
partly be used as collateral remain low, amounting 
to less  than a  third of the NIIP in 2018. The  high 
net  stock  of  foreign  assets  generates  significant 
investment  income,  further  boosting  the  current 
account  surplus  above  that  of  peer  countries 
(Graph  1.5).  Substantial  primary 
is 
produced  by  the  pharmaceutical  sector,  which 
generates high returns on investment (Isaksen et al 
2016). 

in  equity 

income 

Graph 1.5: 

Primary income (% of GDP) 

Source: European Commission, Macrobond 

There  are  mixed  signals  regarding  Denmark’s 
competitiveness. The combination of higher wage 
growth  and  lower  labour  productivity  growth 
fuelled unit labour costs, which increased by 1.7 % 
in  2018,  compared  to  1.6 %  in  2017.  These 
developments  have  so  far  been  in  line  with  EU 
terms, 
trends 
compensation  per  employee  has  outpaced  labour 
productivity  growth  since  2012.  Regarding  non 
cost-competitiveness  factors,  Danish  exports  tend 
to rely more on high and medium quality products 
and  a  favourable  industrial  specialisation  (see 
Section 3.4).  

nominal 

(Graph 

1.6). 

In 

11 

-3-2-101234200720082009201020112012201320142015201620172018DenmarkGermanyEuro areaNetherlandsSweden-6-4-2024682004200520062007200820092010201120122013201420152016201720182019*Inflation (GDP deflator growth)Real Compensation per EmployeeProductivity Contribution (negative sign)Nominal unit labour costULC in EU28y-o-y % change      
      
                                                           
1. Economic situation and outlook 

Public finances 

the  pension  yield 

Denmark 
is  expected  to  have  reached  a 
significant general government account surplus 
of 2.2 % GDP in 2019. The large surplus reflects 
strong  revenue  from 
tax, 
amounting  to  close  to  2 %  of  GDP,  driven  by 
particularly strong valuation effects for bonds and 
stocks  held  by  pension  funds  (Graph  1.7).  More 
generally,  general  government  finances  benefitted 
from  low  cyclical  expenditures  and  strong  tax 
revenue. Volatile revenue components, particularly 
large 
the  pension  yield 
fluctuations in the government finances. 

item,  generate 

tax 

Graph 1.7: 

Pension yield tax revenues and  
10-year DK government bond yields 

Source: Macrobond 

The budgetary position is expected to normalise 
over  the  next  couple  of  years  and  become 
broadly neutral by 2021. This is partly triggered 
by an expected normalisation of the pension yield 
tax  revenue  as  well  as  a  slightly  less  favourable 
cyclical position. The deterioration in the headline 
position  is  also  influenced  by  the  repayment  of 
in 
taxation 
excessively-collected 
2020/2022,  which 
is  estimated  at 
approximately DKK 18.5 billion (0.8 % of GDP).  

property 
total 

in 

The  structural  general  government  budget 
balance is expected to deteriorate over the next 
years,  while  remaining  positive.  The  cyclically-
adjusted  budget  balance  is  forecast  to  fall  from 
some  2 %  of  GDP  to  around  0.2 %  of  GDP  by 
2021,  reflecting  not  least  the  above-mentioned 
normalisation of pension yield tax revenue. 

cut  brings  the  Danish  benchmark  to  the  level 
where it was before the last rate change in January 
2016.  

Financial sector 

Danish banks are generally well capitalised and 
remain  profitable,  amid  a  challenging  low 
interest  rate  environment.  Negative  yields  and 
interest  rates  are  becoming  more  pervasive  in  the 
Danish  economy,  affecting  an  increasing  share  of 
deposits, including by households. The authorities 
have required that banks progressively increase the 
countercyclical  capital  buffer,  which  will  further 
strengthen 
cyclical 
resilience 
their 
downside risks (Section 3.2).  

against 

Housing  market  dynamics  in  Denmark  have 
eased  over  recent  quarters.  This  slowdown  is 
broad-based across regions and housing categories. 
It is reflected in slowing housing prices, as well as 
falling  housing  starts  and  permits  since  2016. 
Many borrowers take advantage of historically low 
mortgage  rates  by  taking  up  new  or  converting 
existing  mortgages  to  loans  with  a  fixed  rate  and 
amortisation, making them more resilient vis-à-vis 
income  and  interest  rate  shocks.  The  increase  in 
the  share  of  these  less  risky  mortgages  also 
suggests  that  the  macro-prudential  and  conduct 
requirements  for  banks  put  in  place  by  Danish 
authorities over the past years have been effective 
(Section 3.2). 

Danish  household  debt  keeps  declining,  and, 
while it remains high, counterbalanced by large 
assets.  Household  debt  dropped  from  124.9 %  of 
GDP in 2018 to an estimated 113.5 % in 2019, and 
is  now  estimated  2.4  times  higher  than  gross 
disposable income. The high level of gross debt is 
matched  by  substantial  household  assets,  which 
implies  a  comfortable  solvency  position.  Danish 
to 
households  nonetheless  remain  vulnerable 
certain  adverse  economic  shocks  due  to  liquidity 
mismatches  on  their  balance  sheets,  even  though 
the  share  of  debt  at  variable  rates,  which  is 
particularly susceptible to an interest rate shock, is 
declining.  Danish  households  have  one  of  the 
highest debt-servicing ratios in the EU, and despite 
the  recent  positive  developments,  the  share  of 
interest-only, variable interest rate loans, which are 
the  most  sensitive  to  shocks,  remained  high 
(Section 3.2). 

12 

-101234562001200220032004200520062007200820092010201120122013201420152016201720182019Government Benchmarks, Macrobond, 10 Year, YieldPension yield revenues (% GDP)%      
1. Economic situation and outlook 

Sustainable development goals  

the 

(reducing 

inequalities). 

Denmark  performs  well  with  regard  to  the 
United Nations’ Sustainable Development Goals 
on equality, education and institutions. Denmark 
is  a  strong  performer 
indicators 
in  all 
pertaining 
to  Sustainable  Development  Goals 
(SDG) 1 (no poverty), SDG5 (gender equality) and 
Likewise, 
SDG10 
Denmark  performs  very  well  on  SDG8  (decent 
work and economic growth), where it is among the 
best  performers.  Denmark  also  performs  well  on 
SDG4  (quality  of  education).  On  SDG16  (peace, 
justice  and  strong  institutions)  Denmark  does 
particularly  well  and  is  ranked  very  high  in  a 
global  context  regarding  the  perceived  absence  of 
corruption.  Denmark  performs  well  on  affordable 
and  clean  energy  (SDG7).  On  the  other  hand, 
Denmark’s 
to  quality 
education  (SDG4)  is  sliding,  albeit  the  levels 
remain  satisfactory (11).  Denmark  has  high  energy 
independence, notably due to a very high share of 
renewable energy. By contrast, Denmark is merely 
an  average  performer  as  regards  greenhouse  gas 
emissions  per  capita  (SDG13  on  climate  action). 
On SDG9 (industry, innovation and infrastructure), 
Denmark is ranked first of the EU Member States 
on  R&D  personnel  as  a  share  of  the  active 
population.  On  SDG15  (life  on  land),  Denmark’s 
intensively farmed land area implies that Denmark 
has  very  little  forest  area  as  a  share  of  the  land 
mass.  On  waste  generation  and 
recycling, 
Denmark  is  broadly  at  the  EU  average  (SDG11, 
sustainable  cities  and  communities  and  SDG12, 
responsible consumption and production). 

results  with 

respect 

(11)  Within the scope of its legal basis, the European Semester 
can help drive national economic and employment policies 
towards the achievement of the United Nations Sustainable 
Development  Goals  (SDGs)  by  monitoring  progress  and 
ensuring  closer  coordination  of  national  efforts.  The 
present report contains reinforced analysis and monitoring 
on  the  SDGs.  A  new  annex  (ANNEX  E)  presents  a 
statistical  assessment  of  trends  in  relation  to  SDGs  in 
Denmark  during  the  past  five  years,  based  on  Eurostat’s 
EU SDG indicator set. 

13 

                                                           
 
1. Economic situation and outlook 

Table 1.1: 

 Key economic and financial indicators 

Source: (1) NIIP excluding direct investment and portfolio equity shares         
(2) domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-
controlled branches.         
(3) The tax-to-GDP indicator includes imputed social contributions and hence differs from the tax-to-GDP indicator used in the section 
on taxation 
Source: Eurostat and ECB as of 12-12-2019, where available; European Commission for forecast figures (Autumn forecast 2019) 

14 

2004-072008-122013-1620172018201920202021Real GDP (y-o-y)2,5-0,42,02,02,42,11,51,5Potential growth (y-o-y)1,40,91,21,61,81,71,71,7Private consumption (y-o-y)3,3-0,31,51,62,6...Public consumption (y-o-y)1,61,60,91,00,4...Gross fixed capital formation (y-o-y)5,8-3,64,83,05,4...Exports of goods and services (y-o-y)6,21,03,14,62,4...Imports of goods and services (y-o-y) 9,50,53,44,33,6...Contribution to GDP growth:Domestic demand (y-o-y)3,2-0,51,91,62,5...Inventories (y-o-y)0,3-0,20,1-0,10,3...Net exports (y-o-y)-1,00,30,10,5-0,4...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0,2-0,10,10,40,40,40,30,3Capital accumulation (y-o-y)0,80,30,40,70,90,80,80,8Total factor productivity (y-o-y)0,50,70,60,50,50,50,60,6Output gap2,4-2,4-1,80,0-0,30,0-0,2-0,3Unemployment rate4,56,76,75,85,14,94,84,7GDP deflator (y-o-y)2,42,20,71,10,81,51,81,9Harmonised index of consumer prices (HICP, y-o-y)1,52,40,31,10,70,71,41,5Nominal compensation per employee (y-o-y)3,42,61,51,61,72,32,73,0Labour productivity (real, person employed, y-o-y)1,10,61,00,41,0...Unit labour costs (ULC, whole economy, y-o-y)2,32,00,51,10,71,62,02,1Real unit labour costs (y-o-y)0,0-0,2-0,20,0-0,10,20,30,2Real effective exchange rate (ULC, y-o-y)1,4-0,7-0,11,40,4-1,8-0,50,2Real effective exchange rate (HICP, y-o-y)-0,2-0,7-0,20,51,1-1,7-0,9-0,5Net savings rate of households (net saving as percentage of net disposable income)-2,7-0,12,26,66,6...Private credit flow, consolidated (% of GDP)17,55,30,71,43,5...Private sector debt, consolidated (% of GDP)192,3224,0212,6202,7198,3...of which household debt, consolidated (% of GDP)116,5136,5130,2127,6124,7...of which non-financial corporate debt, consolidated (% of GDP)74,886,882,174,873,4...Gross non-performing debt (% of total debt instruments and total loans and advances) (2).2,94,12,62,3...Corporations, net lending (+) or net borrowing (-) (% of GDP)3,67,87,74,44,53,14,24,6Corporations, gross operating surplus (% of GDP)22,722,324,124,224,423,123,523,6Households, net lending (+) or net borrowing (-) (% of GDP)-4,8-1,00,71,92,01,71,92,1Deflated house price index (y-o-y)11,1-6,06,13,23,5...Residential investment (% of GDP)6,24,34,04,74,9...Current account balance (% of GDP), balance of payments3,05,28,27,87,06,96,56,5Trade balance (% of GDP), balance of payments4,25,56,87,06,0...Terms of trade of goods and services (y-o-y)0,40,60,7-0,2-0,90,20,20,2Capital account balance (% of GDP)0,10,1-0,10,00,0...Net international investment position (% of GDP)-0,814,541,655,464,4...NENDI - NIIP excluding non-defaultable instruments (% of GDP) (1)-25,6-18,58,318,916,2...IIP liabilities excluding non-defaultable instruments (% of GDP) (1)139,7163,7168,0160,7146,5...Export performance vs. advanced countries (% change over 5 years)3,2-1,1-8,6-1,7-3,5...Export market share, goods and services (y-o-y)-1,6-3,80,6-1,2-0,42,6-1,3-1,5Net FDI flows (% of GDP)1,82,11,91,8-0,2...General government balance (% of GDP)4,3-1,6-0,31,70,82,20,50,0Structural budget balance (% of GDP)..-0,71,71,02,11,40,2General government gross debt (% of GDP)35,141,441,335,534,233,032,331,7Tax-to-GDP ratio (%) (3)48,246,347,846,845,946,744,944,1Tax rate for a single person earning the average wage (%) (4)38,636,835,835,835,4...Tax rate for a single person earning 50% of the average wage (%) (4)33,432,031,031,030,3...(1) NIIP excluding direct investment and portfolio equity sharesKey economic and financial indicators - Denmarkforecast(2) domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-controlled branches.(3) The tax-to-GDP indicator includes imputed social contributions and hence differs from the tax-to-GDP indicator used in the section on taxation(4) Defined as the income tax on gross wage earnings plus the employee's social security contributions less universal cash benefits, expressed as a percentage of gross wage earningsSource: Eurostat and ECB as of 4-2-2020, where available; European Commission for forecast figures (Winter forecast 2020 for real GDP and HICP, Autumn forecast 2019 otherwise) 
 
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

Since  the  start  of  the  European  Semester  in 
2011,  97 %  of  all  CSRs  addressed  to  Denmark 
since  2011  have  recorded  at 
least  ‘some’ 
progress.  Only  3  %  of  these  country  specific 
recommendations 
'no 
recorded 
progress' (Graph 2.1). Substantial progress and full 
implementation  have  been  achieved,  in  particular 
in areas of public finances, labour market policies 
and the financial sector.  

'limited'  or 

Graph 2.1: 

Level of implementation today of 2011-2019 
CSRs 

(1) The overall assessment of the country-specific 
recommendations related to fiscal policy excludes 
compliance with the Stability and Growth Pact. 
(2) 2011 annual assessment: Different CSR assessment 
categories. 
(3) The multiannual CSR assessment looks at the 
implementation until 2020 Country Report since the CSRs 
were first adopted. 

Source: European Commission 

Following a CSR in 2011, Denmark delivered a 
timely  and  durable  correction  of  its  excessive 
deficit  by  2013,  and  has  since  made  the  fiscal 
framework  more  robust.  Denmark  introduced 
legally  binding  multi-annual  expenditure  ceilings 
on all three levels of the public sector (i.e. central 
Government,  regional  and  municipal),  applicable 
from  2014  onwards.  The  comply-or-explain 
principle was also added to the fiscal framework in 
2016,  making  national  law  compliant  with  the 
Fiscal Compact. Since 2016, Denmark’s structural 
balance  consistently  outperformed  its  medium-
term objective of -0.5 % of GDP.  

response 

this  period 

The  labour  market  and  education  system  was 
subject  to  CSRs  in  the  period  2011  to  2014,  as 
well  as  in  2019.  Long-term  labour  supply,  the 
employability  of  people  at  the  margins  of  the 
labour  market  and  the  quality  of  the  education 
system  were  the  subject  of  CSRs  between  2011 
and  2014.  A  number  of  labour  market,  pension, 
social  and  educational  reforms  were  implemented 
during 
these 
in 
recommendations.  Since  then,  the  labour  market 
performance  has  improved,  and  the  number  of 
people  receiving    social  assistance  has  declined. 
Although 
labour  shortages  have  been  easing 
recently, challenges remain. Ensuring supply of the 
right  skills  is  crucial  to  boost  productivity  and 
fostering  sustainable  and  inclusive  growth.  The 
educational  performance  of  children  with  a 
migrant background remains a challenge. In 2019, 
the  Council  recommended  therefore  Denmark  to 
investment-related  economic  policy  on 
focus 
education and skills. 

to 

the 

recommendations, 

The  housing  market  and  the  financial  sector 
were  subject  to  CSRs  in  2011  and  2012. 
Following 
the  Danish 
authorities  have  implemented  several  macro-  and 
micro-prudential  measures  to  safeguard  financial 
stability and limit risky loan taking. Although there 
was no CSR on this topic since 2013, the European 
Commission closely monitors the developments in 
this area. The Danish authorities have continued to 
implement measures every year since then. Recent 
measures  include  a  Systemic  Risk  Buffer  for  six 
systemically  important  banks,  the  reduction  in 
mortgage  interest  tax  deductibility,  limits  to  risky 
debt taking and the activation of a countercyclical 
capital  buffer.  A  2017  reform  will  re-align 
property taxes with actual property values by 2021, 
also  better  addressing 
regional  house  price 
divergences,  although  the  new  valuation  system 
behind the property tax reform has been delayed. 

Increasing  competition  and  productivity  has 
been  subject  to  CSRs  between  2011  and  2018. 
taken  gradually 
The  Danish  authorities  have 
several  steps  to  address  these  challenges.  For 
instance,  the  Parliament  has  adopted  reforms  on 
the  services  market,  including  the  easing  of  retail 
planning  and  increasing  competition  in  the  taxi 
sector  and  in  the  mortgage  market.  Building 
regulations  have  been  reviewed  and  Denmark  has 
continued its  work  with implementing the  utilities 

15 

No Progress0%Limited Progress3%Some Progress50%Substantial Progress44%Full Implementation3%    
 
2. Progress with country-specific recommendations 

Table 2.1: 

Summary table on CSR assessments (*) 

Source: European Commission 
(*) “The assessment of CSR 1 does not take into account the contribution of the EU 2021-2027 cohesion policy funds. The 
regulatory framework underpinning the programming of the 2021-2027 EU cohesion policy funds has not yet been adopted 
by the co-legislators, pending inter alia an agreement on the multiannual financial framework (MFF). 

strategy.  Denmark  has  made  sufficient  progress 
when examined over a longer time horizon, and as 
a result, the CSR in this area has been dropped in 
2019.  

Denmark  has  made  some  progress  (12)  in 
addressing 
country-specific 
2019 
the 
recommendations (see Table 2.1). 

universities. 

Research  and  development  has  been  subject  to 
CSR  in  2016  and  in  2019.  Although  overall 
research  and  development  spending  is  high  in 
Denmark,  this  has  not  translated  into  higher 
productivity  growth.  In  2016  Denmark  was 
recommended  to  promote  cooperation  between 
Denmark 
and 
businesses 
in 
demonstrated  sufficient  progress 
this  area 
including  a 
through  a  number  of  measures, 
prominent 
technology 
research  and 
organisations  and  the  creation  of  an  innovation 
fund,  which  supports  investments  and  long-term 
projects/partnerships.  Nevertheless,  the  research 
and  innovation  activity  remains  concentrated  in  a 
small  number  of  large  firms  and  foundations  and 
mostly  in  the  pharmaceutical  and  biotechnology 
sectors.  Therefore, 
the  Council 
recommended  broadening  the  innovation  base  to 
include more companies.  

in  2019, 

role 

to 

(October 

to 
policy 

taken  measures 
economic 

focus 
Denmark  has 
investment-related 
on 
education  and  skills.  The  2020  Budget  Bill  has 
allocated  a  marked  increase  in  public  expenditure 
on primary schools. Furthermore, a broad political 
agreement 
earmarked 
DKK 102 million  to  initiatives  to  upskill  low-
skilled  workers.  These  initiatives  should  help  to 
shortages. 
address 
Nonetheless, 
to 
incentivise youth to choose a vocational education 
and training (VET) programme, and to increase the 
skills level of people on the margins of the labour 
market. 

labour 
is  a  continued  need 

sector-specific 

2019) 

there 

As part of the 2020 budget, research in climate 
technology  will  be  markedly  strengthened, 

12   Information  on  the  level  of  progress  and  actions  taken  to 
address the policy advice in each respective subpart of the 
CSRs is presented in the Overview Table in the Annex A. 
This overall assessment does not include an assessment of 
compliance with the Stability and Growth Pact. 

16 

Denmark Overall assessment of progress with 2019 CSRs: Some progress CSR 1: 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. Some progress:   Some progress on education and skills;   Limited progress on research and innovation to broaden the innovation base to include more companies;  Some progress on sustainable transport to tackle road congestion. CSR 2: Ensure effective supervision and the enforcement of the anti-money laundering framework. Some progress:   Substantial progress on new legislative measures;  Some progress on supervision and enforcement of the anti-money laundering framework;   Some progress on increasing budget and hiring additional personnel.                                                             
 
  
 
2. Progress with country-specific recommendations 

innovation  base  and 

however  without  specific  measures  to  broaden 
the 
include  more 
companies.  The  Research  Reserve  for  2020  has 
been  increased  from  the  original  plan  by  38 %, 
totalling  DKK 1.925 billion.  The  budget  earmarks 
an  additional  DKK  1  billion  for  green  research  in 
2020 raising it to a total of DKK 2.3 billion. These 
expenses  will  focus  on  areas  such  as  agricultural 
transformation,  environmentally-friendly  transport 
and  sustainable  cities.  The  aim  of  the  increased 
R&D  budgets  is  to  contribute  to  the  objective  of 
reducing  greenhouse  gas  emissions  by  70 %  by 
2030 and will open new possibilities  for SMEs to 
participate in climate-related R&D activities.  

AML  framework.  The  Financial  Supervisory 
Authority  has  made  progress  in  enhancing  its 
supervisory  capacity,  but  more  needs  to  be  done. 
Risk  analysis  tools  and  supervision  manuals  have 
been  drawn  up,  but  are  still  to  be  applied.  An 
upgrade  has  yet  to  be  sought  and  obtained  in 
respect of Financial Task Force standards relevant 
for anti-money laundering supervision of financial 
entities. The Government has boosted the budget at 
the  Money  Laundering  Secretariat  (Denmark’s 
Financial Intelligence Unit) and the Danish FSA to 
increase supervision capacity. The FSA established 
an  AML  Division  and  increased  the  number  of 
AML-dedicated staff by close to 50 % in 2019. 

transport  plan 

tackle  key 
in 

to 
areas,  notably 

Sustainable  transport  is  a  key  priority  for  the 
government.  The  Government  has  presented  a 
specific 
road 
congestion 
the  Greater 
Copenhagen and Lillebælt areas. The Government 
has  taken  action  to  disseminate  European  Rail 
Traffic  Management  System  (ERTMS)  signalling 
on  Danish  railroads,  which  is  a  prerequisite  for 
more  frequent  train  schedules  and  for  further 
electrification of the rail network. In October 2019, 
it  is  set 
the  government  announced 
to 
negotiate 
infrastructure 
agreement 
an 
investments.  Such  a  plan  can  been  seen  in 
Denmark’s  overall  ambition  on  climate  and 
environmental  issues.  One  part  of  the  plan  is 
supposed 
through 
investments  in  public  transport  and  cycling.  In 
addition,  the  government  announced  a  plan  to 
phase out sales of new traditional diesel and petrol 
cars  as  of  2030.  The  government  has  set  up  a 
Commission for Green Transition to foster the sale 
of electric vehicles (13).  

tackle  road  congestions 

that 
on 

to 

the 

2019 
related 

some  progress 

Denmark  has  made 
in 
addressing 
country-specific 
recommendation 
anti-money 
to 
several 
laundering 
(AML).  Denmark 
significant  legislative  steps  over  a  relatively  short 
period  of  time.  The  new  AML  law  entered  into 
force in January 2020 and intends to transpose the 
4th  and  the  5th  AML  Directives.  The  recently 
implemented  policy  measures  still  have  to  prove 
their  effectiveness.  Denmark  has  made  some 
advances  in  supervision  and  enforcement  of  the 

took 

(13)  This Commission is expected to deliver preliminary results 

by mid-2020 and a final report by the end of 2020. 

17 

                                                           
 
2. Progress with country-specific recommendations 

18 

Box 2.1: EU FUNDS AND PROGRAMMES TO ADDRESS STRUCTURAL CHALLENGES AND TO FOSTER GROWTH AND COMPETITIVENESS IN DENMARK Denmark is benefiting from EU support. The financial allocation from the EU Cohesion policy funds(1) for Denmark amounts to EUR 810 million in the current Multiannual Financial Framework. By the end of 2019, some EUR 749 million (around 92 % of the total amount planned) was allocated to specific projects and EUR 284 million was reported as spent by the selected projects(2) showing a level of implementation below the EU average.   EU Cohesion policy funding also contributes to addressing structural challenges in Denmark. The Cohesion Policy programmes for Denmark have allocated EU funds of EUR 156 million for smart growth, EUR 41 million for sustainable growth and EUR 203 million for inclusive growth. In 2019 following the performance review(3) EUR 28 million have been made available within performing priorities.   EU Cohesion policy funding is contributing to transformations of the Danish economy by promoting growth and employment via investments, among others, in research, technological development and innovation, competitiveness of enterprises, employment and labour mobility. Support was already decided for around 5,900 enterprises, and the ongoing projects are expected to create more than 1,100 new innovative firms. ESI Funds are also expected to contribute to the reduction of greenhouse gas emissions by 50,400 tons of CO2(2). The European Social Fund (ESF) has, among others, targeted the up-skilling and reskilling of marginalised persons (including migrants) in Denmark, through support to comprehensive and job-oriented adult and lifelong learning programmes. Approximately 2,750 persons have participated in such programmes. The overall purpose is to increase social inclusion through access to education and employment, and thereby promote economic growth.  The European Agricultural Fund for Rural Development (EAFRD) supports Denmark with EUR 919 million for projects on competitiveness, sustainable management of nature and climate, and balanced development of the economy in rural areas. By 2018 the EAFRD had supported more than 450 agricultural holdings in their restructuring and modernisation investments, and training in agriculture and forestry for more than 34,000 participants. Moreover, some 250,000 hectares (approximately 8 %) of the agricultural and forest land were under management contracts to foster carbon sequestration and conservation. More than 50 % of the rural population were covered by local development strategies.The EAFRD makes available in total EUR 1.2 billion and the European Maritime and Fisheries Fund (EMFF) in total EUR 308 million (including the national co-financing for both). Denmark also benefits from other EU programmes, such as the Connecting Europe Facility, which allocated EU funding EUR 824 million to specific projects on strategic transport networks, Horizon 2020 allocated EU funding of EUR 1.2 billion (including 388 SMEs supported with about EUR 241 million).  EU funds already invest amounts on actions in line with the Sustainable Development Goals (SDGs). In Denmark, European Structural and Investment Funds support 9 out the 17 SDGs and up to 93 % of the expenditure is contributing to those.                                                            (1) European Regional Development Fund and European Social Fund. (2) https://cohesiondata.ec.europa.eu/countries/DK (3) The performance review is regulated by Article 22 of the Regulation (EU) No 1303/2013, whereby 5-7 % of overall resources allocated are released to performing priority axes of the operational programmes, the amount includes national co-financing.  
 
 
   
 
 
3.  REFORM PRIORITIES 

3.1  PUBLIC FINANCES AND TAXATION 

Debt sustainability analysis and fiscal risks 

to 

The 

sustainability. 

Danish  public  finances  are  sound  with  limited 
risks 
European 
Commission’s  assessment  of  the  short,  medium 
and  longer-term  sustainability  of  public  finances, 
notably in the view of population ageing, suggests 
that  sustainability  risks  remain  low  over  all  of 
these  time  horizons  (14).  At  33.8 %  of  GDP  in 
in 
2018,  Danish  government  debt 
comparison  with  most  Member  States.  The  debt 
ratio  has  been  on  a  declining  trend  over  recent 
years,  which  is  expected  to  continue  over  the 
medium  term,  to  reach  15.4 %  of  GDP  by  2030 
(Commission baseline no-policy change scenario). 
A change of the financing model for social housing 
could however result in a lower pace of gross debt 
reduction (Convergence Programme scenario). 

low 

is 

Fiscal Framework 

Denmark  has  a  strong  fiscal  framework.  The 
budget  law  sets  out  boundaries  for  the  Danish 
general  government  deficit.  It  is  the  result  of  the 
implementation of the Fiscal Compact in Denmark 
and  is  intended  to  subject  Danish  public  finances 
to  a  comparable  level  of  fiscal  discipline.  Despite 
wide  tax  and  expenditure  autonomy  at  local  and 
regional  levels,  Denmark  has  a  developed  system 
for  ensuring  compliance  at  all 
levels  of 
government  with  the  decided  budgetary  policy 
stance.  Notwithstanding 
the  Economic 
Councils,  in  its  capacity  as  fiscal  watchdog  (see 
below),  has  noted  that  over  the  period  2013-2018 
the 
to 
municipalities 
investment  ceilings.  However,  with  the  exception 
of  2018  this  was  more  than  offset  by  lower 
government 
the 
framework  appears  to  have  been  respected  at  the 
general government level. 

comply  with 

consumption. 

failed 

2019, 

this, 

For 

Denmark  has  an  independent  fiscal  institution 
(IFI). The Economic Councils, in their capacity as 
IFI,  carry  out  analysis  on  the  effectiveness  and 

(14)  For  an  overview  of  fiscal  sustainability  assessment  in  the 
short,  medium  and  long  term  see  Annex  B  and  European 
Commission  (2020),  ‘Debt  Sustainability  Monitor  2019’ 
Directorate-General  for  Economic  and  Financial  Affairs, 
European  Economy,  Institutional  Paper  120/2020,  January 
2020. 

efficiency  of  economic  policy.  This  includes 
analysing the impact of taxes, transfers and public 
services  on  behaviour  of  other  economic  agents. 
The  IFI  does  not,  however,  carry  out  spending 
reviews  stricto  senso.  The  transfer  in  2018  to 
Horsens has had some negative effects in terms of 
staff shortages and delays in reports. 

Taxation 

among 

EU  Member 

Denmark’s  tax  revenue  as  a  share  of  GDP  is 
high in an EU comparison. At 45.9 % of GDP in 
2018, Denmark has one of the highest tax revenue 
the 
States. 
ratio 
Notwithstanding 
the 
this,  Denmark 
highest  fall  among  all  EU  Member  States,  as  the 
tax to GDP ratio fell from 46.8 % of GDP in 2017 
to  45.9 %  in  2018.  Thus,  Denmark  continues  the 
path  of  a  moderately  falling  tax  to  GDP  ratio, 
albeit from high levels. 

recorded 

The  debt  bias  of  the  tax  system  encourages 
house  ownership.  The  Danish  tax  system  allows 
tax  deductions  for  mortgage  interest  payments, 
which  constitutes  an  incentive  for  households  to 
take  up  mortgage  lending.  The  mortgage  interest 
deductibility  bias  of  the  tax  system  contributes  to 
the high gross indebtedness of Danish households. 
At  around  113.5 %  of  GDP,  Danish  households 
have  the  highest  debt  levels  of  all  EU  Member 
States,  albeit  the  debt  should  be  seen  in  the 
perspective  of  much  larger  (but  largely  illiquid) 
financial  assets,  notably  real  estate  and  pension 
savings (see also Section 3.2). 

Tax  expenditure  stemming  from  mortgage 
interest deductibility raises questions as regards 
fairness,  equality  and  potentially  financial 
stability.  Box  3.1.1  shows  that  a  simultaneous 
abolishment  of  tax  deductibility  of  mortgage 
interest  payments  and  an  equivalent  increase  in 
personal  income  tax  allowance  could  increase 
welfare and economic equality while strengthening 
households’ resilience. The current period of very 
low  interest  rates  with  reduced  mortgage  interest 
payments  could  provide  a  window  of  opportunity 
to improve the current system. 

Corporate  income  taxation  encourages  debt 
over equity financing. In Denmark, as in most EU 

19 

                                                           
3.1. Public finances and taxation 

(NOx) pollution. While diesel cars are subject to a 
higher  registration  fee,  the  tax  structure  favours 
diesel  cars  in  the  case  of  high  annual  mileage. 
Fossil fuel subsidies fell in the past decade, thanks 
to the phasing out of indirect tax subsidy for diesel, 
which  has  a  reduced  energy  duty  compared  to 
petrol. In 2016, fossil fuel subsidies, essentially the 
reduced energy duty on diesel,  amounted to some 
DKK 9 billion (0.4 % of GDP). 

Tax Administration 

years 

2019, 

following 

The  Danish  tax  administration  is  undergoing  a 
period  of  structural  reform.  As  from  2018,  the 
Danish  tax  administration  has  adopted  a  new 
structure,  moving  from  one  single  administration 
to  a  group  of  seven  agencies,  each  one  focussing 
on  a  particular  area  of 
tax  and  customs 
administration.  The  reform  aims  to  make  tax 
collection more efficient and effective. There have 
been some positive results already. Among others, 
in  September 
of 
investigation  after  a  major  tax  scandal  regarding 
dividends tax, the Danish tax authorities  managed 
to  obtain  a  large  amount  of  tax  information  from 
Dubai,  where  an  individual  accused  of  having 
played  a  major  role  in  the  scandal  is  tax  resident 
(which amounted to approximately 0.6 % of GDP). 
This  signals  the  continuous  determination  of  the 
the 
Danish 
consequences  of  the  fraud  case  and  follows 
successes in recovering some of the money lost. At 
the  same 
time,  as  recently  pointed  out  by 
government  auditors,  challenges  remain  more 
generally in the area of recovery of taxes and other 
fees, such as police fines due by Danish taxpayers 
to the Danish state. 

administration 

address 

tax 

to 

to  2024,  because  of  continued 

While  progress  with  administrative  reform  is 
visible  in  some  areas,  challenges  remain  in 
others.  A  much-needed  modernisation  of  the 
property  tax  system  planned  for  2021  has  been 
delayed 
IT 
development  challenges  within  the  Danish  tax 
administration.  The  development  of  a  new  IT 
system  was  markedly  behind  schedule,  implying 
that  any  entry  into  operation  of  the  new  system 
from  2021  was  considered  unfeasible  and  could 
lead  to  additional  challenges  for  the  already-
troubled housing evaluation system and the linked 
taxation system. 

Member  States,  it  is  possible  to  deduct  interest, 
typically from a loan or debt, as expenditure when 
determining  the  amount  of  taxable  profits,  while 
is  generally  not  possible  for  paid  out 
this 
dividends. This favours the use of debt or loans for 
financing,  instead  of  equity.  The  distortion  could 
be  addressed  through  the  introduction  of  an 
allowance  for  deduction  in  respect  of  corporate 
equity (ACE). While the latter would contribute to 
narrowing 
it  could 
incentivise firms to invest. The budget proposal for 
2017  included  an  ACE,  but  it  has  not  been 
implemented. Based on estimates published by the 
Ministry of Finance at that time (Finansministeriet 
2017)  an  ACE  could  boost  GDP  by  1.7 %  in  the 
long run through its positive impact on investment. 
Similar recommendations have been recently made 
by  the  Economic  Councils  (DORS  2019),  the 
International  Monetary  Fund  (IMF  2019)  and  the 
OECD (2019c).  

the  corporate 

tax  base, 

the 

from 

objectives 

Denmark’s  revenues 
from  environmentally 
relevant  taxes  have  been  decreasing  but  still 
among  the  highest  in  the  EU.  However,  the 
falling share of environmental and labour taxes in 
total  tax  revenues  are  taking  Denmark  further 
of  SDG1715. 
away 
Environmental  taxes  accounted  for  3.7 %  of  GDP 
in  2018  (EU  average:  2.4 %),  which  has  however 
decreased from 4.9 % of GDP in 2005. In the same 
year,  energy  taxes  accounted  for  2 %  of  GDP 
against  an  EU  average  of  1.9 %  of  GDP  (Chapter 
high 
particular,  Denmark 
3.5). 
environmental  taxes  on  road  transport.  While  the 
tax  system  has  components  that  reflects  fuel 
economy, changes in the design of the car taxes in 
2017 has contributed to an increase in the sales of 
heavier  cars  with  higher  emissions.  There  are  no 
taxes on air transport. Energy taxation and taxation 
on  pollution/use  of  resources  are  around  EU 
averages. 

has 

In 

In  terms  of  transport  fuel  taxation,  Denmark 
taxes  petrol  significantly  more  than  diesel.  The 
marked difference in taxation (diesel is taxed some 
32 %  lower  than  petrol  in  2018)  is  significantly 
above  the  EU  average  and  implicitly  creates  an 
incentive for diesel cars, despite higher nitric oxide 

15   “Partnership  for  the  goals”,  which  includes  an  indicator 
related to the “Shares of environmental and labour taxes in 
total tax revenues”. 

20 

                                                           
 
3.1. Public finances and taxation 

21 

Box 3.1.1: Revenue neutral tax reform within the Danish personal income tax systemSimulation of the removal of the tax deductibility of mortgage interest payments compensated by an increase in the general tax allowance. Using the European microsimulation model, EUROMOD, the European Commission Joint Research Centre (JRC) has simulated a tax reform consisting in abolishing the deductibility of mortgage interest payments from the personal income tax (PIT) base, and simultaneously raising the general allowance by an equivalent amount, i.e. a budget neutral tax reform(1). In the current low interest rate environment, the abolishment of the mortgage interest deduction leads to a net budgetary effect of 2.4% rise in total public revenue net of expenditure. This amount was then used for the compensatory increase in the PIT general allowance(2).  Such a reform would have relatively mild distributional, inequality and risk of poverty effects. Regarding the distributional effects, individuals in the first half of the disposable income distribution(3) would be net beneficiaries of the tax reform, while individuals in the second half would stand to lose from it (see Graph 1). The annual disposable income for the lowest income decile could increase by 0.8 %, while the impact would be around zero at the 6th decile and negative afterwards. This redistribution pattern is generated because the deductibility of the mortgage interest payments is increasing with income, while a rise in the PIT general allowance would reduce the tax bill relatively more for the lower deciles. The reform would also render the Danish tax system more progressive. Both the removal of the tax deductibility of mortgage interest payments and the increase in the PIT general allowance would be inequality-reducing: the Gini coefficient is reduced by around 0.2 points as a result of the reforms. A poverty reduction effect is also registered, with the at-risk-of-poverty rate, defined at 60% of the median annual equivalised disposable income(4) being reduced by around 0.2 percentage points.                                                             (1) Simulations were based on the tax and benefit system of 2019, using input data extracted from EU-SILC 2017 (incomes refer to 2016). (2) The general tax allowance is granted to all taxpayers liable for paying personal income tax and was raised by around 7.3% in the tax reform context. (3) Individuals are distributed across the deciles according to their equivalised disposable income. The equivalised disposable income adjusts total household disposable income – original income plus benefits net of taxes – to the household composition, using the OECD scale (i.e. assigning a weight of 1 to the household head, 0.5 to other members above 14 years and 0.3 to children younger than 14 year-old). (4) This amounts to around DKK 136,533.66.     -1.0-0.8-0.6-0.4-0.20.00.20.40.60.81.012345678910Graph 1: % Change in mean annual equivalized disposable income with respect to the baseline, by decileElimination of MIDCompensation via the PIT systemSource: European Commission, Joint Research Centre, based on the EUROMOD model  
 
 
 
   
 
 
3.2.  FINANCIAL SECTOR 

Financial sector developments 

Total  private  credit  growth  has  evolved  at  a 
steady  pace  in  2018.  There  has  been  a  moderate 
increase  in  credit  growth  to  households  (1.3 %), 
but  it  remains  below  that  of  its  neighbouring 
countries.  More  recently,  a  hike  in  mortgage 
activity has also taken place (1.3 %), largely due to 
to  non-financial 
mortgage  refinancing.  Credit 
companies  slowed  down  significantly  in  2019, 
after  a  strong  expansion  in  2018.  In  access  to 
finance,  Denmark  is  among  the  top  performers  in 
the  EU,  although  the  relative  cost  of  small  loans 
(up  to  EUR  1  million)  compared  to  the  cost  of 
large loans is high (European Commission 2019f).  

Graph 3.2.1:  Credit growth 

financial  technologies  also  weigh  on  profits  (16). 
With  a  return  on  equity  of  an  estimated  8 %  in 
2019,  the  profitability  of  Danish  banks  has  been 
declining somewhat compared with previous years, 
but  remains  sound  and  higher 
that  of 
European  peers.  Solvency  indicators  are  also 
sound,  with  the  total  capital  ratio  and  the  CET1 
ratio  standing  at  an  estimated  21.5 %  at  17.5 %, 
respectively, in the second quarter of 2019. 

than 

levels  exceed 

Banks  could  come  under  stress  in  an  adverse 
scenario.  While  capital 
the 
regulatory requirements, the latest stress test by the 
national  central  bank  suggests  that  some  banks 
would  come  under  pressure  in  a  severe  recession 
scenario  (Danmarks  Nationalbank,  2019b).  All 
significant  banks  complied  with  their  minimum 
requirements for own funds and eligible liabilities 
(MREL)  that  had  to  be  met  by  1  July  2019.  The 
short  maturities  of  Danish  banks’  MREL-eligible 
instruments  relative  to  similar  issuances  in  other 
Member  States  may,  however,  pose  rollover  risks 
(Danmarks  Nationalbank,  2019c).  The  liquidity 
position  is  comfortable,  as  reflected  in  a  liquidity 
coverage  ratio  of  173 %  at  the  end  of  the  same 
period.  Finally,  asset  quality  is  high,  as  it  is 
reflected in the low ratio of non-performing loans. 

Source: ECB 

Danish  banks  are  generally  profitable,  well 
capitalised and in a good liquidity position, but 
the  low  interest  rate  environment  may  pose 
challenges  going  forward.  Negative  yields  and 
interest  rates  are  becoming  more  pervasive  in  the 
Danish  economy.  For  a  majority  of  households, 
deposits  are  unremunerated  and  some  banks  have 
announced  plans  to  charge  negative  interest  rates 
to large private depositors, as they already do for a 
majority  of  corporate  depositors.  Banks’  reliance 
on  net  interest  income  (NII)  is  thus  increasingly 
under  strain  and  only  partly  offset  by  revenues 
from  fees  and  commissions.  Higher  expenses 
related  to  compliance  with  anti-money  laundering 
provisions  and  to  the  implementation  of  new 

are 

buffers 

being 
Macro-prudential 
progressively built to further strengthen banks’ 
resilience.  While  credit  growth  has  been  easing 
overall,  this  nonetheless  masks  a  build-up  in 
systemic  risk  as  intensified  competition  among 
banks  may  result  in  an  easing  of  credit  standards 
and  as  investors  take  higher  risks  in  their  search 
for  yield.  Against  this  background,  the  Danish 
Systemic  Risk  Council  has  recommended  further 
increases  in  the  rate  of  the  countercyclical  capital 
buffer  (CCyB).  That  rate,  currently  at  1 %,  will 
progressively increase to 1.5 % in the third quarter 
of 2020 and to 2 % in the first quarter of 2021. The 
Council has announced its intention to recommend 
a further increase of the buffer rate to 2.5 %. This 
buffer  will  contribute  to  further  safeguarding 
financial  stability  and  can  be  released  with 

technology 

(16)  In 2018 the Danish Financial supervisory authority has set 
up  a  sandbox  initiative,  allowing  companies  to  test  their 
controlled 
financial 
the 
environment.  This  ‘FT  Lab’  aims 
developments  of  products 
for 
consumers,  while  also  providing  the  supervisor  with  a 
better understanding of financial technology. 

to  promote 
that  are  beneficial 

innovations 

in 

a 

22 

-5-4-3-2-10123456janv-12avr-12juil-12oct-12janv-13avr-13juil-13oct-13janv-14avr-14juil-14oct-14janv-15avr-15juil-15oct-15janv-16avr-16juil-16oct-16janv-17avr-17juil-17oct-17janv-18avr-18juil-18oct-18janv-19avr-19juil-19Total privateNon-financial corporationsHouseholdsFor house purchase%        
                                                           
3.2. Financial sector 

Table 3.2.1: 

Financial soundness indicators, all banks in Denmark 

Source:   ECB - CBD2 - Consolidated Banking data 

immediate  effect  if  the  degree  of  systemic  risk 
were  to  decline.  It  complements  other  prudential 
measures specific to real estate (see below). 

in 

launched  a 

review  of 
The  government 
Denmark’s  participation 
the  European 
banking  union.  The  review  was  announced  in 
July  2017  and  the  final  report  was  released  in 
December 2019. The government’s review was the 
second study on the subject. Similarly to the 2015 
report, the 2019 report also concluded that joining 
in  principal  be 
the  banking  union  would 
advantageous  for  Denmark,  as  it  would  inter  alia 
financial 
strengthen 
institutions’ 
Some 
uncertainties  highlighted  in  the  2015  report  (for 
instance  related  to  Denmark’s  mortgage-credit 
system)  have  now  been  clarified.  However,  the 
2019  report  highlights  that  the  Banking  Union  is 
still developing and that there is  ongoing work on 
additional  measures  at  EU-level,  which  could 
change the regulatory framework for Danish credit 
institutions,  whether  or  not  Denmark  participates 
in the Banking Union. 

of  Danish 

cross-border 

activities. 

oversight 

Household indebtedness 

Debt  of  Danish  households  remains  high  but 
has  been  declining  in  recent  years.  Denmark  is 
among  the  EU  Member  States  among  the  highest 
household  debt-to-GDP  ratio.  Household  debt 
progressively  fell from its peak of 143 % of GDP 
in 2009. The reduction between 2018 and 2019 is 
estimated  to  have  been  particularly  strong,  with 
debt falling by 11 pps to an estimated 113.5 % of 
GDP. Danish household debt was 2.4 times higher 
than gross disposable income in 2019, down from 
a multiple of three at the peak in 2009. This overall 
reduction 
(i.e. 
denominator)  growth  and  not  the  contraction  of 

reflects  GDP 

primarily 

credit. However, credit flows have slowed recently 
interest 
and  households  have  used 
environment 
their 
to  deleverage 
existing debt (Graph 3.2.2). 

to  refinance 

low 

the 

Graph 3.2.2:  Household debt 

Source: Eurostat 

Commission analyses suggest a need for further 
reductions in gross household debt. Estimates of 
prudent  or  fundamentals-based  levels  of  gross 
household  debt  implied  by  cross-country  models 
are  significantly  below  Danish  households’  actual 
debt  level (17).  The  model-implied  gap  between 
those  benchmarks  of  sustainable  debt  levels  and 
the  actual  debt  has  narrowed  in  recent  years,  but 

(17)  Fundamentals-based  benchmarks 

are  derived 

from 
regressions  capturing  the  main  determinants  of  credit 
growth and taking into account a given initial stock of debt. 
Prudential  thresholds  represent  the  debt  threshold  beyond 
which the probability of a banking crisis is relatively high. 
Methodologies  are  described  in  European  Commission 
(2017)  and  updates  to  the  methodology  have  been 
subsequently proposed in European Commission (2018). 

23 

05010015020025030035002040608010012014016020032004200520062007200820092010201120122013201420152016201720182019*Debt-to-GDP, HouseholdsDebt-to-fin. assets, HouseholdsDebt-to- gross disposable income, Households (right axis)% %2014q42015q42016q22016q32016q42017q12017q22017q32017q42018q12018q22018q32018q42019q12019q2Non-performing loans5,13,93,63,43,33,12,92,72,52,72,52,32,31,91,9o/w foreign entities4,23,73,73,53,2----------o/w NFC & HH sectors5,84,44,03,93,73,53,23,03,03,32,92,82,72,32,2o/w NFC sector10,27,06,15,95,45,04,54,24,24,94,44,03,83,33,2o/w HH sector2,92,72,62,62,62,52,42,22,22,22,02,02,01,51,5Coverage ratio31,135,235,628,427,325,425,626,925,427,032,332,132,136,835,8Return on equity(1)4,76,89,09,19,712,712,111,510,810,39,58,68,08,08,5Return on assets(1)0,30,40,50,50,60,70,70,70,70,60,60,50,50,50,5Total capital ratio18,219,820,219,920,720,421,221,522,121,321,721,521,621,521,3CET 1 ratio15,016,216,115,916,416,517,217,518,117,417,317,617,817,517,4Tier 1 ratio16,217,617,817,618,418,218,919,219,719,019,219,519,719,319,3Loan to deposit ratio192,9213,8206,2210,7211,0236,9227,3228,7228,7225,8229,2231,7240,7238,5236,6(1) Annualized data.        
                                                           
 
  
 
3.2. Financial sector 

region  (Graph  3.2.3).  The  number  of  one-family 
house  sales  at  national  level  in  2018  stagnated 
compared  to  the  previous  year,  while  transactions 
of  owner-occupied  flats  declined,  driven  by 
developments  in  the  Copenhagen  region.  The 
slowdown in market dynamics is also reflected in a 
decline  in  housing  starts  and  permits  for  new 
constructions  since  mid-2018  and  a  slowdown  in 
loans for house purchases. 

Graph 3.2.3:  Nominal real estate prices 

Source: Statistics Denmark 

House  prices  valuation  estimates  are  on  the 
upside,  but  provide  no  signs  of  significant 
overvaluation.  Increases  in  the  price-to-income 
and  price-to-rent  ratios  above  their  long-term 
values  point  to  a  marginal  worsening  of  housing 
affordability  over  recent  years..  House  prices  in 
Denmark,  both  at  national  and  regional  level 
appear  broadly  in  line  with  fundamentals.  This 
contrasts  somewhat  with  price-to-rent  or  price-to-
income indicators, which point to higher valuation 
gaps  and  pressures  on  housing  affordability. 
However, the latter indicators do not take account 
of  regulations  affecting  rental  market,  supply 
constraints  and  other  fundamental  drivers  of 
prices,  such  as  population  growth  or  urban 
migration. 

financing 

conditions 

Mortgage 
remain 
favourable  with  mortgage  rates  at  historical 
the  average  effective  mortgage 
lows.  While 
interest rate has been declining for a long time, in 
September  2019  it  has  fallen  for  the  first  time 
below  1 %  to  0.93 %.  The  average  rate  for  new 

would  in  principle  point  to  a  need  for  a  further 
deleveraging.  This  is  under  way,  as  households 
increasingly switch to mortgages with amortisation 
(see also Graph 3.2.4). 

There  are  several  factors  that  mitigate  debt 
sustainability  risks.  Households  have  strong 
balance  sheets  and  the  high  level  of  gross  debt  is 
matched by a  high level of household assets  – net 
assets of Danish households amounted to 185 % of 
GDP  in  the  second  quarter  of  2019  -  implying  a 
comfortable  solvency  position.  While  the  high 
level  of  gross  debt  may  thus  be  an  imperfect 
indicator  of  debt 
there  are 
nonetheless  frictions  that  may  result  from  the 
liquidity  mismatch  in  Danish  households’  balance 
sheets  and  the  asymmetric  reaction  of  assets  and 
liabilities to certain shocks.  

sustainability, 

A  large  share  of  the  assets  mentioned  above  is 
illiquid.  These  include  as  housing  or  pension 
savings  (which  may  also  suffer  from  negative 
valuation effects in a downturn), while there is still 
a  high,  albeit  declining,  share  of  debt  at  variable 
rates  that  is  susceptible  to  an  interest  rate  shock. 
However,  debt  service  ratios  have  declined  from 
around 24 % at the end of 2008 to around 15 % at 
the  end  of  2018,  suggesting 
that  household 
resilience  vis-à-vis  such  shocks  has  increased. 
Furthermore,  gross  household  debt 
is  highly 
correlated with high household income, indicating 
that the balance sheet risks reside predominantly at 
to  adverse  shocks 
households  more  resilient 
(Danmarks Nationalbank 2018d). 

Housing market 

Housing  prices  have  been  rising  relatively 
strongly,  compared  with  other  EU  Member 
States,  but  market  dynamics  in  Denmark  have 
eased  over  recent  quarters.  The  slowdown  has 
affected all regions and housing categories. At the 
national  level,  annual  growth  of  prices  of  one-
family  houses  decelerated  from  3.9 %  in  2018  to 
2.4 %  in  the  first  half  of  2019.  In  the  capital 
region, price growth slowed from 4.9 % in 2018 to 
2.8 %  in  the  second  quarter  of  2019,  the  lowest 
rate  observed  since  the  third  quarter  of  2012. 
Annual  price  growth  of  owner-occupied  flats, 
which  averaged  8 %  between  mid-2012  and  mid-
2018, decelerated from the second quarter of 2018 
onwards,  with  prices  even  contracting  in  the  first 
half of 2019. This pattern is mirrored in the capital 

24 

-10-5051015mars-2010juil-2010nov-2010mars-2011juil-2011nov-2011mars-2012juil-2012nov-2012mars-2013juil-2013nov-2013mars-2014juil-2014nov-2014mars-2015juil-2015nov-2015mars-2016juil-2016nov-2016mars-2017juil-2017nov-2017mars-2018juil-2018nov-2018mars-2019Houses - All DenmarkHouses - Capital regionFlats - All DenmarkFlats - Capital regiony-o-y % change        
banks 

started 

loans  was  0.73 %  in  September  2019,  as  some 
Danish 
residential 
mortgages with negative interest rates. The decline 
in  the  average  rate  is  mainly  driven  by  the 
refinancing  of  existing  mortgages  at  lower  rates, 
which are counted as new loans. 

offering 

Since  2014,  the  Danish  authorities  have  put  in 
place  macro-prudential  and  requirements  on 
banks  to  limit  borrowing.  These  restrictions 
predominantly take the form of limits to the debt-
to-income  (DTI)  and  loan-to-value  (LTV)  ratios, 
and  target  in  particular  borrowers  in  areas  that 
have  experienced  high  price  increases  (the  so-
called  “growth  areas”  around  Copenhagen  and 
Aarhus)  and  loans  with  characteristics  that  are 
considered risky, i.e. loans with adjustable interest 
rates  or  without  amortisation.  These  measures 
seem to have been effective both in slowing down 
loan  growth  in  the  “growth  areas”  (Danmarks 
Nationalbank,  2018c)  and  in  steering  borrowers 
towards loans with longer interest rate fixation and 
amortisation,  and 
financial 
stability  risks  emanating  from  the  residential  real 
estate  sector.  In  February  2019,  46 %  of  the 
outstanding  mortgage 
amount  was 
concentrated in loans with instalments, while 57 % 
of that amount in loans with variable interest rates 
(Graph 3.2.4). This compares with shares of 54 % 
and 64 %, respectively, four years earlier. 

thus  decreasing 

loan 

Graph 3.2.4:  Mortgage loans by type of loan 

3.2. Financial sector 

Denmark(18) on vulnerabilities in the residential 
real  estate  sector  (19).  The  Board  in  particular 
focussed  on  the  high  share  of  loans  with  risky 
characteristics  (deferred  amortisation  and  variable 
interest  rates)  in  combination  with  the  high 
indebtedness of Danish households. It recommends 
Denmark  to  monitor  these  vulnerabilities  and 
consider  the  tightening  or  activation  of  further 
capital-  or  borrower-based  measures 
the 
medium  term,  if  necessary.  Policy  measures  that 
are  in  place  appear  to  be  fairly  effective  in 
addressing the identified risks.  

in 

A  new  credit  database  will  strengthen  risk 
assessment. In addition, the Danish Systemic Risk 
Council  and 
its  members  carry  out  regular 
assessments  of  both  the  risks  emanating  from  the 
housing  market  and  of  the  policies  to  mitigate 
them.  In  this  context  it  is  positive  that  as  of  end 
2019, the  Danish authorities  will  have access to a 
new  credit  database  that  will  allow  to  further 
deepen  their  assessments.  Finally,  the  ESRB  also 
commends  Denmark  to  review  other  policies  that 
may  support  imbalances  in  the  mortgage  market, 
such  as  rental  market  regulation,  tax  deductibility 
of mortgages and housing taxation. 

The implementation of the  new, albeit  delayed, 
housing taxation system should bring efficiency 
gains.  Once  in  place,  this  reform  will  ensure  that 
the amount of taxes paid on a property will reflect 
its underlying value and that of the land on which 
it stands. Currently, this link is weak, implying that 
in  urban  areas  with  high  structural  demand,  the 
ratio  of  taxes  to  house  prices  is  relatively  low 
when compared to rural areas. As such, the current 
system  may  create  feedback  loops  by  further 
fuelling  the  demand  for  properties  with  high 
intrinsic  value  and  push  up  their  prices  above 
levels justified by fundamentals.  

Anti-money laundering 

The  Danske  Bank  money 
revealed  end  2018 
Denmark’s  anti  money 

laundering  case 
strengthening 
laundering  (AML) 

led 

to 

Source: Danmarks Nationalbank 

In  June  2019,  the  European  Systemic  Risk 
Board  (ESRB)  issued  a  recommendation  to 

(18)  Recommendation of the European Systemic Risk Board of 
27  June  2019  on  medium-term  vulnerabilities  in  the 
residential real estate sector in Denmark (ESRB/2019/05) 
(19)  Denmark  is  one  of  ten  EU  member  states  to  which  the 
Board  issued  a  warning  or  recommendation  following  a 
European  Economic  Area-wide  assessment  of  residential 
real estate. 

25 

020406080100120sept-2014déc-2014mars-2015juin-2015sept-2015déc-2015mars-2016juin-2016sept-2016déc-2016mars-2017juin-2017sept-2017déc-2017mars-2018juin-2018sept-2018déc-2018Instalments/fixed rateInstalments/variable rateNo instalments/fixed rateNo instalments/variable rate% of total        
                                                           
3.2. Financial sector 

in  2018  and  on 

The  FATF  upgraded  Denmark  on  ten  of  its  40 
recommendations 
three 
additional recommendations in 2019. The FATF 
now  considers  Denmark  “largely  compliant”  with 
its  duty  to  assess  risks  and  as  regards  the 
application  of  a  risk-based  approach  to  fighting 
money laundering. Despite this, Denmark remains 
under enhanced monitoring and an upgrade has yet 
to  be  sought  and  obtained  in  respect  of  FATF 
standards  relevant  for  anti-money 
laundering 
supervision  of  financial  entities.  The  Danish 
Parliament  adopted 
in 
December  2019,  which  entered  into  force  on  10 
January  2020.  The  legislative  package  intends  to 
transpose the 5th Anti-money laundering directive, 
introduce  measures 
the  political 
agreement of March 2019 into actions and the right 
for  supervisors  to  issue  administrative  penalties. 
These  measures 
competent 
authorities  to  apply  the  new  tools,  fine-tuning 
procedures and keeping abreast of new trends and 
vulnerabilities. However, these measures are yet to 
be assessed and yield results. 

the  AML  package 

allow  Danish 

translating 

Substantial  increases  in  financial  and  human 
resources  dedicated  to  AML  tasks  have  taken 
place  within 
competent  authorities.  The 
Government  has  boosted  the  budget  as  well  as 
number  of  personnel  at  the  Money  Laundering 
Secretariat 
Intelligence 
(Denmark’s  Financial 
Unit)  and  the  Danish  FSA  in  the  agreement  of 
March  2019.  The  DFSA  established  an  AML 
Division  and  increased  the  number  of  AML-
dedicated  staff  by  close  to  50 %  in  2019.  The 
report  by  Rigsrevisionen  might  lead  to  additional 
actions 
the  Danish  Financial 
Intelligence Unit.. 

to  strengthen 

framework.  Danske  Bank  is  currently  under 
investigation  for  clearing  financial  transactions 
totalling  over  EUR 200  billion  through  its  branch 
in  Estonia  between  2007  and  2015. This  case  has 
led to a loss of trust in the integrity and anti-money 
laundering defence capabilities of Danish financial 
institutions  and  drawn  international  scrutiny  to 
laundering. 
cross-border  fight  against  money 
Important  shortcomings  in  the  prevention  and 
investigation  of  money 
laundering  had  been 
highlighted  already  by  the  Financial  Action  Task 
Force  (FATF)  report  of  2017  (20).  The  IMF  has 
also  stressed  that  Danish  banks’  exposure  to 
higher-risk  countries  poses  a  more  substantial 
money  laundering  threat  relative  to  the  other 
Nordic  countries  (IMF,  2019).  The  Danish  Court 
of  Auditors  (Rigsrevisionen)  in  its  January  2020 
report  assessed  Denmark’s  anti-money  laundering 
administration  for  the  period  of  2016-2018  and 
highlighted  important  deficiencies  in  the  AML 
prevention framework. 

to 

further 

reinforce 

reaffirmed 

In  2019,  Denmark  has 
its 
commitment to address the identified issues and 
undertook  several  significant  legislative  steps 
over  a  relatively  short  period.  A  broad  political 
agreement 
anti-money 
laundering efforts was reached in March 2019. The 
initiatives can be grouped into three categories: (1) 
strengthening  of  control  and  intervention  powers, 
(2)  significant 
tightening  of  sanctions  and 
increased resources, and (3) clearer organisational 
focus.  Legislative  amendments  to  the  Financial 
Business Act were adopted in December 2018 and 
June  2019,  and  will  allow  the  Danish  FSA  to 
revoke  financial  institutions’  licenses  for  gross 
violations  of  the  AML  Act  and  to  substantially 
increase  the  fines  for  failure  to  comply  with  that 
act.  The  Financial  Supervisory  Authority  (FSA) 
adopted a report in January 2019 on its supervision 
of Danske Bank with regard to its Estonian branch. 
The  report  has  identified  23  initiatives  that  could 
improve anti-money laundering supervision. As of 
July  2019,  fit  and  proper  requirements  have 
laundering 
become  applicable 
financial 
compliance  officers  employed  by 
institutions.   

to  anti-money 

(20)  The  Financial  Action  Task  Force  was  created  in  1989  by 
the  G7  and  entrusted 
to  set  global  standards  and 
recommendations.  These  standards  and  recommendations 
cover  anti-money  laundering  rules  for  financial  and  other 
entities to be enforced by public authorities.  

26 

                                                           
 
3.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

3.3.1.  EMPLOYMENT DEVELOPMENTS 

rate 

reached  77.5 % 

Supported  by  a  solid  economic  upswing,  the 
Danish  labour  market  is  performing  well.  The 
employment 
in  2018, 
approaching the national 2020 target of 80 %, and 
well  above  the  EU  average  of  73.2 %.  The  gap 
between the female and the male employment rate 
has  decreased  in  recent  years,  reaching  7.0  pps  in 
2018,  well  below  the  average  gap  at  EU  level 
(11.6 pps).  The  unemployment  rate  has  continued 
to decline, down to 5.1 % in 2018, the lowest since 
2008.  Long-term 
the 
unemployment,  which  has  dropped  to  1.0 %, 
remains one of the lowest in the EU. 

pre-crisis 

level 

in 

The size of the labour force reached a record in 
2018 (2.8 million). This is driven by a significant 
inflow  of  foreign  workers,  mainly  from  other  EU 
Member States, and the increasing number of older 
workers  staying  longer  on  the  labour  market.  In 
2018,  the  employment  rate  of  people  aged  55-64 
stood  at  73.3 %,  corresponding  to  a  13.4  pps 
increase  relative  to  2008  (59.9 %).  This  is  the 
impact  of  reforms  introduced  in  the  2000’s, 
incentivising  people  to  stay  on  the  labour  market. 
Since 2006, the statutory and early retirement ages 
have been indexed to life expectancy. A reform in 
2011 brought the indexation mechanism into effect 
sooner 
the  current 
initially  decided.  In 
scheme,  the  retirement  age  is  increased  by  0.5 
years each year until 2022 and then increased to 68 
in  2030.  The  Danish  Parliament  has  not  yet 
adopted further increases in the retirement age but 
is  expected  to  raise  the  retirement  age  to  69  in 
2035  and  to  70  in  2040.  These  reforms  are  set  to 
contribute to long-term  fiscal sustainability and to 
help  make  up  the  2.5  pps  shortfall  from  the 
country’s Europe 2020 employment target (80 %). 

than 

The  labour  force  is  projected  to  continue 
growing,  but  sector-specific  differences  may 
increase  the  risk  of  skills  mismatches.  The 
estimated  11 %  increase  of  the  labour  force  by 
2030 (relative to 2016) is expected to be driven by 
demographic  changes  (Cedefop,  2018).  The  age 
cohorts  of  those  aged  30-34  and  35-39,  are 
expected 
to  33 %  and  29 % 
respectively.  Overall  employment  is  forecast  to 
grow between 2021 and 2030, but with significant 
sector-specific  differences  (lowest  in  engineering 
by 0.7 % p.a. and highest in the primary sector and 
utilities by 2.2 % p.a.).  

increase 

to 

Labour  shortages  persist,  but  the  overall 
situation  appears  to  be  slightly  improving.  The 
total number of unsuccessful recruitments (61,110) 
stood at 20 % in December 2019, which is slightly 
below  the  February  2019  level  (70,300)  of  22 % 
(Agency  for  Labour  Market  and  Recruitment, 
2019).  This  reflects  a  continuous,  but  slightly 
declining,  labour  market  tightness.  The  shortages 
concern  mainly  sector-specific  skilled  workers,  in 
particular 
(32 % 
unsuccessful  recruitments),  the  agricultural  sector 
(29 %  unsuccessful  recruitments)  and  the  services 
sector  (29 %  unsuccessful  recruitments).  The  low 
share  of  ICT  specialists  also  remains  a  challenge. 
The  risks  of  labour  shortages  may  decline  along 
with more moderate economic growth in 2020 and 
2021, estimated at 1.5 % and 1.6 %, respectively.  

the  construction  sector 

in 

Wages  accelerated  in  2018  and  are  forecast  to 
continue  growing.  Nominal  compensation  per 
employee increased by 2 % in 2018, from 1.7 % in 
2017.  The  upward  pressure  on  wages  is  expected 
to continue in 2019. As nominal wages grew ahead 
of inflation, real wages have also seen an increase 
(1.4 % in 2018), supporting employees' purchasing 
power.  In  sectors  experiencing  labour  shortages, 
construction  and  services,  wage  growth  was 
around  that  of  the  whole  economy  at  2.1 %  and 
1.9 % in 2018, respectively (Graph 3.3.1). 

Graph 3.3.1:  Real compensation per employee (GDP 
deflator, National Currency) 

Source: Eurostat 

27 

951001051101151202000200120022003200420052006200720082009201020112012201320142015201620172018index 2000=100Real compensation per employeeReal productivity per personReal unit labour cost          
 
3.3. Labour market, education and social policies 

participation  rates.  The  employability  rate  of 
recent  VET  graduates  is  85.6 %  in  2018,  well 
above  the  EU  average  (79.5 %).  Previously,  the 
lack of apprenticeship places was a barrier, but the 
2016  tripartite  agreement  has  resulted  in  approx. 
3,000  additional  apprenticeship  places,  well  on 
track in reaching the overall goal of establishing 8-
10,000 new places by 2025. Nonetheless, the VET 
programmes fail in attracting youth to choose this 

The supply of vocational education and training 
(VET)  graduates  is  crucial  to  meet  labour 
market  needs,  but  participation  remains  low. 
Despite  a  slight  increase  in  the  share  of  youth 
starting 
after 
compulsory school, from 19.4 % in 2018 to 20.1 % 
in  2019,  this  remains  significantly  below  the 
target  of  30 %.  Regional 
government’s  2025 
differences  are  significant,  with  youth  residing  in 
lowest  VET 
the 

a  VET  programme  directly 

larger  cities  having 

the 

28 

Box 3.3.1: Monitoring performance in light of the European Pillar of Social RightsThe European Pillar of Social Rights is a compass for a renewed process of upward convergence towards better working and living conditions in the European Union. It sets out twenty essential principles and rights in the areas of equal opportunities and access to the labour market; fair working conditions; and social protection and inclusion.  The Social Scoreboard supporting the European Pillar of Social Rights points to well-performing labour market and good social outcomes in Denmark. The employment rate is high, and the gender employment gap is relatively low. The unemployment rate shows a downward trend, though approaching the EU average with the situation having improved in other Member States. The long-term unemployment rate is among the lowest in the EU. The share of early school leavers from education and training has increased in recent years. In 2018 it reached 10.2 %, slightly above the Europe 2020 target of 10 %. This increase may be related to the high chances of finding a job, which incentivise young persons to interrupt their studies.  Denmark is among the best performers in terms of work-life-balance. Around 63.7 % of children aged less than 3 years are in formal childcare, which is very high compared to the EU average of 34.3 %. Subsidised childcare provision is among the factors supporting the relatively high female employment rate, at 74.8 % (EU average of 67.4 %). Social Scoreboard for DENMARK SOCIAL SCOREBOARD SDGs Equal opportunities and access to the labour market  Early leavers from  education and training  (% of population aged 18-24)      Youth NEET  (% of population aged 15-24) Gender employment gap Income quintile ratio (S80/S20) At risk of poverty or social exclusion (in %) Dynamic labour markets and fair working conditions   Employment rate  (% of population aged 20-64)  Unemployment rate  (% active population aged 15-74) Long-term unemployment rate  (% active population aged 15-74) GDHI per capita growth  Net earnings of a full-time single worker earning AW Social protection and inclusion  Impact of social transfers (other than pensions) on poverty reduction    Children aged less than 3 years in formal childcare Self-reported unmet need for medical care  Individuals' level of digital skills Critical situation To watch Weak but improving Good but to monitor On average Better than average Best performers Members States are classified on the Social Scoreboard according to a statistical methodology agreed with the EMCO and SPC Committees. It looks jointly at levels and changes of the indicators in comparison with the respective EU averages and classifies Member States in seven categories. For methodological details, please consult the proposal for a Joint Employment Report 2020, COM(2019) 653 final; NEET: neither in employment nor in education and training; GDHI: gross disposable household income. Update of January 2020.   
 
   
 
 
3.3. Labour market, education and social policies 

direction. There appears to be a gender imbalance, 
with 39.7 % female VET students in 2018.  

Graph 3.3.2:  Youth: in education and training, employment 

rate, unemployment rate, unemployment-to-
population ratio, NEET 

of 

The  relatively  low  share  of  the  workforce 
specialising in ICT (4.3 %) remains a challenge. 
The national Technology Pact aims to increase the 
number 
tertiary  Science,  Technology, 
Engineering  and  Mathematics  (STEM)  graduates 
by  20 %  by  2028.  Recent  government  initiatives 
focus  on  promotional  activities,  in  with  expected 
participation of 1 million persons. A key challenge 
is  the  occupation  of  women  in  digital  jobs  and 
entrepreneurship  (European  Commission  2019h). 
In  the  Women  in  Digital  Scoreboard  (European 
Commission  2019i)  Denmark  scores  65.4  (EU 
average  of  50),  but  only  1.8 %  of  employed 
women  are  ICT  specialists.  Furthermore,  59 %  of 
the  SMEs  reports  difficulties  recruiting  ICT 
specialists,  which 
the  EU  average 
is  above 
(55.5 %). 

Launched 
in  February  2019,  the  National 
Coalition  for  digital  skills  and  jobs  aims  to 
promote the enhancement of digital skills. With 
more  than  10,000  members,  it  supports  actions 
targeting  adequate  and  continuous  supply  of  high 
quality graduates in line with labour market needs. 
It divides digital skills in three categories: 1) basic 
user’s skills for all citizens, 2) coding skills and 3) 
reflective skills that focus on developing the basic 
literature  and  culture  around  ICT  (European 
Commission 2019h). 

Youth unemployment has fallen in recent years, 
but  the  share  of  early  school  leavers  has 
increased.  This  development  hampers  Denmark’s 
progress  towards  SDG821.  Youth  unemployment 
fell to 10.5 % in 2018, well below the EU average 
of  15.2 %.  The  share  of  early  leavers  from 
education and training (aged 18-24) has, however, 
gradually increased from 7.2 % in 2016 to 10.2 % 
in 2018, slightly below the EU average of 10.6 % 
and  is  classified  as  “to  watch”  in  the  Social 
Scoreboard. The  drivers  remain  unknown,  but  the 
relatively  high  chances  of  finding  unskilled  or 
incentivised  working 
skilled 
instead of finishing their studies (Graph 3.3.2). 

jobs,  may  have 

21   “Decent  work  and  economic  growth”,  which  includes  an 
indicator  related  to  “Young people  neither  in  employment 
nor in education or training”. 

Source: Eurostat 

Despite a good labour market situation, certain 
marginalised  groups  face  barriers  to  accessing 
the  labour  market.  As  a  result  of  recent  years’ 
the  number  of 
improvements, 
labour  market 
people on the  margin of the labour  market(22) has 
been  on  a  downwards  path  since  2016,  reaching 
approx.  73,000  persons  in  2017,  but  above  the 
2008  pre-crisis  level  of  51,000  persons.  This 
includes  youth,  migrants,  homeless  and  people 
with disabilities, mental issues or who attend drug 
rehabilitation  programmes.(Ministry  of  Social 
Affairs  and  the  Interior,  2018).  The  widespread 
characteristics  and  the  relatively  small  absolute 
sizes  of  each  group,  makes  it  difficult  to  target 
with  standard  policy  initiatives.  A  government 
increase 
proposal 
significant 
employment  among  people  with 
disabilities, 
to  find 
ordinary  work  or  ‘flexjobs’  by  2025.  A  total  of 
DKK 128.4 million was earmarked to 11 initiatives 
for the period 2019-2022, but it remains too early 
to assess these schemes.  

targeting  13,000  persons 

(October  2018)  aims 

to 

Adult  participation  in  life-long  learning  has 
decreased  significantly  in  recent  years,  but  it 
remains among the highest in the EU. This rate 

(22)  Those persons, who for three  years in a row have been in 
employment (ordinary or subsidised) for max. 20 % of the 
year.  This  includes  unemployment  and  social  assistance 
benefits  recipients,  but  not  those  on  early  retirement 
schemes and flex-jobs. 

29 

01020304050607080900246810121416182000200120022003200420052006200720082009201020112012201320142015201620172018%%Unemployment rate (lhs)Unemployment ratio (lhs)NEET (lhs)In education, training (rhs)Employment rate (rhs)                                                           
      
                                                           
3.3. Labour market, education and social policies 

average  (5.9  %),  but  after  a  seven-year  period  of 
fluctuating around 3 % (Graph 3.3.3). 

Graph 3.3.3:  At-risk-of-poverty or social exclusion rate, age 

groups 

Source: Eurostat 

The number of households  with very low work 
intensity  increased  significantly  between  2008 
and 2018. Denmark’s national Europe2020 target - 
to reduce the number of persons in very low work 
intensity households by 22 000 - is far from being 
reached.  On  the  contrary,  the  number  of  persons 
living in households with very low  work intensity 
has increased from 347,000 in 2008 to 459,000 in 
2018. Between 2017 and 2018 alone, this number 
rose by 50,000 persons (from 409,000 to 459,000). 
The gap to the national Europe 2020 target is thus 
far  from  being  closed.  This  sharp 
increase 
contradicts  with  the  development  of  other  key 
indicators and the specific drivers remain unclear. 

Income inequality has remained stable in recent 
years,  while  the  median  household  income  has 
increased  slightly.  At  the  same  time,  income 
inequality,  as  measured  by  the  income  quintile 
share  S80/S20  ratio(23),  has  remained  stable  since 
2014  (4.1  in  2018  vs.  EU  average  of  5.17). 
Adjusted for purchasing power parities, the annual 
median  household  income  (single  person)  has 
increased to EUR 17,234, among the highest in the 

(23)  The  ratio  of  total  income  received  by  the  20  %  of  the 
population  with  the  highest  income  (top  quintile)  to  that 
received  by  the  20  %  of  the  population  with  the  lowest 
income (lowest quintile)(Eurostat). 

has  declined  from  31.3 %  in  2015  to  23.5 %  in 
2018,  which  is  still  more  than  double  that  of  the 
EU  average  (11.1 %).  The  drivers  behind  this  7.8 
pps drop may be linked to high economic activity. 
Ensuring business continuity, employers may have 
allowed less time for trainings. The adult learning 
participation  rate  for  those  in  employment  has 
declined more than that of the unemployed, which 
further  supports  this  hypothesis.  Among  those 
23.5 % who take part in adult learning, there are no 
significant  differences  in  terms  of  skills  level  or 
educational  background.  There  are,  however, 
significant  gender  gaps  with  the  participation  of 
men  (19.2 %)  being  lower  than  that  of  women 
(27.8 %).  In  2018,  the  28.5 %  of  the  unemployed 
persons took part in adult learning, which is almost 
triple that of the EU average (10.7 %). 

A  broad  political  agreement  (October  2019) 
earmarked DKK 102 million to the upskilling of 
unskilled workers. The overall aim is to ease the 
shift from unskilled to skilled work and to address 
the  labour  shortages,  by  ensuring  the  supply  of 
skilled workers with the necessary competences. It 
was also agreed to continue implementing the Job 
Rotation  scheme  during  the  course  of  2020, 
allowing  unskilled  workers in certain  sectors (e.g. 
health) to take part in trainings to become a skilled 
worker  in  the  same  field,  while  an  unemployed 
person fills up the position in the time-period that 
the training takes place. 

3.3.2.  SOCIAL POLICY AND INCLUSION 

The  ‘at  risk  of  poverty’  or  ‘social  exclusion’ 
(AROPE) rate stood at 17.4 % in 2018, which is 
relatively  low  (EU  average  of  21.9  %).  Despite 
the  relatively  high  economic  activity,  it  remains 
above the 2008 pre-crisis level, showing a slightly 
negative  trend.  The  social  situation  for  people 
above  the  age  of  65  is  particularly  favourable 
to  other  EU  Member  States.  The 
compared 
AROPE  rate  for  this  age  group  stood  at  9.6 %  in 
2018 (EU average of 18.6 %), leading to a drop of 
9  pps.  during  the  past  decade  (18.6  %  in  2008). 
This decrease may, among others, be driven by the 
higher  share  of  workers  above  the  age  of  65 
staying longer on the labour market, supported by 
the  impact  of  active  labour  market  and  pension 
reforms  introduced  in  the  00's.  The  share  of  the 
population 
severe  material 
deprivation stood at 3.4 % in 2018, below the EU 

experiencing 

30 

051015202520052006200720082009201020112012201320142015201620172018% of populationChildren (<18y)Working age (18-64)Elderly (65+)      
                                                           
EU  (average  of  EUR  15,310).  In-work  poverty 
stood  at  5.4 %  in  2018  -  almost  half  of  the  EU 
average  of  9.2 %  -  and  has  remained  relatively 
stable in recent years. 

-  which 

The  share of household expenditure  devoted to 
housing  stood  at  28.1 %  in  2018,  the  second 
highest  in  the  EU  (average  of  24.0 %).  This 
indicator 
includes  consumption  on 
housing,  water,  electricity,  gas  and  other  fuels  – 
has  gradually  declined  since  2013  from  30.0 %. 
Furthermore, the housing cost overburden rate (24) 
fell  to  14.7 %  in  2018,  but  remains  among  the 
highest in the EU (average of 10.4 %). The limited 
supply  of  affordable  housing  solutions  is  of 
particular  concern  in  the  capital  area,  which  also 
has the highest number of job vacancies. This may 
fuel 
in 
geographical 
social 
disequilibria. 

labour  mobility  and 

labour  market 

turn  hamper 

and 

Denmark  is  progressing  towards  some  of  the 
ten  social  mobility  goals  from  May  2016(25) 
introduced  by  the  former  government  in  May 
2016. These initiatives aim to lower the number of 
vulnerable  persons,  increase  the  activity  rate  and 
incentivise  more  people  to  start  an  education  or 
training  despite  a  disability.  The  target  group 
include  homeless  people,  people  with  disabilities, 
and people with social problems, including people 
who  attend  drug  or  alcohol 
rehabilitation 
programmes..  Some  of  the  goals  has  seen  a 
positive  development,  such  as  the  crime  rates  for 
marginalised  young  persons  and  the  number  of 
persons  who  complete  an  alcohol  rehabilitation 
programme.  On  the  other  hand,  the  trend  has 
stagnated  or  been  negative  for  other  goals, 
including  the  share  of  marginalised  young  people 
who  are  attending  an  upper  secondary  education. 
The  total  number  of  homeless  people  stood  at 
6,400  in  2019,  which  is  unchanged  compared  to 
the  situation  in  2017  (VIVE,  2019),  but  with  a 

(24)  The  share  of  the  population  living  in  a  household  where 
total  housing  costs  (net  of  housing  allowances)  represent 
more  than  40%  of  the  total  disposable  household  income 
(net of housing allowances). 

(25)  http://socialministeriet.dk/media/18383/10-goals-for-

social-mobility-regeringen-may-2016.pdf 

3.3. Labour market, education and social policies 

change  in  composition  away  from  young  and 
towards older homeless persons (26).  

is 

less 

favourable  on 

The  labour  market  situation  of  people  with 
disabilities 
some 
indicators..  There  is  a  gap  in  the  AROPE  rate  of 
7.9 pps, which is below the EU average (9.5 pps). 
Furthermore, the tertiary education attainment gap 
between  people  with  and  without  disabilities  is 
much higher than the EU average (21.6 pps vs. the 
EU average of 10.2 pps). This gap has increased in 
recent years, while it appears to have been stable in 
the  EU  as  a  whole.  The  Disability  Barometer 
shows,  however,  that  the  share  of  people  with 
disabilities  with  a  tertiary  education  in  Denmark 
has  been  constant  from  2012  to  2016,  while  the 
for  people  without 
corresponding  proportion 
disabilities has increased. 

In  September  2019,  the  government  passed  an 
agreement for a temporary child benefit scheme 
in Parliament. The main purpose is to mitigate the 
impact of a number of policy measures introduced 
by the former government, in particular the Ceiling 
of  Social  Assistance  Benefit  and  the  Integration 
Benefit.  Around  27,900  children  (aged  0-14)  are 
estimated  to  benefit  from  this  temporary  support 
scheme, which will remain in place until the policy 
measures  have  been  reviewed.  A  single  parent  of 
two  children  in  the  age  group  0-14,  who  is 
receiving  social  assistance  benefits,  may  receive 
up  to  DKK  1,850  (EUR  250)  in  additional 
allowance per month (tax-free). 

The  government  has  launched  a  review  of  the 
social benefits system. While the income level of 
minimum income recipients is one of the highest in 
the  EU,  a  Commission  for  Social  Benefits 
(Ydelseskommissionen)  has  been  established,  to 
review  the  system  and  present  a  number  of 
recommendations  by 
the  end  of  2020..  The 
recommendations  must  propose  a  replacement  for 
the  Ceiling  on  Social  Assistance  benefits  of  2016 
in  addition  to  striking  a  balance  between  a 
reasonable  living  standard  for  children  of  benefit 
recipients and an incentive to work for recipients.. 

(26)  The new government has not yet decided whether or not to 
continue monitoring the ten social mobility goals, as a key 
analytical tool in the social policy making. 

31 

                                                           
                                                           
3.3. Labour market, education and social policies 

active labour  market policies  and the lower social 
benefits.  

There  is,  however,  a  significant  gender  gap 
(women  46.9 %  vs.  men  70.4 %).    The  share  of 
refugees  and  their  family  members  (aged  21-64), 
who were in paid employment after three years of 
residence,  has  increased  from  20.4 %  in  first 
quarter of 2016 to 41.7 % in third quarter of 2019 
(Ministry  of  Immigration  and  Integration,  2019  – 
Integrationsbarometer.dk).  This  increase  has  been 
more dominant among male refugees (from 30.5 % 
to 61.2 %) relative to female refugees (from 7.8 % 
to 19.7 %).  

The  government  and  the  social  partners  have 
agreed  to  prolong  the  fast-track  Integration 
Education (IGU) programme (2016), which has 
shown positive outcomes. This programme targets 
recently  arrived  migrants,  by  offering  a  two-year 
contract  at  apprentice  wage  levels,  including  20 
weeks  of  vocational  education  and 
language 
training.  Around  48 %  of  the  municipalities  and 
52 % of the firms report a high level of satisfaction 
with the  scheme (Rambøll, 2019). As a result, the 
programme  has  been  prolonged  for  three  years 
(until  June  2022).  In  absolute  terms,  the  total 
number  of  IGU  contracts  registered  (2,377  in 
December 2019), is relatively low.  

As  part  of  the  2020  Budget  Bill,  it  has  been 
agreed  to  work  towards  an  extension  of  the 
target  group.  For  instance  in  terms  of  age 
requirements  (currently  limited  to  those  aged 
18-39)  or  number  of  years  of  residence 
in 
Denmark (currently limited those  with less  than 5 
years residence). For this purpose, DKK 10 million 
p.a. has been earmarked for the period 2021-2023. 
Furthermore, as two thirds of the IGU participants 
are male, it is important to consider how to attract 
more women to register for the programme. Drop-
out  rates  remain  relatively  high,  as  approx.  35  to 
45 % interrupt the programme. In some cases, this 
is linked to refugees entering into ordinary work or 
education. 

In  December  2018,  the  initiatives  from  the 
political  agreement  "Denmark  without  parallel 
societies – no ghettos by 2030” went into force. 
Consisting of 22 initiatives, the main purpose is to 
break 
be 
characterised as ghettos, such that these no longer 
the  number  of 
In  2018, 
exist  by  2030. 

neighbourhoods 

that  may 

up 

Strong  economic  activity  have  shifted  people 
away from social benefits and into employment, 
and  recent  policy  measures  targeting  “making 
work  pay”  may  have  contributed  to  this  shift. 
This  include  the  Ceiling  on  Social  Assistance 
benefits (2016) and the 225-hour work requirement 
(2016). The number of social assistance recipients 
has decreased by 29.8 % in the period June 2015 to 
June  2019.  The  number  of  integration  benefit 
recipients, i.e. those who do not fulfil the residence 
requirements  (minimum  9  of  the  last  10  years  of 
residence  to  be  in  Denmark,  Greenland  or  the 
Faroe  Islands)  and  employment  requirements 
(minimum  2  ½  years  of  employment  within  the 
last  10  years  of  residence)  to  receive  social 
assistance  benefits,  has  likewise  decreased.  This 
positive  development  may  also  be  linked  to  the 
high  likelihood  of  finding  a  job,  as  a  result  of 
economic activity and job creation. 

3.3.3.  INTEGRATION POLICY 

requirements 

Denmark has taken steps towards lowering the 
number  of  new  migrants  and  refugees,  while 
intensifying  their  labour  market  integration. 
The 
for  obtaining  permanent 
residence,  as  well  as  the  access  to  social  benefits, 
have  been  tightened,  which  may  have  contributed 
to  a  marked  decline  in  the  number  of  asylum 
claims and family reunifications.. The government 
is  planning  to  continue  the  overall  integration 
policy of the previous government, but with a few 
adjustments,  such  as  prolonging  the  residence  of 
those  refugees  who  have  been  working  for 
minimum two years in Denmark. 

Recently  arrived  migrants  (including  refugees) 
integrate  faster  on  the  labour  market  than 
before,  while  the  situation  remains  difficult  for 
those who have resided in Denmark longer. The 
employment  rate  of  all  non-EU  born  persons 
residence)  has 
(independently  of  years  of 
fluctuated  around  60 %  in  recent  years,  reaching 
62.8 %  in  2018.  The  situation  is  more  favourable 
for  those,  who  have  arrived  in  Denmark  recently 
(i.e. within the last five years) whose employment 
rate  stood  at  58.6 %  in  2018.  The  majority  of  the 
newly  arrived  work  in  sectors  with  high  labour 
shortages, 
(hotels, 
restaurants,  cleaning)  (Confederation  of  Danish 
positive 
Employers,  April 
development  appears 
the 
favourable  economic  conditions,  the  job-oriented 

2019). 
to  be  driven  by 

particular 

services 

This 

in 

32 

3.3. Labour market, education and social policies 

in 

quality 

Participation  in  early  childhood  education  and 
care  is  nearly  universal,  but  quality  is  uneven. 
In 2018, 98 % of the above 4-year-old participated 
in  early  childhood  education  and  care.  For  those 
below the age of three, this rate stood at 63.2 % in 
2018,  among  the  highest  in  the  EU.  However, 
conditions vary between municipalities, leading to 
(Danmarks 
differences 
Evalueringsinstitut,  2020).In  2018,  60  %  of  staff 
holds a  formal degree as a pedagogue, and 7% of 
staff  holds  a  formal  degree  as  a  pedagogical 
assistant.  Recent  political  initiatives,  such  as  the 
“Strong  ECEC–  everyone  must  form  part  of  the 
community" (2017) and "1.000 days programme – 
a  better  start  to  life”  (2019),  introduces  more 
pedagogical  staff  in  certain  areas  with  children 
from  vulnerable  backgrounds,  upskilling  of  staff 
and a focus on continued training. There will be an 
expected  increase  of  60,000  children  within  the 
next ten  years and therefore a corresponding  need 
for  additional  trained  staff.  As  part  of  the  2020 
Budget  Bill,  a  gradual  implementation  of  legal 
minimum  staff/child  ratios  will  be  introduced  by 
2025,  specifically  three  children  per  adult  in 
in 
nurseries 
kindergartens. 

children  per 

adult 

and 

six 

Graph 3.3.4:  Underachievers in reading by socio-economic 

status (ESCS 2018) 

neighbourhoods  defined  as  “ghettos”  reached 
30(27).  A  key  element  of  the  “ghetto  plan”  is  the 
introduction  of  higher  sanctions  for  committing 
crimes within these neighbourhoods, and an upper 
limit  of  40 %  social  housing  has  been  introduced. 
Other  elements  include  an  obligation  for  children 
living  in  vulnerable  housing  areas  to  attend  25 
hours of childcare per week if they are not already 
admitted to a  childcare facility (from the  age of 1 
year),  andDanish  language  test  in  grade  0.  The 
impact of these measures remains to be examined. 
Furthermore,  the  new  government  is  planning  to 
reduce the number of elements in the agreement. 

3.3.4.  EDUCATION AND SKILLS 

The  rate  of  early  leavers  from  education  and 
training  is  increasing.  The  rate  of  early  leavers 
from education and training has expanded by 3 pps 
since 2016, reaching 10.2 % in 2018. Most of this 
change takes place in the cities.  While the gender 
gap is relatively high (4.7 pps higher for boys than 
for  girls), 
the  native  and 
foreign-born  population  remains  the  narrowest  in 
the  EU,  at  0.3  pps.  However,  native-born  with 
migrant background do not seem to catch up as the 
gap persists (European Commission, 2019e). 

the  gap  between 

Danish  school  children  performed  relatively 
well  in  reading  and  mathematics,  and  slightly 
less  well  in  science.  But  learners  with  a  migrant 
background  continue  to  lag  behind.  The  share  of 
both  low  and  top  achievers  is  smaller  than  in 
comparable countries. The performance of students 
from  disadvantaged  and  migrant  backgrounds 
remain  an  issue  (Graph  3.3.4).  Overall,  average 
basic skills continued to be strong (OECD 2019b). 
The  share  of  low  achievers  did  not  improve  in 
reading  and  mathematics  but  increased  slightly  in 
science(OECD  2019b).  First-generation  migrants 
show nearly three times the share of low achievers 
in  reading  compared  to  non-migrant-students,  and 
native-born  students  with  migrant  background  do 
not  close  the  gap.  Socio-  economic  background 
continues to influence education outcomes.  

Source: OECD 

(27)  A “ghetto” fulfils three out of five of the following criteria; 
1) a majority of residents are without work or education, 2) 
a  majority  of  residents  with  lower  secondary  education 
diploma,  3)  a  majority  of  residents  with  low  income,  4) 
crime  rates  are  minimum  three  times  that  of  the  average 
and 5) more than half of the residents originate from non-
Western countries. 

The  2020  Budget  Bill  includes  resources  to 
recruit  more  teachers,  and  the  removal  of  the 
tertiary  education  ceiling  (uddannelsesloftet).  A 
total  of  DKK 275 million  for  2020,  which  will 
increase  to  DKK  800  million  in  2023,  has  been 

33 

0510152025303540IEEEFIDEDKBEEU without ESSENLAT%All studentsStudents in the bottom quarter of ESCS1Students in the top quarter of ESCS                                                           
      
the 

earmarked to support the increase in the number of 
teachers.  The  purpose  is  to  address  the  increasing 
shortage of teachers, combined with an increase in 
class  size.  This  has  a  positive  impact  related  to 
SDG428.  Furthermore, 
tertiary  education 
ceiling,  introduced  in  2017,  ensures  that  tertiary 
graduates  can  register  for  a  degree  at  the  same  or 
lower  academic  level,  only  after  six  years  upon 
finalisation  of  their  initial  degree.  The  main 
purpose  was  to  avoid  graduates  to  complete  more 
than  one  state-funded  tertiary  degree,  a  second 
degree at the same or lower level would have to be 
financed  by  the  student.  This  ceiling  has  been 
criticised  for  putting  unnecessary  pressure  on 
students.  The  new  government  and  supporting 
parties  have  agreed 
the  ceiling, 
effective  from the start of the upcoming academic 
year (summer 2020). 

to  abandon 

About  half  of  those  aged  30-34  hold  a  tertiary 
degree  and  Danish  universities  continue  to 
attract  an  important  share  of  foreign  students. 
This  contributes  to  reducing  current  and  future 
skill  shortages.  Among  tertiary  graduates,  women 
(56.6 %) outnumber men (41.8 %). The percentage 
of  people  (25-64)  holding  a  tertiary  degree  varies 
between  regions.  In  the  capital  region  more  than 
half of  working age people hold a tertiary degree, 
but  in  the  Southernmost  region  of  Denmark 
Sjaelland  this  is  only  31.3 %.  Higher  education 
(ISCED  5-8)  provides  only  a  weak  boost  to 
employability  of  2.2  pps  compared  to  Vocational 
Education and Training (VET), one of the smallest 
advantages in the EU. Furthermore, 10.2 % of the 
graduates  in  Denmark  studying  for  a  degree  go 
abroad  as  part  of  their  studies.  The  latest  reforms 
make  higher  education  more  flexible  and  link  it 
labour  market  needs.  An 
more  closely 
agreement  from  December  2018  introduced  the 
possibility to introduce up to 25 one-year full-time 
professionally-oriented  master  courses,  which 
allow to combine study and work, as well as work 
experience between degrees. 

to 

28   “Quality education” 

3.3. Labour market, education and social policies 

Graph 3.3.5:  People holding tertiary education degree 

Source: European Commission  

Denmark  is  among  those  Member  States  with 
the highest level of digital skills. While the share 
of  the  population  (95.5 %)  who  regularly  makes 
use of the internet remained the highest in the EU, 
the digital skills of the overall population (ages 16-
74)  (European  Commission  2020)  and  of  those 
aged 16-19, slightly declined from 2015 to 2017  - 
albeit from a high level. Technological change and 
digitalisation  are  making  jobs  increasingly  skill-
intense – both in terms of level and types of skills. 
A  digital  skills  set  needs  to  be  complemented  by 
transversal  skills  such  as  problem-solving  and 
(i.e.  communication, 
socio-behavioural 
creativity,  entrepreneurship,  critical 
thinking) 
(Morandini et al, forthcoming). 

skills 

Health  

The  Danish  population  benefits  from  a  good 
status  of  health,  helped  by  high  expenditure. 
Denmark is among those Member States with one 
of  the  highest  spending  (10.1 %  of  GDP)  on 
health.  The  population  reports  good  health  status 
and very low unmet needs for medical care (1.3 % 
in  2018),  with  a  very  small  income  gradient  for 
services  covered  by  public  health  insurance.  In 
recent years, life expectancy at birth has gradually 
increased  to  81.1  years  in  2017.  The  number  of 
healthy life  years,  years that a person at age  65 is 
still  expected  to  live  in  a  healthy  condition,  has 
remained  relatively  stable  since  2014  and  was 
lower  than  the  EU  average  in  2018.  The  rate  of 
treatable causes of mortality are lower than the EU 
average, but preventable mortality is only close to 
EU  average.  Smoking,  lack  of  physical  activity, 
poor  nutritional  habits,  high  levels  of  alcohol 

34 

                                                           
 
3.3. Labour market, education and social policies 

of 

use 

effective  healthcare 

the  National  Strategy 

health  data  in  the  context  of  prevention  and  care, 
but  also  more  flexible  health  care  arrangement, 
home 
including  more 
regular 
for 
care.Furthermore, 
Artificial  Intelligence  (2019)  aims  at  creating  a 
more 
system  offering 
treatments  based  on  the  needs  of  the  individual 
patient,  as  smart  solutions  can  contribute  to 
improved  quality  and  coherence 
in  patient 
treatment while supporting healthcare staff in their 
tasks. Also, a new initiative creating a  "One stop-
shop"  for  guidance  on  access  to  health  data  for 
public  and  private  researchers  and  a  single-entry 
gateway to applying  for access to health data  will 
improve 
research  and  development  of  new 
treatments and digital solutions. 

consumption  and  adult  obesity  remain  matters  of 
concern  for  public  health.  Quality  of  cancer 
treatment  is  high  despite  overall  incidence  and 
mortality  rates  remaining  above  EU  average.  The 
IVth  Danish  cancer  plan  (to  run  until  2020),  is 
implementing  further  steps  for  improving  cancer 
prevention, detection and treatment.  

the  key  drivers  behind 

The  primary  care  sector  performs  efficiently 
and  hospitalisation  rate  is  planned  to  further 
decrease.  Between  2007  and  2020,  highly 
specialized  hospitals  are  expected  to  reduce  the 
number  of  bed-days  by  approximately  20  %.  The 
need  for  better  care  coordination  and  cost  control 
have  been 
the  re-
organisation of primary care. Potentially avoidable 
hospital admissions are still high for some chronic 
diseases  (asthma,  COPD  and  diabetes),  with  a 
considerable  variation  between  regions  and  ages 
(29).  Denmark  has  one  of  the  lowest  number  of 
hospital  beds  per  capita  in  EU  and  policies  to 
promote outpatient treatment and earlier discharge 
from hospital are in place. 

Possible  challenges  emerge  related  to  shortage 
of  physicians 
in  primary  care  and  care 
coordination. Only around 20 % of the doctors are 
general  practitioners  and  their  availability  to  take 
in  new  patients  varies  widely  among  different 
regions,  which  increases  the  pressure  on  working 
conditions.  On  the  other  hand,  the  ratio  of  nurses 
to doctors is relatively high and the Danish Health 
Strategy  (2018)  foresees  a  strengthening  of  the 
primary  care  sector,  among  others  by  expanding 
the scope of tasks performed by nurses. Since 2018 
a  series  of  initiatives  have  been  launched  to 
strengthen the coordination of care. As part of the 
2020  Budget  Bill,  the  government  has  earmarked 
DKK  300  million  in  2020  and  DKK  600  million 
yearly  from  2021  and  onwards,  allowing  the 
recruitment of 1,000 additional nurses in 2021. 

Denmark  is  among  those  Member  States,  with 
an  advanced  deployment  of  e-health.  This 
includes the efficient use of IT systems and digital 
communication  between  different  actors  in  the 
health  care  sector,  such  as  hospitals  and  general 
practitioners.  The  Strategy  for  Digital  Health 
(2018- 2022) focuses on digitisation and the use of 

(29)  The number of patients above the age of 65 is twice as high 
in some municipalities, compared to others (OECD, 2017). 

35 

                                                           
3.4.  COMPETITIVENESS, REFORMS AND INVESTMENT 

3.4.1.  COMPETITIVENESS AND PRODUCTIVITY 

TRENDS  

the  manufacturing 
productivity performance. 

sector’s 

robust 

labour 

Since  2012,  Denmark’s  share  in  world  export 
markets  has  been  relatively  stable.  Denmark’s 
recent  strong  export  growth  (Section  1)  has 
benefited from a favourable export mix. High and 
medium-high  R&D  intensity  goods  exports  has 
increased from 40 % in 2008 to 50 % in 2018. On 
the other hand, in geographic terms, Denmark has 
been  gradually  losing  relative  market  share  in 
some  of  its  dynamic  export  markets  (such  as 
Poland). Denmark’s overall trade surplus is driven 
by extra-EU goods trade, while it is a net importer 
from  other  EU  Member  States.  In  2019,  the  US 
became the second largest goods export market of 
Denmark, overtaking Sweden.  

Denmark  is  among  the  best  performing  EU 
countries  as  regards  developing  and  taking-up 
environmental  technologies.  Exports  of  green 
goods  and  services  amounted  to  some  DKK  81 
billion  in  2018,  up  by  13 %  compared  with  2015. 
The  vast  majority  of  green  exports  (over  80 %) 
concerns  resource  protection  such  as  renewable 
energy  production  or  technologies  to  limit  energy 
consumption  while  a  minor  share  concerns 
environmental protection in a narrow sense. 

outside 

increasingly 

important  for 

increasingly 
Danish  exports  of  goods  are 
produced 
borders. 
Danish 
“Merchanting”  and  “factoryless  production”  (30) 
the 
are  becoming 
Danish  manufacturing  industry.  Merchanting  and 
goods  and  services  sold  abroad  (where  the  vast 
majority  of 
is 
categorised) are responsible for an increasing share 
of  the  current  account  surplus  (Graph  3.4.1).  The 
role of factoryless production grew from 0.5 % of 
the  gross value added of the manufacturing sector 
in  2007  to  16 %  by  2018.  Due  to  the  low  labour 
factoryless 
intensity  but  high  value  added, 
production has been one of the key factors behind 

factoryless  goods  production 

(30)  “Merchanting”  exports  cover  Danish  firms’  purchases  of 
goods  abroad  that  are  resold  abroad  without  processing. 
“Factoryless  production” is  when  an enterprise  outsources 
the  physical  processing  abroad,  but  retains  the  ownership 
of  materials,  finished  goods  and  intangible  assets.  The 
difference between merchanting and factoryless production 
can  be  difficult  to  establish  for  the  purpose  of  national 
accounts statistics. 

Graph 3.4.1:  Current account developments 

Source: Statistics Denmark 

These  global 
interconnectedness  of  Danish 
firms  raises  important  statistical  measurement 
challenges. The discrepancy between domestic (in 
a  geographic  sense)  activity  on  the  one  hand  and 
national activity (by Danish economic actors active 
both  domestically  and  abroad) 
is  widening. 
Statistics  Denmark  has  undertook  several  times 
relatively  large  data  revision  in  the  national 
accounts  mainly  due  to  lack  of  adequate  data  on 
the international activity of Danish multinationals. 

Danish  exports  benefitted  from  favourable 
industrial  specialisation  and  strong  sectoral 
performance.  The  highly  export  oriented  and 
successful  pharmaceutical  industry  has  a  share  of 
around  20 %  in  the  Danish  industrial  production 
compared to 5 % in the EU. The transport industry, 
which  has  been  most  negatively  affected  by  the 
recent general slowdown in the EU, contributes to 
less  than  2 %  of  the  Danish  industrial  production 
compared  to  14 %  in  the  EU.  The  production  of 
the  Danish  machinery  industry  (which  includes 
wind turbines) increased by 14 %,  while it  fell by 
around  3 %  in  the  EU  in  2018.  Danish  export 
benefitted from favourable pricing as well: positive 
terms of trade  developments have been helping to 
sustain the  sizable current account surplus (Graph 
of 
3.4.2). 
greater 
pharmaceuticals 
the 
dependence  on  fewer  products  and  on 

growing 
also 

relative 

imply 

could 

The 

size 

36 

-2024681020052006200720082009201020112012201320142015201620172018Q2-2019% of GDPIncome account and current transfersGoods and services produced in Denmark and sold abroadMerchantingGoods processed and sold abroadCurrent account balance                                                           
         
3.4. Competitiveness, reforms and investment 

organisation  of  health  systems  in  main  export 
markets such as the US.  

Graph 3.4.2:  Terms of trade development 

the  services  sector.  Productivity  developments  in 
the manufacturing sector benefitted inter alia from 
the strong performance of the chemical (including 
pharmaceutical)  and  machinery  export  industries 
(Graph 3.4.3).  

Graph 3.4.3:  Sectoral labour productivity 

Source: European Commission 

improvements,  productivity 
Despite  recent 
developments  have  been  sluggish 
for  an 
extended period of time. Denmark’s productivity 
growth  has  been  continuously  slowing  down  in 
recent  decades,  similarly  to  the  EU  as  a  whole. 
However,  total  labour  productivity  growth  has 
stabilised  or  accelerated  slightly  since  2015, 
mainly due to the strong productivity performance 
of the manufacturing sector (Graph 3.4.3).   

in 

The ‘servicification’ of the economy has been a 
to  overall  productivity  performance. 
drag 
Services  have  gained  weight 
the  Danish 
economy  and  impact  negatively  on  aggregate 
labour  productivity.  Structural  change  alone  has 
been responsible for a loss of 0.28 pps of average 
labour  productivity  growth  in  the  period  1970-
2016  in  Denmark  (Bauer  et  al.,  2020).  Weak 
competition  particularly  in  domestically  oriented 
services  sector  has  been  identified  as  one  of  the 
main  reasons  for  weak  productivity  growth  (The 
Danish  Economic  Councils  2017).  Some  services 
sectors (such as pharmacies) appear to be strongly 
and possibly excessively regulated (OECD 2019a).  

Manufacturing  productivity  remained  robust. 
The progressive shift of production to merchanting 
and  factoryless  production  has  boosted  labour 
productivity, reversing the declining overall trends 
since 2015 and masking weak productivity gains in 

Source: European Commission 

that 

Denmark's allocative efficiency is above the EU 
average  in  both  the  service  and  manufacturing 
sectors.  This  means 
labour  flows  help 
productive  firms  grow,  while  the  least  productive 
firms shrink and exit the market. In manufacturing, 
about 40 % of job creation takes place in the most 
productive  quartile  of  firms,  while  this  ratio  is 
around 52 % in services (Bauer et al., 2020). These 
labour  reallocation  dynamics  to  high  productivity 
firms  are  able  to  support  aggregate  productivity 
(Graph 3.4.4).  

Productivity  increased  more  among  exporting 
firms.  Since  the  early  2000s,  a  wide  gap  in  both 
labour  and  total  factor  productivity  has  opened 
when  comparing  exporters  to  non-exporters.  The 
productivity  gap  between  top  performers  and 
laggards  has  widened  substantially  over  the  last 
two  decades.  Top  performers  have  usually  been 
large  exporting  firms.  On  the  other  hand,  most 
firms start small even when already internationally 
active.  Policies  in  support  of  small  firms  are  then 
able to boost productivity towards  young firms as 
well.  Furthermore,  when  aiming  at  supporting 
productivity through innovation, Danish firms can 
benefit  from  improvements  in  the  quality  of 
workforce  and  skills  that  can  promote  digitisation 

37 

80901001101201301401501601701802007200920112013201520172019TotalChemicals And Related ProductsMachinery (excl. Transport Equipment)OtherIndex 2007=10070809010011012013014015016020052006200720082009201020112012201320142015201620172018Total labour productivityManufacturingChemicals and chemical productsMachinery and equipmentIndex 2010=100        
           
3.4. Competitiveness, reforms and investment 

and  potentially  internationalisation  alongside  (see 
also Section 3.3). 

Graph 3.4.4:  Job destruction per sector 

average in terms of total intangible investment-to-
capital ratio in the business sector and ranks in the 
middle  range  based  on  the  contribution  from 
intangible investment to productivity (Bauer et al., 
2020).  Higher  investment  in  intangibles  assets  is 
likely  to  positively  affect  the  effectiveness  of 
firms’  resources  and  in  turn  boosting  aggregate 
productivity (Graph 3.4.5).  

Graph 3.4.5:  Contribution of intangible capital growth to 

productivity growth 

Source: European Commission based on based on Bauer et 
al. (2020) 

Increasing productivity gaps between large and 
small firms  suggest  weaknesses in the diffusion 
of  technological  advances.  Despite  the  high 
overall  R&D  level,  the  concentration  of  R&D 
activities in a small number of large firms could be 
a  sign  of  insufficient  R&D  capacity  building 
small  and  medium-sized  enterprises. 
within 
Technological  diffusion  could  be  improved  by 
fostering  cooperation  between  academia  and 
businesses,  facilitating  the  creation  and  growth  of 
new, innovative start-ups, and easing entry barriers 
in  sectors  that  are  highly  regulated  (see  also 
section 3.4.2). 

Incentivising  investment  into  intangible  assets 
could boost the innovation capacity of small and 
young firms. Intangible assets can contribute more 
to  economic  growth  than  tangible  assets  (Thum-
Thysen et al 2017). Investment in so-called  “non-
National Account intangible assets”(31) is found to 
accelerate  the  ability  to  internalise  the  benefits  of 
technology  adoption  (Pellegrino  and  Zingales, 
2017). Currently,  Denmark ranks below euro area 

instance  software  and  databases, 

(31)  “National Accounts intangible assets” (NA intangibles) are 
for 
research  and 
development,  Mineral  exploration  and  artistic  originals. 
“Non-National  Accounts 
(non-NA 
intangibles)  are  for  instance  design,  brand,  organisational 
capital, training.  

intangible  assets” 

Source: European Commission based on Bauer et al. (2020) 

So-called  “green  enterprises”  belong  to  the 
highly  productive 
segment  of  Denmark's 
economy.  The  examples  of  Danish  wind  turbinr 
industry and other energy technologies show that it 
pays  off  to  position  itself  within  strategic  value 
chains  from  the  research  stage  up  to  deployment, 
commercialisation  and  export.  Denmark  has  a 
unique opportunity to build on its leading position 
both  in  energy  technologies  and  climate  ambition 
to  set  standards  by  clearly  stating  objectives  and 
funding targets in research and innovation. 

remain 

Productivity  developments  within  the  public 
sector 
challenging.  The  National 
Productivity  Board  set  out  an  attempt  to  measure 
productivity  developments  within 
the  Danish 
primary  and  secondary  school  sectors  (DORS 
2019).  The  analysis  is  based  on  a  measure  of 
quality  (OECD  PISA  scores)  as  opposed  to 
previous attempts at merely measuring quantitative 
output (number of pupils times number of hours at 
analysis 
school). 
could 
include  other 
potentially  be 

successful, 

the 
to 

extended 

If 

38 

0204060EU Services(average)EUManufacturingDanishServices(average)DanishManufacturingJob Destruction TopJob Destruction BottomJob Creation TopJob Creation Bottom-0,4-0,3-0,2-0,10,00,10,20,30,40,50,6ELITDEESPTFIATDKFRSENLUSUKNA intangiblesnon-NA intangiblesTotal intangibles%         
                                                           
        
3.4. Competitiveness, reforms and investment 

guarantee 

additional 

underpin 
instruments 
supporting  the  financing  of  investments  with  a 
higher level of local specificities. InvestEU will be 
policy-driven  and  focus  on  four  main  areas: 
Sustainable  Infrastructure,  Research,  Innovation, 
and Small Businesses. 

Research and Innovation  

to 

Denmark has a strong R&D system, but there is 
room to improve its economic impact. At 3.05 % 
of GDP in 2018, Danish R&D expenditure ranks at 
the top of the  EU and is above the 2020 target of 
3 %  of  GDP.  According 
the  European 
Innovation  Scoreboard  (European  Commission 
2019j),  room  for 
improvement  remains  with 
respect  to  the  economic  benefits  from  innovation, 
such  as  employment  impacts  and  the  deployment 
of  innovation  in  companies  (EIS  2019).  A  key 
policy  challenge  is  how  to  better  exploit  R&D 
investments  in  terms  of  furthering  innovation 
activities  and  outcomes  in  private  companies  and 
society in general. 

than 

Private sector R&D spending is concentrated in 
large  firms, 
a  relatively  small  number  of 
especially  in  pharmaceuticals.  The  50  largest 
R&D active companies accounted for 70 % of the 
total Danish private R&D investment, significantly 
in  a  range  of  other  advanced 
higher 
economies.  The  eight  largest  companies  alone 
accounted  for  almost  40 %  of  the  total  private 
R&D  expenditures.  The  pharmaceutical  sector  is 
responsible  for  almost  60 %  of  the  total  R&D 
expenditures, 
the 
worldwide  average  of  19 %.  Overall  R&D 
spending remains high, but the absolute number of 
R&D  active  companies  has  declined  since  2009, 
largely  because  smaller  firms  not  engaging  in 
R&D.  Only  33 %  of  SMEs  introduced  product  or 
process  innovations.  Moreover,  since  2010  these 
innovation  activities  have  even  slightly  decreased 
(European  Commission  2019c).  Widening  R&D 
spending  to  SMEs  might  well  have  the  added 
benefit  of 
the  slowing  pace  of 
technology diffusion. 

significantly  higher 

improving 

than 

Despite  Denmark’s  strong  R&D  system,  the 
number  of  new  enterprises  per  capita  is  low. 
Denmark  provides  rather  favourable  regulatory 
conditions  for  entrepreneurs,  but  risk  capital  and 
private  early stage (pre-seed and seed) investment 
in  start-ups  is  low.  Despite  the  efforts  of  the 

dimensions  and  may  serve  as  inspiration  for 
analysing  developments  in  other  areas  of  public 
sector productivity. 

3.4.2.  INVESTMENT, INFRASTRUCTURE AND 

MARKET INTEGRATION 

reaching  22.0 %  of  GDP 

Private  investment  continues  its  upward  trend. 
Since  its  ten-year  low  at  18.1 %  of  GDP  in  2010, 
investment has increased faster than in the EU as a 
whole, 
in  2018. 
Investment in intangible assets, such as intellectual 
property  products,  accounts  for  a  quarter  of  total 
investment.  Further 
tangible 
(infrastructure)  as  well  as  non-tangible  assets 
(R&D,  education)  is  key  to  boost  productivity 
growth.  

investment 

in 

is  still 

the  most 

An 
increasing  share  of  Danish  businesses 
perceives  uncertainty  about  the  future  as  a 
barrier to investment. According to the European 
Investment Bank’s Investment Survey, availability 
of  skilled  staff 
important 
investment barrier in all sectors. At the same time, 
Danish  firms’  uncertainty  about  the  future  has 
increased.  In  2019,  59 %  of  Danish  businesses 
cited  uncertainty  about  the  future  as  a  barrier  to 
investment up from 48 % in 2018. The pessimistic 
the 
expectations  by  Danish  businesses  about 
political, regulatory and economic climate over the 
next year also reflects this trend (EIB 2019). 

the  European  Fund 

The  EU  supports  investment  in  Denmark  also 
via 
for  Strategic 
Investments  (EFSI).  By  December  2019  total 
financing  under  the  EFSI  amounted  to  EUR  940 
million,  intended  to  trigger  EUR  6,057  million  in 
additional  investments.  The  current  experience 
with  the  EU  financial  instruments  and  the  EFSI 
budgetary  guarantee  demonstrated  a  need  for 
streamlining 
simplification, 
better 
investment  support 
the  EU’s 
coordination  of 
instruments during the next 2021-27 programming 
period.  By  the  end  of  2020,  EFSI  and  other  EU 
financial  instruments  will  come  under  the  roof  of 
the  new  InvestEU  programme  that  promotes  a 
more  coherent  approach  to  financing  EU  policy 
objectives  and  increases  the  choice  of  policy 
implementation options and implementing partners 
to  tackle  country  specific  market  failures  and 
investment  gaps.  In  addition,  under  InvestEU, 
Member States can set-up a national compartment 
by allocating up to 5 % of their structural funds to 

and 

39 

3.4. Competitiveness, reforms and investment 

Network industries 

Road  congestion  has  a  significant  cost  for  the 
Danish  economy.  While  being  concentrated 
around  the  main  urban  areas,  the  Danish  Road 
Directorate  (Vejdirektoratet)  estimates  the  gross 
social  cost  of  road  congestion  in  Denmark  at 
DKK 24 billion  (1.1 %  of  GDP)  annually.  With  a 
view  to  Denmark’s  greenhouse  gas  emissions 
reduction 
the 
government  is  set  to  negotiate  an  agreement  on 
infrastructure investments, which takes climate and 
environmental  issues  into  account,  e.g.  through 
investment in public transport and cycling. 

chapter  3.4.3), 

target 

(see 

for 

plan 

government’s 

The  further  electrification  of  the  national 
railroad network is delayed. Denmark has a low 
share  of  electrified  rail  and  a  low  efficiency  of 
train services (European Commission 2019b). The 
previous 
further 
electrification  of  the  railroad  network  has  been 
delayed.  This  delay  was  partly  due  to  prior 
necessary adaptations of the signalling system. The 
planned  deployment  of  a  new  signalling  system, 
European  Railway  Traffic  Management  System 
(ERTMS), should pave the way for electrification. 
New  electric  trains  for  regional  and  international 
traffic  to  Germany,  and  for  regional  and  intercity 
traffic  are  expected  to  be  operational  as  of  2021 
and 2024, respectively. 

several 

objectives, 

The  continuous  deployment  of  offshore  wind 
parks  will  increase  pressure  on  electricity  grid 
infrastructures. Denmark’s electricity grid is well 
interconnected 
to  other  countries  with  an 
interconnectivity  level  of  50.6 %,  well  above  the 
electricity  interconnection  target  of  at  least  15 % 
by  2030.  Interconnection  to  other  grids  help  to 
achieve 
notably 
decarbonisation,  security  of  supply  and  energy 
efficiency.  Further 
the  grid 
network are necessary to ensure that the increasing 
share of renewable energy can be used efficiently. 
As  regards  electricity  markets,  ancillary  services 
markets  are  open  to  participation  for  renewable 
energy, which indicates that the latter can compete 
on  market  terms  and  participate  to  the  good 
functioning of the grid. Exploiting Denmark’s full 
renewable  energy  potential  will  require  additional 
specific  measures,  inter  alia  on  system  flexibility, 
smart grids and storage. 

investments 

into 

government to attract private venture capital and to 
provide  early-stage  funding  through  the  Growth 
Fund  and 
incubators,  overall  venture  capital 
expenditure  is  among  the  lowest  in  Europe  at 
0.06 %  of  GDP  in  2018.  Despite  that,  Denmark 
ranks  as  the  second-best  performer  in  the  EU  for 
the  availability  of  venture  capital  investments. 
in 
Although  many  companies  are  created 
Denmark, start-ups struggle to scale up and grow. 
A smaller share of businesses survive over the one, 
three  and  five  year  mark  than  in  most  EU 
countries.  Additionally,  young,  high-growth 
innovative  companies  are  often  leaving  Denmark 
as  they  scale,  sometimes  as  the  result  of  foreign 
acquisitions.  

account 

feature  of 

foundations.  These 

Private foundations play an important  role but 
are not well integrated in the innovation system. 
A  specific 
the  Danish  National 
Innovation  system  is the important role played by 
a 
private 
significant share of the privately funded R&D and 
also invest in related initiatives or physical spaces, 
such as incubators, networks, prizes or events.  As 
the  funding  by  private  foundations  is  set  to 
increase  in  the  coming  years,  there  is  growing 
importance  of  strengthening  coordination  among 
private  foundations  and  the  responsible  ministry 
(European Commission 2019c).  

for 

lacks  an 

integrated 

Denmark 
innovation 
strategy.  Though  there  are  many  initiatives  that 
have  a  strategic  ambition,  there  is  a  lack  of  an 
overarching vision across the whole of government 
that  clearly  spells  out  what  Denmark  wants  to 
achieve  within  the  global  innovation  landscape, 
and  how  it  intends  to  get  there.  Due  to  recent 
changes  across  the  Danish  National  Innovation 
System,  ministries  and  their  agencies  became 
increasingly  specialised  within 
their  specific 
mission  and  mandates.  A  Policy  Support  Facility 
expert  panel  highlighted  that  Denmark  as  an 
innovation  leader  can  put  forth  the  ‘next  level’  of 
what leading practice means by articulating a clear, 
deliberate,  overarching  strategic  direction  of  the 
to  deploy  and 
innovation  system,  allowing 
synchronise  actions  across  the  innovation  system 
towards  an  ambitious  goal  and  value  proposition 
(European Commission 2019c).  

40 

3.4. Competitiveness, reforms and investment 

Sweden, 

between  2016  and  2018.  On  the  contrary,  at  the 
interconnection  with 
transmission 
capacity  was  reduced  from  Eastern  Denmark  to 
Sweden  (DK2-SE4  interconnection)  during  37 % 
of  operating  hours  in  2018,  due  to  congestions  at 
Sweden’s  West  Coast  Corridor.  The  Swedish 
transmission  system  operator,  Svenska  Kraftnät, 
announced  in  June  2019  that  it  would  take 
measures  to  reduce  the  impact  of  the  West  Coast 
Corridor on the connections to and from Sweden.  

Narrow price-cost margins point to competitive 
electricity  retail  markets.  The  price  paid  by 
household  customers  in  2018  was  made  up  by 
18 %  of  energy  cost,  17 %  of  network  cost,  and 
65 % of taxes, public service obligation and VAT. 
This  suggests  that  markets  are  competitive  and 
could explain the comparatively low switching rate 
of customers, oscillating between 4.7 % and 7.1 % 
between  2014  and  2018  (for  household  and  non-
household  customers  with  an  annual  consumption 
up to 100 MWh).  

The  production  of  biogas  has 
increased 
significantly in 2018 to reach 9 % of Denmark’s 
gas consumption.  This  had somewhat  limited the 
effects of the decrease in the production of natural 
gas (-15 % in 2018 compared to 2017). Danish gas 
the 
supply  will  change 
rebuilding  of  the  Tyra  platform  until  July  2022. 
Until then, Denmark will import the majority of its 
gas from Germany, as opposed to previously being 
a net exporter. 

significantly  after 

Retail and E-commerce 

Rapid  changes  in  the  retail  landscape  and 
triggering 
consumer  needs  are 
evolving 
reflection  on  the  suitability  of  existing  retail 
regulations. The 2017 reform of the Planning Act 
has  allowed  the  establishment  of  larger  grocery 
shops  and  has  removed  size  caps  for  non-grocery 
stores.  It  has  also  provided  municipalities  with 
more  flexibility  in  taking  local  conditions  into 
account  in  the  planning  process.  An  evaluation 
report planned for mid-2020 will take stock of the 
developments in the market structure, in particular 
as 
regards  e-commerce,  and  analyse  how 
municipalities have implemented the new rules. E-
commerce  continues 
in 
Denmark,  including  in  the  grocery  sector.  After 
medicines  and  supplements,  groceries  have  seen 

to  develop 

rapidly 

Broadband 

Denmark  has  a  high  coverage  of  next-
generation  access  networks  (NGA)  and  ultra-
fast  broadband,  which  are  available  to  95  % 
and 92 % of homes, respectively. NGA and fibre 
to  the  premises  networks  in  rural  areas  are  only 
available 
to  70 %  and  61 %  of  households 
respectively,  which  is  well  above  the  EU  average 
(52 %  and  14 %,  respectively).  To  promote 
broadband  availability  outside  urban  areas,  the 
government  has  committed  to  further  enhancing 
for  which 
network  quality 
DKK 290 million  of  public  funds  were  allocated 
between  2016  and  2019.  In  mobile  broadband, 
high  take-up  of  131  broadband  subscriptions  per 
100 people (the EU average is 92 subscriptions per 
100  people),  and  full  4G  coverage  (100 %)  were 
reported.  Moreover,  Denmark  has  assigned  33 % 
of the harmonised spectrum for 5G use by the end 
of 2020 within the so-called 5G pioneer bands. 

rural  areas, 

in 

Environment 

circular 

economy.  Moreover, 

Denmark  remains  the  country  in  the  EU  that 
produces  the  most  municipal  waste  per  capita. 
In  2017,  Denmark  produced  781 kg  per  year  per 
inhabitant  of  municipal  waste,  well  above  the  EU 
average of 487 kg per year per inhabitant. Much of 
this  waste  is  incinerated  with  energy  recovery. 
Further  investments  higher  in  the  waste  hierarchy 
as  well  as  for  recycling  would  allow  meeting  the 
more  ambitious  post-2020  targets  and  promoting 
projects 
the 
improving  waste  data  reporting  and  extended 
producer responsibility would be crucial, as well as 
capacity  building  projects  for  municipalities  to 
realise the necessary waste management reforms in 
the  country.  The  relatively  high  share  of  toxic 
waste  in  total  waste  may  pose  a  challenge  to 
further  increases  of  the  waste  recovery  rate.  In 
September 2018, the Danish government presented 
a  strategy  for  circular  economy,  followed  by  a 
supporting  political  agreement  in  October  2018. 
The strategy and the political agreement include 16 
initiatives funded by DKK 116 million in 2019-22.  

Energy markets 

improvements  as  regards 
There  are  some 
electricity 
transmission  capacity,  but  new 
challenges emerge. Available capacity for trading 
of  electricity  with  Germany  has  increased  from 
11 %  to  58 %  of  nominal  transmission  capacity 

41 

3.4. Competitiveness, reforms and investment 

with  stakeholders  and  there 
is  a  culture  of 
consensus  in  how  policies  are  developed.  The 
increased  use  of  digital  solutions  will  allow 
reaching  out  to  a  broader  population  of  firms. 
Support  offered  through  business  hubs  will  now 
cover  all  types  of  businesses,  rather  than  growth-
oriented companies only. The launch of a national 
strategy  for  business  promotion  is  planned  for 
February 2020. 

SME’s  report  of  slightly  eased  labour  market 
pressure. While access to skilled labour remains a 
priority,  mainly  in  construction  and  services, 
although the skills gap is now less acute than in the 
past (see Section 3.3). In 2018, SMEs in Denmark 
reported 
the  availability  of  skilled  staff  or 
experienced  managers  as  their  most  important 
issue (SAFE survey 2018). 

the  second  largest  increase  in  internet  sales  over 
the past ten years (Wanscher 2019). 

of 

of 

on 

and 

focus 

digital 

reduction 

forefront 

A recently launched growth plan for trade and 
logistics  aims  to  help  Danish  companies  be  at 
the 
green 
transformation  and  enable  them  to  cope  with 
increasing  global  competition.  In  retail,  the 
actions 
the 
the 
environmental impact of e-commerce, reduction of 
food  waste, 
revitalisation  of  city  centres, 
improvement  of  digital  skills  and  support  to 
Danish  companies  in  embracing  the  opportunities 
of digitalisation. The green growth of the logistics 
sector  is  to  be  supported  among  others  by  clear 
rules and access to skilled labour. The third set of 
actions  aims  to  protect  Danish  consumers  by 
tracking imported products not complying with the 
Danish health and safety regulations. 

While Danish firms overall steadily progress in 
e-commerce,  this  is  less  the  case  for  SMEs. 
Danish  firms  are  among  the  European  leaders  in 
the  uptake  of  several  of  the  most  common  digital 
services  and  technologies  or  investing  in  training 
their employees for acquiring and improving their 
ICT skills (see Table 3.4.1).  

Table 3.4.1:  Selected indicators on digitisation of 

businesses, 2019 (% of enterprises) 

Administrative  burden  remains  under  control. 
Firms benefit from an easy access to digital public 
administration,  which  efficiently  deals  with  their 
requests. The efforts to make public administration 
more  and  more  digital  continue.  To  improve  the 
in  making 
support  offered 
business-friendly  policies,  Denmark  is  currently 
for 
bringing 
Simplified  Business  Legislation 
the 
Implementation Council.  

the  Business  Forum 
and 

to  policy-makers 

together 

a 

on 

Late  payment  is  a  problem  for  some  small 
companies. As many as 39 % of companies report 
experiencing  problems  due  to  late  payments.  One 
out  of  seven  Danish  businesses  experience  such 
problems 
(European 
regular 
Commission,  2019d).  According  to  stakeholders, 
business  tend  to  pay  increasingly  late,  requiring 
favourable  payment  conditions  in  exchange  for 
concluding contracts. Some business organisations 
call for the introduction of tighter payment rules or 
maximum time limits. 

basis 

Source: European Commission 

3.4.3.  INSTITUTIONAL QUALITY AND 

GOVERNANCE  

Business environment  

Denmark’s business support system has further 
improved.  Danish  policy-makers  work  closely 

Public Services and artificial Intelligence 

Denmark outperforms the EU average in digital 
public  services  (e-government).  90 %  of  people 
submit  official  forms  to  administrative  authorities 
electronically,  well  above  the  EU  average  (56 %) 
(European  Commission  2020).  The  Danish 
Business  Authority  is  working  towards  further 
improvement of the digital public services. So far, 
1000 forms used by businesses have been digitised 
and 600 are in the pipeline. All authorities having 

42 

TechnologyDenmarkEU average3D printing6,2%4,1%Industrial or service robots9,6%6,7%Big Data (analyse from any data source)13,6%12,3%Cloud services40,9%17,8%Large firms selling online61,5%39,2%SMEs selling online32,7%17,5%Large firms with high levels of digital intensity90%61,5%SMEs with high levels of digital intensity52%24,7%Large firms with very low digital intensity0,6%9%SMEs with very low digital intensity15,1%39,4%LargefirmsprovidingupskillingICTtrainingsto employees79%70,3%SMEsprovidingupskillingICTtrainingstoemployees29,2%22,6% 
  
 
3.4. Competitiveness, reforms and investment 

interactions with businesses have agreed to digitise 
all  the  forms  by  the  end  of  2020.  In  December 
2019,  the  Business  Authority  launched  a  new 
action plan on digital public services.  

Denmark is committed to making progress and 
investing in digital technologies. Denmark signed 
the  Declaration  on  cooperation  on  Artificial 
Intelligence. 
the  Danish 
In  March  2019, 
government  launched  its  National  Strategy  for 
artificial  intelligence  (AI).  With  the  strategy,  the 
government aims to provide a common ethical and 
human centric foundation for AI as well as a set of 
goals  for  using  AI  within  the  public,  private  and 
research  sector.  The  strategy  also  establishes  a 
number  of 
further  strengthen 
Denmark’s development and application of AI. For 
instance  AI  solutions  are  sought  to  support  voice 
recognition  and  assisting  citizens  in  danger  (e.g. 
experiencing  heart  attack  etc.).  In  addition,  the 
country  is  preparing  the  new  “Digital  Strategy 
2020-2024” 
the  digital 
interaction  of  businesses  and  citizens  with  the 
public administration. 

further  enhance 

initiatives 

for 

to 

Public procurement 

The government has taken several further steps 
to  increase  transparency  and  better  access  of 
SMEs  for  public  procurements.  In  2019,  the 
Danish  Competition  and  Consumer  Authority 
reported  improvements  in  the  overall  number  of 
bids, higher percentage of flexible and innovation-
promoting  procedures  and  a  considerable  increase 
(30 % from 2015 to 2017, to 46 %) in the share of 
EU tenders won by small companies with less than 
50  employees  (KFST  2019).  The  government 
initiative  launched  in  May  2018  (Økonomi-  og 
Indenrigsministeriet 2018) and amendments to  the 
Procurement  Act  aim  to  provide  better  access  for 
smaller  companies,  lower  their  transaction  costs, 
which often represent a relatively large share of the 
contract,  and  to  reduce  the  complexity  of  public 
procurements  (see  also  OECD  2019c).    A  central 
government  advisory  unit  has  been  established  in 
2019 in cooperation between  the  Competition and 
Consumer  Authority  and  the  Ministry  of  Finance 
in  order  to  strengthen  the  level  of  in-house  
knowledge, 
the  knowledge  sharing 
between the governmental authorities and to avoid 
duplicated efforts as well as to prevent increases in 
cost due to the need to outsource. 

increase 

43 

3.4. Competitiveness, reforms and investment 

44 

Box 3.4.1: Investment challenges and reforms in DenmarkMacroeconomic perspective Aggregate investment in Denmark is above the EU average levels as a percentage of GDP. Following a historical high of 13.9 % of GDP in 2018, business investment is forecast to contract slightly then to stabilise at high levels. Household investment picked up from low levels supported by rising housing prices. Public investment remained relatively high at an estimated 3.4 % of GDP in 2019 and set to remain robust due to increased public investment in housing, healthcare, education and transport infrastructure (Section 1).  Assessment of barriers to investment and ongoing reforms  Overall, barriers to private investment in Denmark are moderate. In recent years, the Parliament has adopted reforms on the services market, including easing of retail planning and increasing competition in the taxi sector and in the mortgage market. Recent initiatives also help to further foster cooperation between academia, business and the research community. Building regulations have been eased. A strategy to enhance public procurement, including better access for smaller firms presented in May 2018 is being implemented. However, favourable tax treatment of debt over equity financing could potentially hold back equity investment. Venture capital expenditure is among the lowest in Europe. Investment in research and innovation remains concentrated in a limited number of larger companies. Increasing productivity gaps between large and small firms suggest weaknesses in the diffusion of technological advances (Section 3.4.2). To accomplish the highly ambitious targets of energy and climate objectives, significant private and public investments will be necessary (Section 3.5). Assessment of barriers to investment and ongoing reforms  Selected barriers to investment and priority actions underway 1. Investment in the transport infrastructure is needed with the objective to decarbonise the transport sector, reduce air pollution and reduce congestion particularly around Copenhagen. The government is set to negotiate an agreement on infrastructure investments, which takes climate and environmental issues into account, e.g. through investment in public transport and cycling (Section 3.4).  2. Investment growth is mainly driven by large enterprises. Further policy measures could help to broaden the base of innovation towards smaller companies and increase productivity of SMEs. Risk capital investment is limited and private early stage investment in start-ups is low. Reducing the debt bias in the corporate tax system could incentivise smaller firms to invest (Section 3.1). Regulatory/ administrative burdenTaxationPublic administrationAccess to financePublic procurement /PPPsCooperation btw academia, research and businessJudicial systemFinancing of R&D&ICSRInsolvency frameworkBusiness services / Regulated professionsCompetition and regulatory frameworkRetailEPL & framework for labour contracts ConstructionWages & wage settingDigital Economy / TelecomEducation, skills, lifelong learning CSREnergyTransportCSRLegend:No barrier to investment identifiedSome progressCSRInvestment barriers that are also subject to a CSRSubstantial progressNo progressFully addressedLimited progressNot assessed yetPublic administration/ Business environmentFinancial Sector / TaxationR&D&ISector specific regulationLabour market/ Education 
 
    
 
 
3.5.  ENVIRONMENTAL SUSTAINABILITY 

3.5.1.  ENERGY AND CLIMATE TARGETS  

transport  and  as  regards  North  Sea  energy 
extraction. 

Current state of play 

Denmark  has  high  environmental  standards 
and  is  on  track  to  reach  its  greenhouse  gas 
emissions  2020  target.  Since  1990,  Denmark  has 
reduced  its  greenhouse  gas  emissions  (excluding 
international  aviation  and  land  use)  by  31 %  in 
2018,  according  to  preliminary  data.  Most  of  the 
emissions reduction has come through a shift from 
fossil fuels to renewable energy in power and heat 
production.  In  2018,  emissions  in  the  not  covered 
by the European Union Emission Trading Scheme 
(ETS) were 19 % below the 2005 level, according 
to  preliminary  data.  Denmark  thus  reduced  its 
emissions by 4 pps more than the interim target for 
2018. In 2020, emissions are projected to be 20 % 
below  the  2005  level,  thus  achieving  the  2020 
target. With a share of renewable energy of 35.8 % 
in  2017,  Denmark  has  already  surpassed  its  2020 
target of 30 %. On the other hand, Denmark’s final 
energy  consumption  increased  in  2018  for  the 
fourth  consecutive  year,  a  trend  that  has  been 
particularly  stark  in  the  industry,  road  transport 
and international aviation. 

Little  progress  has  been  made  in  reducing 
emissions  from  fuels  and  cars.  The  greenhouse 
gas  intensity  of  the  fuels  supplied  in  2017  was 
merely  2.2 %  lower  than  in  2010  and  further 
actions  would  thus  be  needed  to  reach  the  2020 
target  of  6 %  reduction  (European  Commission 
2019b).  Moreover,  CO2  emissions  from  new 
passenger  cars  increased  slightly  in  2017  to 
107 g CO2/km.  This  reflects  a  shift 
towards 
heavier  cars,  a 
that  have  continued 
throughout  2019 (32).  The  emission  level  thus 
emission 
the 
remains 
maximum 
that  car 
level  of  95 g  CO2/km 
manufacturers  will  have  to  deliver  by  2020.  In 
addition, the emission intensity of smog-precursor 
gas  emissions  (among  which  NOx)  is  high  in 
Denmark compared to the EU-average. The major 
sources  of  these  emissions  are  transport-related. 
Progress  has  been  equally  slow  as  regards  sea 

significantly 

above 

trend 

(32)  Car  sales  in  2019  being  the  highest  ever  recorded  both  in 
terms of numbers and value, with the growth driven mainly 
by  the  “larger”  and  SUV  segments  and  the  average  CO2 
emissions  (WLTP)  of  the  new  cars  thus  increasing. 
Introducing  more  electric  cars  has  been  recommended  by 
the Climate Council as one of the most effective and cost-
efficient measures to reduce emissions from the sector. 

The green shift 

Denmark has set a highly ambitious greenhouse 
gas emissions reduction target of 70 % by 2030 
relative to the 1990 level, and carbon neutrality 
by  2050  at  the  latest.  Under  current  policies, 
emissions  are  projected  to  decline  by  46 %  by 
2030,  compared  to  the  1990  level  (Graph  3.5.1). 
Achieving  the  70 %  target  by  2030  thus  requires 
the  reduction  rate  to  more  than  double,  compared 
to the reduction rate seen between 2005 and 2018. 
Achieving  these  targets  will  require  significant 
private  and  public  investments  as  well  as  reforms 
throughout  the  economy.  Besides  investments,  a 
successful 
low-carbon 
economy  will  require  reforms  and  modernisation 
in  production,  consumption,  transportation  and 
many other elements in the Danish economy. 

transformation 

the 

to 

The  announced  targets  represent  a  unique 
opportunity to restructure the Danish economy 
and prepare it for the global transition to a low-
carbon  society.  As  a  country  with  a  high 
continued 
price/wage 
Denmark’s 
level, 
international  competitiveness  will 
require  a 
product  mix  which  includes  a  high  share  of 
advanced  technology.  Business  investments  to 
reduce  greenhouse  gas  emissions  could  provide 
Danish  enterprises  first-mover  advantages  in  the 
development  and  marketing  of  carbon-neutral 
technologies, in turn placing  Denmark  well in the 
international  competition 
these  segments. 
Nevertheless,  firm  policy  actions  and  substantial 
investments are necessary in the near future. Policy 
choices  would  depend  on  the  time  horizon  of  the 
results, shifting relative prices due to technological 
change  and  on  social/distributional  effects.  A 
fundamental 
exists  between  market 
conform policies (taxes) and more direct measures. 

choice 

in 

Transport  and  the  agricultural  sector  are  now 
the  two  largest  contributors  to  the  non-ETS 
sectors’  emissions  (Graph  3.5.1).  Under  EU 
legislation,  Denmark  has  a 
to  reduce 
greenhouse  gas  emissions  in  the  non-ETS  sectors 
by 20 % by 2020 and by 39 % by 2030, relative to 
the 2005 level. Denmark is on track to achieve the 
2020  target,  but  is  projected  to  miss  the  2030-
target  by  14 pps  with  current  policies  (Danish 
Energy Agency, 2019). 

target 

45 

                                                           
3.5. Environmental sustainability 

46 

Box 3.5.1: Transition to a low-carbon economyDenmark’s climate objective of reducing greenhouse gas emissions by 70 % in 2030 compared to the 1990 levels will not only position Denmark as a leader in terms of climate ambition, but also constitutes a unique opportunity in terms of economic growth, jobs creation and health benefits. Denmark’s sustainable energy technologies sector is already a highly successful segment of the economy with strong export market performance. Investments in the low-carbon transition could help raise productivity as green enterprises in Denmark belong to the highly productive segment (Section 3.5).  Denmark will face important investment needs and policy challenges to achieve a 70 % greenhouse gas emission reduction by 2030, compared with 1990. In its National Energy and Climate Plan (NECP) submitted to the Commission on 20 December 2019, Denmark estimated that accumulated public and private investment needs would amount to DKK 100-180 billion for the period of 2018-2030, or approximately DKK 10 billion annually (around 0.4 % of GDP). Investment needs are most significant in renewable electricity generation (estimated at DKK 60-90 billion). As regards energy efficiency and conversion of heat supply, energy efficiency and new technology, biogas and new district heating capacity, the NECP estimates additional investments needs between DKK 10-30 billion for each of these three sectors until 2030. In terms of public financing, the agreed multi-annual budget of the 2018 Energy Agreement allocates approximately DKK 0.5 billion of funding in 2019, which gradually increases to approximately DKK 2.8 billion by 2025. In addition, a new ‘Denmark’s Green Future Fund’ will be established, which will manage a total budget of DKK 25 billion. As regards EU financing sources, Denmark has benefitted from European Fund for Strategic Investments (EFSI) targeting public and private investments with the aim to support the transition. Having a large multiplier effect in the use of public budget to leverage private finance (as achieved by the EFSI funds so far) will be key to meeting the financing needs. As regards private funds, for instance the Danish pension firms in their joint press statement of September 2019 committed to invest DKK 350 billion in new investments until 2030 related to green financial assets and direct holdings in energy generation and energy-efficient construction outside Denmark as well. Policy choices exist between market conform, cost-efficient considerations and more direct measures, while taking into account social and distributional effects. In an agreement on the allocation of the research reserve for 2020, the Parliament has allocated DKK 1.542 billion (EUR 200.5 million) funding for green research. The current tax structure could be reviewed from a greenhouse gas reduction point of view. Taxation can play a key role in reducing emissions, in line with the principles of cost-efficiency and the polluter-pays-principle. Lowering the costs associated with a transition of the energy system greatly depends on streamlining the very dissimilar energy taxes and subsidies (Danish Ministry of Taxation 2018). Instead of slight adjustments in the existing tax system, the Council on Climate Change suggested a comprehensive reform aiming at converting the current energy tax into a single consistent CO2 tax on emissions, which should apply to industry and households alike in line with the polluter-pays-principle.  While Denmark is among the least carbon-intensive economies in the EU, some sectors might be subject to negative impacts from the transition. An important challenge is to ensure that the transition to a low-carbon society will be socially fair and to limit any potential adverse social and distributional implications. Anticipating and mitigating these negative impacts will be crucial, for instance by ensuring that affected groups can benefit from re-skilling and up-skilling and by monitoring redistributional effects. The Commission will also monitor possible impacts of energy and climate policies on energy prices and energy poverty. The Commission’s Just Transition Fund and Just Transition Mechanism will provide additional support to implement the transition (see Annex D).  
 
 
 
 
 
 
   
 
 
3.5. Environmental sustainability 

Graph 3.5.1:  Greenhouse gas emissions per sector 

congestion  could  be  a  significant  step  to  reducing 
both  air  pollution  and  greenhouse  gas  emissions 
challenges (Chapter 3.4.2).   

for 

target 

The government has announced its intentions to 
set  a  binding  reduction 
the 
agricultural  sector.  Emissions  from  agriculture 
have  been  stable  over  many  years,  and  are 
projected to remain so towards 2030 under current 
policies.  The  socio-economic  cost  of  reducing 
emissions in the agricultural sector is estimated to 
be  lower  than  equivalent  reductions  by  passenger 
cars  (DORS  2019).  In  the  political  agreement  on 
the budget law  for 2020, it was agreed to allocate 
DKK 200 million annually throughout the 2020s to 
fund  the  set  aside  of  agricultural  lands  with  high 
carbon soil content for environmental and climate 
purposes,  and  to  consider  the  establishment  of  a 
new forest fund. 

At current trends, Denmark will not contribute 
significantly  to  reach  the  EU  2030  energy 
efficiency target. Increasing investments in energy 
efficiency could contribute to reducing greenhouse 
gas  emissions.  Denmark  indicated  a  very  low 
contribution  to  the  EU  energy  efficiency  2030 
targets  in  its  draft  National  Energy  and  Climate 
Plan  (NECP) (34).  The  decision  to  discontinue  the 
energy  savings  obligation  scheme  after  2020  will 
reduce  the  level  of  funding  for  measures  to 
increase end-use efficiency across all sectors.  

The Government has announced that a Climate 
Act will be presented to Parliament in February 
2020.  According  to  the  National  Energy  and 
Climate Plan, the Climate Act will be followed by 
a  new  Climate  Action  Plan  in  spring  2020.  The 
Climate  Action Plan will also include  new energy 
efficiency  measures  such  as  energy  savings  in 
public buildings. The  most prominent  new energy 
saving  measure  targeting  private  enterprises  and 
buildings  is  expected  to  save  approximately  1.2 
Mtoe  of  energy  consumption.  In  the  light  of  the 
observed  growth  in  consumption,  further  energy 
efficiency  measures  in  industry,  services,  private 
dwellings  and  (road  and  air)  transport  may  be 
needed (Graph 3.5.2). 

(34)  The  Commission  will  assess,  in  the  course  of  2020,  the 
final  National  Energy  and  Climate  Plan  submitted  by 
Denmark on 20 December 2020. 

Source: Statistics Denmark 

Emissions  from  transport  increased  by  7 % 
from 2013 to 2017 and are projected to remain 
stable towards  2030 under the current policies. 
The  Council  on  Climate  Change(33)  has 
recommended  a  number  of  actions,  including  the 
reintroduction  of  departure  taxes  for  aviation, 
setting  a  target  for  the  number  of  zero-emission 
cars  in  2030,  a  ban  on  sales  of  both  diesel  and 
petrol  cars  as  2030,  a  change  in  the  car  taxation 
system and the introduction of a subsidy scheme to 
support  sales  of  electric  cars  (Council  on  Climate 
Change,  2018c).  The  Commission  for  Green 
Transition  of  Passenger  Cars,  established 
in 
February  2019,  has  been  tasked  to  develop  a 
strategy  for  how  best  to  achieve  the  government's 
goal  that  all  new  cars  from  2030  and  onwards 
should  be  low-  or  zero-emissions  cars  and  to 
provide specific proposals on financing options for 
maintaining  state  revenue,  as  well  as  changes  in 
the  taxation  system  (Ministry  of  Finance  2019). 
The  budget  law  for  2020  inter  alia  includes 
temporary  tax  reductions  for  electric  and  plug-in 
hybrid  cars,  and  measures  to  incentivise  greener 
  Transport  policies  addressing 
company  cars. 

(33)  Denmark  established  its  Council  on  Climate  Change  in 
2014.  The  Council  provides  advice  on  cost-effective 
climate  policies,  aiming  to  ensure  that  efforts  for  lower 
GHG  emissions  are  fairly  balanced  with  welfare  and 
development  goals.  To  this  end,  the  Council  provides 
recommendations  based  on  independent  analysis  with  a 
short, medium and long-term strategy horizon; it evaluates 
implementation  to  meet  national  and  international  climate 
goals, and contributes to the public debate. 

47 

05101520253035404550199019952000200520102015202020252030Energy supplyEnergy use in manufacturing industriesIndustrial processes and product useTransportOther energy useAgricultureWaste managementInternational aviationMt CO2-eq      
                                                           
                                                           
3.5. Environmental sustainability 

Graph 3.5.2:  Energy efficiency: Primary and final energy 

Synergies and trade-offs on competitiveness 

consumption 

While  Denmark  is  already  a  market  leader  in 
green energy technologies, there is potential for 
further  growth.  In  the  last  decades,  considerable 
spending  on  R&D  has  put  Danish  companies  in  a 
strong position globally in several areas relating to 
green energy technology, such as wind energy and 
district  heating.  Denmark  thus  has  a  strong  green 
technology  brand  and  in  2017,  export  of  green 
energy  technology  made  up  11 %  of  Denmark’s 
total exports of goods, the highest share among the 
EU  (Danish  Ministry  of  Climate,  Energy  and 
Utilities,  2018).  Taking 
the 
investments  needed  worldwide  to  live  up  to  the 
further 
Paris  Agreement, 
is 
technology 
considerable.  The  business  opportunities  arising 
from  green  transition  could  spark  second-round 
effects,  with  potential  important  positive  impacts 
for the entire economy. 

the  potential 
and 

for 
export 

development 

account 

into 

this  strategy, 

Denmark  has  adopted  an  indicative  political 
target  that  50 %  of  all  public  procurement 
should  be  green.  A  national  strategy  on  Green 
Public  Procurement  is  being  implemented  as  part 
of  the  government  strategy  on  ‘intelligent  public 
procurement’.  As  part  of 
the 
‘Partnership  for  Green  Public  Procurement’  is  a 
collaborative  effort  of  twelve  municipalities,  two 
regions  and  others,  in  order  to  reduce  their 
environmental  impact  from  their  procurement 
actions and drive the market in a greener direction.  
In  addition,  the  Municipality  of  Copenhagen 
adopted  the  Copenhagen  2025  Climate  Plan,  with 
objectives  and  initiatives  for  achieving  carbon 
neutrality. It highlights the important role of public 
procurement, to “actively seek to move the market 
in a climate friendly direction”. 

Synergies  and 
territorial cohesion and just transition analysis 

trade-offs  on  social  and 

Certain  sectors  face  reskilling  and  upskilling 
needs  due  to  the  energy/climate  transition.  The 
work  force  in  several  sectors  needs  to  adapt  to 
significant  technological  changes  required  in  the 
transition  to  a  low-carbon  economy  (European 
Commission  2019g).  Policies  concern  preserving 
the  competitiveness  of  the  Danish  industry,  in 
order  to  avoid  that  jobs  and/or  emissions  are 
transferred abroad. 

Source: Denmark’s draft National Energy & Climate Plan, 
Eurostat (PEC2020-2030, FEC2020-2030 indicators and 
renewable SHARES) 

Denmark  has  an  ambitious  objective  of 
achieving  a  55 %  renewable  energy  share  by 
2030.  Based  on  the  current  projections,  Denmark 
is  forecast  to  reach  42 %  renewable  energy  share 
by  2030  (well  above  the  30 %  EU  2020  target, 
Graph 3.5.3). However, additional policy measures 
are  needed  to  reach  the  ambitious  new  national 
target.  As  regards  the  electricity  sector,  where 
Denmark  has  set  an  objective  of  a  100 % 
renewable  share  in  2030,  additional  measures 
would  be  necessary  as  the  current  projections 
indicate a 90 % achievement by 2030. 

Graph 3.5.3:  Renewable energy: Share in gross final energy 

consumption 

Source: Denmark’s draft National Energy & Climate Plan, 
Eurostat (PEC2020-2030, FEC2020-2030 indicators and 
renewable SHARES) 

48 

16,918,617,714,715,814,6051015202520052006200720082009201020112012201320142015201620172018201920202021202220232024202520262027202820292030Primary energy consumption (PEC)Final energy consumption (FEC)million tones of oil equivalent. 55,035,80102030405060200520062007200820092010201120122013201420152016201720182019202020212022202320242025202620272028202920302020 baseline2030-as from MSrenewable share%      
      
3.5. Environmental sustainability 

Graph 3.5.4:  Revenues from environmental taxes (% of total 

tax revenues) 

Source: Eurostat 

A more ambitious climate policy could translate 
into  higher  environmental  taxation  and  a 
broadening  of  the  climate  policy-related  tax 
base.  Higher  tax  rates  on  emissions  could  be  a 
cost-efficient  policy 
stimulate  emissions 
to 
reductions.  A  ticket  tax  introduced  with  the  same 
structure  and  level  as  the  German  Air  Transport 
Tax could for example generate a fiscal revenue of 
some  EUR  171  million  annually  for  Denmark 
(European  Commission  2019k).  Due  to  the  sharp 
increase  in  the  carbon  price  in  the  ETS,  revenues 
from  auctioning  ETS  allowances  in  2018  were 
more  than  twice  as  high  as  in  previous  years 
reaching  EUR  190  million.  Future  revenues  from 
auctioning  will  depend  on  the  number  of  ETS 
allowances  (which  will  be  gradually  reduced 
according to EU legislation) and the carbon price.  

is 

in 

the 

climate 

included 

Denmark’s  cement  industry  could  be  affected. 
Cement  production  is  the  major  source  of  CO2 
emissions  from  industrial  processes.  The  cement 
the 
industry 
first  of 
Government’s 
partnerships.  These 
partnerships concern different business sectors and 
aim to come up with proposals to contribute to the 
new  national  target  of  70 %  CO2  reduction  by 
2030.  The  Commission’s  proposal  for  a  Just 
Transition  Mechanism  will  also  help  ensure  that 
the  transition  towards  climate  neutrality  is  fair  by 
helping  most  affected  regions  address  the  social 
and economic consequences (see Annex D).  

The  Just  Transition  Fund  could  contribute  to 
the  development  of  new  and 
innovative 
solutions  for  the  whole  value  chain.  Innovation 
hubs  and  transition  labs  could  use  the  knowledge 
in  the  Danish  areas  of  smart  specialisation.  This 
could 
technological 
innovation, ease the social impact of the transition 
and  stimulate  a  circular  economy  approach  to  the 
sustainability issues in the value chain. 

the  necessary 

facilitate 

Impact on public finances  

The  climate  objectives  will 
impact  public 
finances  as  well.  The  main  objective  of 
greenhouse  gas  taxation  is  to  address  negative 
externalities  that  are  not  internalised  in  a  firms’ 
production  costs,  and  thereby  affect  consumption 
incentives.  While  they  are  thus  meant  to  reduce 
excess production, they also generate tax revenues. 
Environmental taxes constituted 8.1 % of the total 
tax  revenues  in  2018,  a  share  that  has  gradually 
declined  over  the  last  15  years  as  the  Danish 
economy  advanced  to  meet  the  climate  objectives 
(Graph 3.5.4). Further decline in environmental tax 
revenues  is  projected  in  the  coming  years  as  the 
transition to carbon neutrality continues. 

49 

024681012199519971999200120032005200720092011201320152017Energy taxesTransport taxesPollution taxesResource taxes%      
 
ANNEX A 

Overview table 

Commitments  

Summary assessment(1) 

2019 country-specific recommendations (CSRs)  

CSR  1:  Focus  investment-related  economic  policy 
on  education  and  skills,  research  and  innovation  to 
broaden 
include  more 
companies,  and  on  sustainable  transport  to  tackle 
road congestion.  

innovation  base 

the 

to 

Denmark  has  made  Some  Progress  in  addressing 
CSR 1. 

investment-related  economic  policy  on 

Focus 
education and skills,  

Some  Progress:  The  re-priorisation  contribution 
to  education  will  be 
(omprioriteringsbidraget) 
cancelled from 2020, thereby significantly increasing 
the  funding  of  education  (approx.  DKK  678  million 
per  year).  Increased  funding  for  basic  education 
(Folkeskolen)  from  2020  till  2023  (i.e.  raising  by 
DKK 275 million in 2020 up to DKK 807 million in 
2023).  A  broad  political  agreement  (October  2019) 
earmarked  DKK  102  million  to  initiatives  targeting 
the upskilling of unskilled workers.  

research  and  innovation  to  broaden  the  innovation 
base to include more companies,  

Limited  Progress:  Denmark  has  taken  measures  to 
increase  funding  for  research  and  innovation.  The 
Research Reserve  for 2020 has been increased  from 
the  original  plan  by  38  %,  totalling  DKK  1.925 
billion.  The  budget  earmarks  an  additional  DKK  1 
billion for green research in 2020 raising it to a total 
of  DKK  2.3  billion.  However  no  specific  measures 
were proposed to broaden the innovation base and to 
include more companies.  

and  on 
congestion.  

sustainable 

transport 

to 

tackle 

road 

Some  Progress:  The  Government  has  presented  a 
specific transport plan to tackle key road congestion 
areas,  notably  in  the  Greater  Copenhagen  and 
to  Denmark’s 
Lillebælt  areas.  With  a  view 
greenhouse  gas  emissions  reduction 
the 
target, 
government  is  set  to  negotiate  an  agreement  on 
infrastructure  investments,  which  takes  climate  and 
environmental  issues  into  account,  e.g.  through 
investment  in  public  transport  and  cycling.  The 
to  disseminate 
taken  action 
Government  has 
European  Rail  Traffic  Management  System 
(ERTMS) signalling on Danish railroads, which is a 
prerequisite  for  further  electrification  of  the  rail 
network.  New  electric 
trains  for  regional  and 
international  traffic  to  Germany  are  expected  to  be 
operational from 2021.  

CSR  2:  Ensure  effective  supervision  and 
the 
enforcement of the anti-money laundering framework  

Denmark  has  made  Some  Progress  in  addressing 
CSR  2:  Denmark  undertook  several  significant 
legislative  steps  over  a  relatively  short  period  of 
time,  but  the  recently  implemented  measures  still 

50 

A. Overview table 

have  to  prove  their  effectiveness.  The  Financial 
Supervisory  Authority  has  made  progress 
in 
enhancing  its  supervisory  capacity,  but  upgrade  has 
yet to be sought and obtained in respect of Financial 
Task  Force  standards  relevant  for  anti-money 
laundering  supervision  of  financial  entities.  The 
DFSA  established  an  AML  Division  and  increased 
the number of AML-dedicated staff by close to 50% 
in 2019. 

Europe 2020 (national targets and progress)  

Employment rate target set in the NRP: 80 %.  

77.5 % (2018)  

The  employment  rate  has  gradually  increased,  from 
74.3 % in 2012, to 75.4 % in 2015 and up to 77.5 % 
in 2018. It remains, however, below pre-crisis levels 
(79.0  %  in  2007).  Denmark  has  adopted  a  series  of 
active labour market reforms in recent years, with the 
overall  purpose  of  increasing  the  supply  of  labour, 
promote  the  incentives  to  work  and  reduce  the 
number  of  social  benefit  recipients.  These  measures 
are  expected 
the  2.5 
percentage  point  gap  from  Denmark’s  national 
Europe 2020 employment target (80 %). 

to  contribute 

to  closing 

R&D target set in the NRP: 3 % of GDP  

3.03 % (2018) 

intensity 

in 
Research  and  development  (R&D) 
Denmark has been above 3 % of GDP since 2015. In 
2018,  R&D  intensity  reached  3.03 %  of  GDP,  a 
slight  decrease  from  the  previous  year  figure  of 
3.05 %.  Business  R&D  investments  in  the  country 
account  for  around  2/3  of  total  R&D  expenditure, 
while there is a political commitment to keep public 
R&D intensity at least at 1 % of GDP.  

National  greenhouse  gas  (GHG)  emissions  target:  
-  20  %  in  2020  compared  with  2005  (in  sectors  not 
included in the EU emissions trading scheme)  

In 2020, emissions are projected to be 21% below the 
2005 level. Denmark would thereby achieve the 2020 
target.  

Interim target, 2018: -15% compared with 2005:  

In 2018, emissions were 19% below the 2005 level.   

2020 renewable energy target: 30 %  

36.7 % (2018) 

With  a  36.7 %  share  of  renewable  energy  in  final 

51 

 
 
A. Overview table 

energy consumption in 2018, Denmark is on track to 
meet  its  2020  target  of  30 %.  Progress  is  most 
noticeable  in  electricity  generation  (biomass  and 
wind energy) and in heating (largely biomass) 

Energy efficiency, 2020 energy consumption targets:  

Denmark's  2020  energy  efficiency  target  is  17.52 
Mtoe  expressed  in  primary  energy  consumption 
15.14 Mtoe expressed in final energy consumption)  

Between  2017  and  2018,  Denmark  increased  its 
primary  energy  consumption  by  0.6  %  and  its  final 
energy  consumption  by  0.8%  (respectively  from 
17.8 Mtoe  in  2017  to  18  Mtoe  in  2018  and  from 
14.8 Mtoe in 2017 to 15 Mtoe in 2018). 

After  four  consecutive  years  of  increase  in  energy 
consumption,  Denmark 
indicative 
national 2020 target for primary energy consumption. 
Final  energy  consumption  is  below  target  only 
because Denmark changed the target to align  with a 
higher expected consumption.  

is  above 

its 

Denmark’s practice of updating its indicative targets 
so  that  they  correspond  to  the  level  in  the  latest 
available baseline forecasts will by definition tend to 
narrow  or  eliminate  any  gaps  between  targets  and 
actual energy consumption as 2020 gets closer. These 
gaps  are 
the  best  indicators  for 
Denmark’s contribution to the EU 2020 target. In this 
respect,  recent  increases  in  the  Danish  energy 
consumption  have  contributed  to  widening  the  gap 
towards the EU 2020 target. 

therefore  not 

Early school/training leaving target: 10 % (less than 
10  %  school  drop-out  rates  of  the  population  aged 
18-24).  

10.2 % (2018) 

the  school  drop-out  rate  of 

Since  2016, 
the 
population aged 18-24 has increased. It rose from 8.8 
% in 2017 to 10.2 % 2018, reaching a level above the 
<10 % target for the first time in eight years (11 % in 
2010). 

Tertiary  education  target:  More  than  40  %  of 
population aged 30-34.  

49.1 % (2018) 

The  more-than-40 %  target  has  been  reached  and 
even  surpassed  by  9.1  percentage  points.  The  share 
of the population aged 30-34 which has successfully 
completed tertiary studies has increased from 39.2 % 
in 2008 to 49.1 % in 2018.  

Target  for  reducing  the  number  of  people  at  risk  of 
poverty or social exclusion, expressed as an absolute 
number  of  people:  reduce  the  number  of  people  in 
households  with  low  work  intensity  by  22  000 

459 000 persons (2018) 

The  number  of  people  living  in  low-work  intensity 
households rose from 433 000 in 2010 to 459 000 in 
2018,  corresponding  to  an  increase  of  26  000 

52 

  
towards 2020 (base year 2010: 433 000).  

A. Overview table 

persons.  The  gap  to  the  national  Europe  2020  target 
in the area of poverty and social exclusion (reducing 
the  number  of  persons  living  in  low  work  intensity 
households  with  22  000  by  2020)  is  thus  far  from 
being  closed.  Denmark  has  introduced  a  strategy  to 
progress  towards  its  ten  social  mobility  goals  (May 
2016), aiming among others to reduce the number of 
vulnerable persons and increasing their employability 
and the participation rates in  education and training. 
Denmark is making progress on some of these goals 
(e.g. crime rates for marginalised young persons) but 
lagging behind on others (e.g. share of  marginalised 
young people attending upper secondary education).  

---------------------------------------- 

(1)  The  following  categories  are  used  to  assess  progress  in  implementing  the  country-specific 
recommendations (CSRs):  

No  progress:  The  Member  State  has  not  credibly  announced  nor  adopted  any  measures  to  address  the 
CSR. This category covers a number of typical situations to be interpreted on a case by case basis taking 
into account country-specific conditions. They include the following:  

  no legal, administrative, or budgetary measures have been announced  

 

in the national reform programme, 

 

in any other official communication to the national Parliament/relevant parliamentary committees or 
the European Commission, 

  publicly (e.g. in a press statement or on the government's website); 

  no non-legislative acts have been presented by the governing or legislative body; 

 

the  Member  State  has  taken  initial  steps  in  addressing  the  CSR,  such  as  commissioning  a  study  or 
setting up a study group to analyse possible measures to be taken (unless the CSR explicitly asks for 
orientations or exploratory actions). However, it has not proposed any clearly-specified measure(s) to 
address the CSR. 

Limited progress: The Member State has:  

  announced certain measures but these address the CSR only to a limited extent; and/or 

  presented legislative acts in the governing or legislative body but these have not been adopted yet and 

substantial further, non-legislative work is needed before the CSR is implemented; 

  presented  non-legislative  acts,  but  has  not  followed  these  up  with  the  implementation  needed  to 

address the CSR. 

53 

 
 
A. Overview table 

Some progress: The Member State has adopted measures  

 

that partly address the CSR; and/or  

 

that address the CSR, but a fair amount of work is still needed to fully address the CSR fully as only a 
few of the measures have been implemented. For instance, a measure or measures have been adopted 
by the national Parliament or by ministerial decision but no implementing decisions are in place.  

Substantial progress: The  Member State has adopted measures that go a long way towards addressing 
the CSR and most of them have been implemented.  

Full  implementation:  The  Member  State  has  implemented  all  measures  needed  to  address  the  CSR 
appropriately.  

54 

 
 
ANNEX B 

Commission debt sustainability analysis and fiscal risks 

55 

ANNEX C 

Standard tables 

Table C.1: 

Financial market indicators 

(1) Latest data Q3 2019. Includes not only banks but all monetary financial institutions excluding central banks. 
(2) Latest data Q2 2019. 
(3) Quarterly values are annualized. 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators). 

56 

201420152016201720182019Total assets of the banking sector (% of GDP)(1)407,3375,4377,4365,5354,2400,3Share of assets of the five largest banks (% of total assets)68,167,868,365,764,5-Foreign ownership of banking system (% of total assets)(2)12,212,512,37,07,06,9Financial soundness indicators:(2)              - non-performing loans (% of total loans)5,13,93,32,52,31,9              - capital adequacy ratio (%)18,219,820,722,121,621,3              - return on equity (%)(3)4,76,89,710,88,08,5Bank loans to the private sector (year-on-year % change)(1)0,21,01,20,83,54,0Lending for house purchase (year-on-year % change)(1)0,41,11,51,21,21,7Loan-to-deposit ratio(2)192,9213,8211,0228,7240,7236,6Central bank liquidity as % of liabilities(1)0,50,10,10,10,10,0Private debt (% of GDP)214,0211,4209,0202,7198,3-Gross external debt (% of GDP)(2) - public17,815,012,812,410,611,0    - private39,241,941,739,337,738,1Long-term interest rate spread versus Bund (basis points)*16,219,423,115,95,87,0Credit default swap spreads for sovereign securities (5-year)*16,012,715,510,96,86,8 
 
 
 
   
 
 
C. Standard tables 

Table C.2: 

Headline Social Scoreboard indicators 

(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 (SMD) and/or living in households with zero or very low work intensity (LWI).       
(2) Unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within two weeks.       
(3) Gross disposable household income is defined in unadjusted terms, according to the draft Joint Employment Report 2019.       
(4) Reduction in percentage of the risk of poverty rate, due to social transfers (calculated comparing at-risk-of poverty rates 
before social transfers with those after transfers; pensions are not considered as social transfers in the calculation).       
(5) Average of first three quarters of 2019 for the employment rate, unemployment rate and gender employment gap.       
Source: Eurostat 

57 

201420152016201720182019 5Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)7,87,87,28,810,2:Gender employment gap (pps)7,47,86,96,77,07,2Income inequality, measured as quintile share ratio (S80/S20)4,14,14,14,14,1:At-risk-of-poverty or social exclusion rate(1) (AROPE)17,917,716,817,217,4:Young people neither in employment nor in education and training (% of population aged 15-24)5,86,25,87,06,8:Dynamic labour markets and fair working conditionsEmployment rate (20-64 years)74,775,476,076,677,578,1Unemployment rate(2) (15-74 years)6,96,36,05,85,15,0Long-term unemployment rate (as % of active population)1,71,71,41,31,10,8Gross disposable income of households in real terms per capita(3) (Index 2008=100) 104,1107,4111,3112,9114,2:Annual net earnings of a full-time single worker without children earning an average wage (levels in PPS, three-year average)254912617026568:::Annual net earnings of a full-time single worker without children earning an average wage (percentage change, real terms, three-year average)0,591,221,27:::Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction(4)55,052,752,251,047,3:Children aged less than 3 years in formal childcare69,677,370,071,763,2:Self-reported unmet need for medical care1,41,31,31,01,3:Individuals who have basic or above basic overall digital skills (% of population aged 16-74):75,078,071,0:: 
 
 
   
 
 
C. Standard tables 

Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator       
(1) Long-term unemployed are people who have been unemployed for at least 12 months.       
(2) Difference between the average gross hourly earnings of male paid employees and of female paid employees as a 
percentage of average gross hourly earnings of male paid employees. It is defined as "unadjusted", as it does not correct for 
the distribution of individual characteristics (and thus gives an overall picture of gender inequalities in terms of pay). All 
employees working in firms with ten or more employees, without restrictions for age and hours worked, are included.       
(3) PISA (OECD) results for low achievement in mathematics for 15 year-olds.       
(4) Impact of socio-economic and cultural status on PISA (OECD) scores.       
(5) Average of first three quarters of 2019. Data for youth unemployment rate is seasonally adjusted.       
Source: Eurostat, OECD 

58 

Table C.3: Labour market and education indicatorsLabour market indicators201420152016201720182019 5Activity rate (15-64)76,676,977,577,978,279,0Employment in current job by durationFrom 0 to 11 months19,218,820,820,318,3:From 12 to 23 months11,112,512,213,014,0:From 24 to 59 months16,817,418,019,020,6:60 months or over52,451,149,047,847,2:Employment growth* (% change from previous year)0,91,41,71,61,41,2Employment rate of women(% of female population aged 20-64)71,071,572,573,273,974,5Employment rate of men (% of male population aged 20-64)78,479,379,479,980,981,7Employment rate of older workers* (% of population aged 55-64)60,763,065,868,269,271,3Part-time employment* (% of total employment, aged 15-64)24,624,726,425,324,823,9Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)8,28,412,912,310,710,8Transition rate from temporary to permanent employment(3-year average)32,239,244,841,839,4:Youth unemployment rate (% active population aged 15-24)14,212,112,212,410,510,1Gender gap in part-time employment19,518,920,219,018,918,3Gender pay gap(2) (in undadjusted form)16,015,115,014,7::Education and training indicators201420152016201720182019Adult participation in learning(% of people aged 25-64 participating in education and  training)31,931,327,726,823,5:Underachievement in education(3):13,6::14,6:Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)44,947,647,748,849,1:Variation in performance explained by students' socio-economic status(4)::::9,9:(4) Impact of socio-economic and cultural status on PISA (OECD) scores.(5) Average of first three quarters of 2019. Data for youth unemployment rate is seasonally adjusted.Sources: Eurostat, OECD* Non-scoreboard indicator(1) Long-term unemployed are people who have been unemployed for at least 12 months.(2) Difference between the average gross hourly earnings of male paid employees and of female paid employees as a percentage of average gross hourly earnings of male paid employees. It is defined as "unadjusted", as it does not correct for the distribution of individual characteristics (and thus gives an overall picture of gender inequalities in terms of pay). All employees working in firms with 10 or more employees, without restrictions for age and hours worked, are included.(3) PISA (OECD) results for low achievement in mathematics for 15 year-olds.Notes: 
 
 
   
 
 
C. Standard tables 

Table C.4: 

Social inclusion and health indicators 

* Non-scoreboard indicator       
(1) At-risk-of-poverty rate (AROP): proportion of people with an equivalised disposable income below 60 % of the national 
equivalised median income.        
(2) Proportion of people who experience at least four of the following forms of deprivation: not being able to 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.       
(3) Percentage of total population living in overcrowded dwellings and exhibiting housing deprivation.       
(4) People living in households with very low work intensity: proportion of people aged 0-59 living in households where the 
adults (excluding dependent children) worked less than 20 % of their total work-time potential in the previous 12 months.       
(5) Ratio of the median individual gross pensions of people aged 65-74 relative to the median individual gross earnings of 
people aged 50-59.       
(6) Fixed broadband take up (33%), mobile broadband take up (22%), speed (33%) and affordability (11%), from the Digital 
Scoreboard.       
Source: Eurostat, OECD 

59 

201320142015201620172018Expenditure on social protection benefits* (% of GDP)Sickness/healthcare6,46,36,26,16,6:Disability4,14,14,03,95,1:Old age and survivors13,314,013,512,712,1:Family/children3,63,53,53,43,4:Unemployment1,81,61,51,41,4:Housing0,70,70,70,70,7:Social exclusion n.e.c.1,31,31,51,51,6:Total31,331,631,029,730,9:of which: means-tested benefits11,211,311,311,111,2:General government expenditure by function (% of GDP)Social protection24,524,023,523,022,422,1Health8,58,68,58,58,48,4Education6,97,17,06,86,56,5Out-of-pocket expenditure on healthcare13,813,813,713,713,7:Children at risk of poverty or social exclusion (% of people aged 0-17)*15,414,515,713,914,515,2At-risk-of-poverty  rate(1) (% of total population)11,912,112,211,912,412,7In-work at-risk-of-poverty rate (% of persons employed)5,54,95,55,35,35,4Severe material deprivation rate(2)  (% of total population)3,63,23,72,63,13,4Severe housing deprivation rate(3), by tenure statusOwner, with mortgage or loan0,91,11,50,50,91,5Tenant, rent at market price4,84,75,13,66,05,9Proportion of people living in low work intensity households(4) (% of people aged 0-59)11,912,211,610,710,011,1Poverty thresholds, expressed in national currency at constant prices*107205108491109962110964113538114955Healthy life yearsFemales12,712,811,911,912,0:Males11,611,011,011,511,1:Aggregate replacement ratio for pensions(5)0,40,50,40,50,50,5Connectivity dimension of the Digital Economy and Society Index (DESI)(6):66,471,172,476,4:GINI coefficient before taxes and transfers*49,951,450,751,250,4:GINI coefficient after taxes and transfers*26,827,727,427,727,6: 
 
 
   
 
 
C. Standard tables 

Table C.5: 

Product market performance and policy indicators 

1 Value added in constant prices divided by the number of persons employed.       
2 Compensation of employees in current prices divided by value added in constant prices.       
3 The methodologies, including the assumptions, for this indicator are shown in detail here: 
http://www.doingbusiness.org/methodology.        
4 Average of the answer to question Q7B_a. "[Bank loan]: If you applied and tried to negotiate for this type of financing over 
the past six months, what was the outcome?". Answers were codified as follows: zero if received everything, one if received 
75% and above, two if received below 75%, three if refused or rejected and treated as missing values if the application is still 
pending or don't know.       
5 Percentage population aged 15-64 having completed tertiary education.       
6 Percentage population aged 20-24 having attained at least upper secondary education.       
7 Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are 
shown in detail here: http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm       
Please be aware that the indicator values from 2003 to 2013 are comparable, however the methodology has considerably 
changed in 2018 and therefore past vintages cannot be compared with the 2018 PMR indicators!       
8 Simple average of the indicators of regulation for lawyers, accountants, architects and engineers.       
9 Aggregate OECD indicators of regulation in energy, transport and communications (ETCR).       
Source: "European Commission; World Bank — Doing Business (for enforcing contracts and time to start a business); OECD (for 
the product market regulation 
indicators); SAFE (for outcome of SMEs' applications for bank loans)." 

60 

Performance indicators201320142015201620172018Labour productivity per person1 growth (t/t-1) in %Labour productivity growth in industry0,41-0,96-1,753,840,881,94Labour productivity growth in construction3,620,817,555,16-2,175,61Labour productivity growth in market services1,900,341,431,50-0,021,14Unit Labour Cost (ULC) index2 growth (t/t-1) in %ULC growth in industry1,153,163,97-1,360,91-0,11ULC growth in construction-2,981,22-4,07-1,424,50-3,75ULC growth in market services-0,821,010,42-0,261,580,63Business environment201320142015201620172018Time needed to enforce contracts3 (days)515485485485485485Time needed to start a business3 (days)6,06,03,53,53,53,5Outcome of applications by SMEs for bank loans40,700,440,980,790,480,67Research and innovation201320142015201620172018R&D intensity2,972,913,063,093,053,03General government expenditure on education as % of GDP6,907,107,006,806,506,50Employed people with tertiary education and/or people employed in S&T as % of total employment484848495050Population having completed tertiary education5293031313233Young people with upper secondary education6727374757575Trade balance of high technology products as % of GDP-0,10-0,040,190,10-0,24-0,27Product and service markets and competition2003200820132018*OECD product market regulation (PMR)7, overall1,481,351,221,02OECD PMR7, retail3,001,831,691,01OECD PMR7, professional services80,870,780,820,97OECD PMR7, network industries92,051,701,610,99 
 
 
  
 
 
C. Standard tables 

Table C.6:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 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 material 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.   
Weighting of energy in HICP: the proportion of 'energy' items in the consumption basket used for the construction of the HICP.  
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual % 
change).  
Real unit energy cost: real energy costs as % of total value added for the economy.  
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2010 
EUR).  
Real unit energy costs for manufacturing industry excluding refining: real costs as % of value added for manufacturing sectors.  
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP.  
Electricity and gas prices for medium-sized industrial users: consumption band 500–20 00MWh and 10 000 -100 000 GJ; figures 
excl. VAT.  
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste.  
Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP.  
Proportion of GHG emissions covered by EU emissions trading system (ETS) (excluding aviation): based on GHG emissions.  
(excl. land use, land use change and forestry) as reported by Member States to the European Environment Agency.  
Transport energy intensity: final energy consumption of transport activity including international aviation (kgoe) divided by 
gross value added in transportation and storage sector (in 2010 EUR).  
Transport carbon intensity: GHG emissions in transportation and storage sector divided by gross value added in transportation 
and storage sector (in 2010 EUR).  
Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of 
international bunker fuels.  
Aggregated supplier concentration index: Herfindahl index covering oil, gas and coal. Smaller values indicate larger 
diversification and hence lower risk.  
Diversification of the energy mix: Herfindahl index covering natural gas, total petrol products, nuclear heat, renewable 
energies and solid fuels. Smaller values indicate larger diversification.  
* European Commission and European Environment Agency - 2018 provisional data.  
Source: European Commission and European Environment Agency (Share of GHG emissions covered by ETS); European 
Commission (Environmental taxes over labour taxes and GDP); Eurostat (all other indicators). 

61 

Green growth performance201320142015201620172018MacroeconomicEnergy intensity kgoe / €0,070,070,070,070,070,07Carbon intensity kg / €0,220,200,180,190,17-Resource intensity (reciprocal of resource productivity)kg / €0,490,490,490,510,510,51Waste intensity kg / €-0,08-0,08--Energy balance of trade % GDP0,30,00,00,0-0,1-0,2Weighting of energy in HICP%10,3110,5611,3210,1511,069,45Difference between energy price change and inflation p.p.0,80,7-5,9-2,2-1,50,8Real unit of energy cost% of value added10,99,59,810,1--Ratio of environmental taxes to labour taxesratio0,170,160,170,170,16-Environmental taxes% GDP4,14,04,03,93,73,6Sectoral Industry energy intensity kgoe / € 0,040,040,040,040,040,04Real unit energy cost for manufacturing industry excl. refining% of value added5,54,94,94,9--Share of energy-intensive industries in the economy% GDP7,317,247,086,936,856,49Electricity prices for medium-sized industrial users€ / kWh0,100,100,090,090,080,08Gas prices for medium-sized industrial users€ / kWh0,040,040,040,030,030,04Public R&D for energy % GDP0,050,040,030,020,020,03Public R&D for environmental protection% GDP0,020,020,020,020,010,01Municipal waste recycling rate%42,043,745,646,746,947,9Share of GHG emissions covered by ETS*%39,136,032,734,231,631,5Transport energy intensitykgoe / €0,330,360,380,370,370,37Transport carbon intensitykg / €2,662,732,992,972,973,07Security of energy supplyEnergy import dependency%12,412,313,013,411,7-Aggregated supplier concentration indexHHI5,87,64,95,97,9-Diversification of energy mixHHI26,326,827,227,128,728,8   
 
ANNEX D 

Investment guidance on Just Transition Fund 2021-2027 for 
Denmark 

Building  on  the  Commission  proposal,  this  Annex (35)  presents  the  preliminary  Commission  services’ 
views on priority investment areas and framework conditions for effective delivery for the 2021-2027 Just 
Transition Fund investments in Denmark. These priority investment areas are derived from the broader 
analysis  of  territories  facing  serious  socio-economic  challenges  deriving  from  the  transition  process 
towards a climate-neutral economy of the Union by 2050 in Denmark, assessed in the report. This Annex 
provides the basis for a dialogue between Denmark and the Commission services as well as the relevant 
guidance  for  the  Member  States  in  preparing  their  territorial  just  transition  plans,  which  will  form  the 
basis for programming the Just Transition Fund. The Just Transition Fund investments complement those 
under  Cohesion  Policy  funding  for  which  guidance  in  the  form  of  Annex  D  was  given  in  the  2019 
Country Report for Denmark (36). 

In  Denmark,  the  cement  industry  is  located  in  the  region  of  Northern  Jutland.  In  this  industry,  process 
related greenhouse gas emissions intensity significantly exceed the EU average. 

The  carbon intensity of the industry in the  region highlights the  scale of the decarbonisation challenge, 
suggesting that the  sector would be likely to undergo, by 2030, significant restructuring in its industrial 
processes.  There  is  a  risk  of  a  negative  impact  on  the  around  350  people  directly  employed  in  the 
production,  as  well  as  further  impact  on  the  subcontractors  and  the  regional  economy.  A  restructuring, 
which  takes  into  account  social  aspects,  requires  new  innovative  solutions  for  the  whole  value  chain. 
Based on this preliminary assessment, it appears warranted that the Just Transition Fund concentrates its 
intervention on that region. 

The smart specialisation strategies (37) provide an important framework to set priorities for innovation in 
support of economic transformation. In order to tackle these transition challenges, investment needs have 
therefore been identified for making the regional economy more modern and competitive. Key actions of 
the Just Transition Fund could target in particular: 

• 

• 

• 

• 

• 

investments 
technologies; 

in  research  and  innovation  activities  and  fostering 

transfer  of  advanced 

investments in enhancing the circular economy, including through waste prevention, reduction, 
resource efficiency, reuse, repair and recycling; 

investments in the deployment of technology and infrastructures for affordable clean energy, in 
greenhouse gas emission reduction, energy efficiency and renewable energy; 

investments in the creation of new firms, including through business incubators and consulting 
services; 

productive  investments  in  SMEs,  including  start-ups,  leading  to  economic  diversification  and 
reconversion; 

• 

upskilling and reskilling of workers. 

(35)  This Annex is to be considered in conjunction with the EC proposal for a Regulation of the European Parliament and of the 
Council  on  the  Just  Transition  Fund  2021-2027    (COM(2020)  22)  and  the  EC  proposal  for  a  Regulation  of  the  European 
Parliament and of the Council laying down common provisions on the European Regional Development Fund, the European 
Social Fund Plus, the Cohesion Fund, and the European Maritime and Fisheries Fund and financial rules for those and for the 
Asylum and Migration Fund, the Internal Security Fund and the Border Management and Visa Instrument  (COM(2020) 23) 

(36) SWD(2019) 1003 final 
(37) As defined in Article 2(3) of Regulation EU 1303/2013 (CPR) 

62 

                                                           
D. Investment guidance on Just Transition Fund 2021-2027 for Denmark 

Cement  production  sites  in  Northern  Jutland,  performing  activities  listed  in  Annex  I  to  Directive 
2003/87/EC,  employ  a  substantial  number  of  workers  and  their  activity  is  at  risk  due  to  their  high 
greenhouse gas emission. Support to investments to reduce the emissions could be considered, provided 
that  they  achieve  a  substantial  reduction  of  emissions  (going  substantially  below  the  relevant 
benchmarks used  for  free  allocation  under  Directive  2003/87/EC)  and  on  the  condition  that  the 
investments are compatible with the European Green Deal. 

63 

ANNEX E 

Progress towards the Sustainable Development Goals (SDGs) 

Assessment of Denmark’s short-term progress towards the SDGs (38) 

Table E.1 shows the data for Denmark and the EU-28 for the indicators included in the EU SDG indicator 
set used by Eurostat for  monitoring progress towards the SDGs in an EU context (39). As the short-term 
trend at EU-level is assessed over a 5-year period, both the value at the beginning of the period and the 
latest available value is presented. The indicators are regularly updated on the  SDI dedicated section of 
the Eurostat website. 

Table E.1: 

Indicators measuring Denmark’s progress towards the SDGs 

(Continued on the next page) 

(38)  Data  extracted  on  15  January  2020  from  the  Eurostat  database  (official  EU  SDG  indicator  set;  see  https://ec.europa.eu/eurostat/web/sdi/main-

tables).  

 (39)  The  EU  SDG  indicator set  is aligned as  far as appropriate with the UN  list  of  global  indicators,  noting that the UN  indicators are selected  for 
global level reporting and are therefore not always relevant in an EU context. The EU SDG indicators have strong links with EU policy initiatives. 

64 

 
                                                           
 
  
 
E. Progress towards the Sustainable Development Goals (SDGs) 

Table (continued) 

(Continued on the next page) 

65 

 
 
   
 
E. Progress towards the Sustainable Development Goals (SDGs) 

Table (continued) 

(Continued on the next page) 

66 

 
 
   
 
E. Progress towards the Sustainable Development Goals (SDGs) 

Table (continued) 

(Continued on the next page) 

67 

 
 
   
 
E. Progress towards the Sustainable Development Goals (SDGs) 

Table (continued) 

More detailed information regarding the data used for the assessment available on the Eurostat SDI dedicated section 
Source: Eurostat 

68 

 
 
 
 
   
 
REFERENCES 

Bauer, P., Fedotenkov, I., Genty, A., Hallak, I.,  Harasztosi, P., Martinez Turegano, D., Nguyen, D., Preziosi, N., 
Rincon-Aznar,  A.,  Sanchez  Martinez,  M.,  (2020),  Productivity  in  Europe:  Trends  and  Drivers  in  a  Service-
Based Economy, JRC Technical Report. Brussels, Belgium. 

Cedefop  (2018),  2018  Skills  Forecast  Denmark,  European  Centre  for  Development  and  Vocational  Training, 
December 2018.  

Christensen  H.  E.,  Wederkinck  R.,  Bo  C.  and  Burman  S.,  Few  industrial  groups  contribute  significantly  to 
Denmark's balance of payments surplus, DST analysis of 29 November 2019. 

Coutinho  L.,  Turrini  A.,  and  Zeugner  S.,  Methodologies  for  the  Assessment  of  Current  Account  Benchmarks, 
Discussion paper 086 of September 2018. 

Danish  Energy  Agency  (2019),  Basisfremskrivning  2019  -  energi-  og  klimafremskrivning  under  fravær  af  nye 
tiltag (https://ens.dk/sites/ens.dk/files/Analyser/bf19.pdf). 

Danmarks  Evalueringsinstitut  (2020):  Læringsmiljø  i  kommunale  børnehaver.  National  undersøgelse.  UCN 
Absalon 
(https://www.eva.dk/sites/eva/files/2020-
01/L%C3%A6ringsmilj%C3%B8%20i%20kommunale%20b%C3%B8rnehaver_270120.pd)  

Danmarks Nationalbank (2018a), The labour market is slowly tightening. Analysis of 10 September 2018.  

Danmarks  Nationalbank  (2018b),  Globalisation  complicates  current  account  interpretation,  Analysis  of  7 
February 2018.  

Danmarks  Nationalbank  (2018c),  Impacts  of  the  2016  guidelines  on  mortgaging  of  homes,  Analysis  of 
November 2018. 

Danmarks Nationalbank (2018d), Household wealth and debt, Analysis of December 2018. 

Danmarks  Nationalbank  (2019a),  Mortgage  refinancing  supports  private  consumption,  Analysis  of  16 
September 2019.  

Danmarks Nationalbank (2019b), Stress Test: Banks are less resilient to stress, Analysis of November 2019. 

Danmarks Nationalbank (2019c), Financial Stability- 2nd half 2019, Analysis of November 2019 - No. 25. 

Damvad 
(https://ens.dk/sites/ens.dk/files/Tilskud/evaluering_af_eudp_2019.pdf). 

Muusmann 

Analytics 

(2019), 

and 

Evaluering 

af 

EUDP 

2019 

European  Commission  (2017),  Benchmarks  for  the  assessment  of  private  debt,  Note  for  the  Economic  Policy 
Committee.   

European Commission (2018), Fundamentals-based private debt benchmarks: enhanced sample and robustness 
checks, European Commission note to LIME, June. 

European Commission (2019a),  Country Report Denmark 2019, Commission Staff Working Document (2018) 
120, Publications Office of the European Union, Luxembourg.  

European Commission (2019b), Quality of petrol and diesel fuel used for road transport in the European Union. 
Reporting year 2017, COM(2019)561 final. 

69 

 
European Commission (2019c), Peer review of Danish R&I system, Horizon 2020 Policy Support Facility, 2019. 

European Commission (2019d), Survey on the access to finance of enterprises (SAFE), Analytical Report 2019, 
Publications Office of the European Union, Luxembourg. 

European  Commission  (2019e),  PISA  2018  and  the  EU,  Striving  for  social  fairness  through  education, 
Publications Office of the European Union, December 2019.                                 

European Commission (2019f), 2019 SBA Fact Sheet – Denmark. 

European  Commission  (2019g),  Employment  and  Social  Developments  in  Europe.  Sustainable  growth  for  all: 
choices for the future of Social Europe, European Commission, Brussels. 

European  Commission  (2019h),  Digital  Economy  and  Society  Index  2019,  Country  Profile  Denmark 
(https://ec.europa.eu/digital-single-market/en/desi). 

European  Commission  (2019i),  Women  in  Digital  Scoreboard  2019  (https://ec.europa.eu/digital-single-
market/en/news/women-digital-scoreboard-2019-country-reports). 

European  Commission  (2019j),  European  Innovation  Scoreboard, Publications  Office  of  the  European  Union, 
Luxembourg. 

European Commission (2019k), Taxes in the Field of Aviation and their impact, Final report of June 2019 

European 
(2020), 
data.eu/datasets/digital_agenda_scoreboard_key_indicators/visualizations) 

Commission 

Agenda 

Digital 

Scoreboard 

(https://digital-agenda-

European  Commission  (2020),  Debt  Sustainability  Monitor  2019  (https://ec.europa.eu/info/publications/debt-
sustainability-monitor-2019_en) 

European Environment Agency (2019a), Monitoring CO2 emissions from new passenger cars and vans in 2017, 
EEA report no. 15/2018.  

European  Environment  Agency  (2019b)  Annual  European  Union  greenhouse  gas  inventory  1990–2017,  EEA 
greenhouse  gas  data  viewer,  (https://www.eea.europa.eu/data-and-maps/data/data-viewers/greenhouse-gases-
viewer).  

European  Environment  Agency  (2019c),  Economic  losses  from  extreme  weather  and  climate-related  extremes 
(https://www.eea.europa.eu/data-and-maps/indicators/direct-losses-from-weather-disasters-3/assessment-2). 

European Investment Bank (2019) EIB Investment Survey – Denmark overview, Luxembourg 2019. 

(2018), 
Government 
(https://kefm.dk/media/12222/energiaftale2018.pdf). 

Denmark 

of 

Energiaftale 

af 

29. 

juni 

2018 

Government  of  Denmark  (2019a),  Aftale  om  et  sammenhængende  Danmark  -  Investeringsplan  2030 
(https://www.trm.dk/politiske-aftaler/2019/aftale-om-et-sammenhaengende-danmark-investeringsplan-2030/). 

International Monetary Fund (2019), Denmark, Selected issues, IMF Country Report No. 19/179.  

Isaksen,  J.,  Kramp,  P.  L.,  Pedersen,  E.  H.,  and  Spange,  M.  (2016),  Direkte  investeringer,  Monetary  Review, 
Danmarks Nationalbank.  

Konkurrence- og Forbrugerstyrelsen (KFST) (2019) Status for offentlig konkurrence 2019, December 2019 

Mayer,  T.  and  G.I.P.  Ottaviano  (2008),  The  happy  few:  the  internationalization  of  European  firms, 
Intereconomics 43(3), pp. 135-148. 

70 

 
Ministry of Climate, Energy and Utilities (2018), Denmark’s draft integrated national energy and climate plan. 

Ministry  of  Finance 
(https://www.fm.dk/nyheder/pressemeddelelser/2019/02/regeringen-nedsaetter-kommission-for-groen-
omstilling-af-personbiler).  

for  grøn  omstilling  af  personbiler 

(2019),  Kommission 

i  Danmark 

Ministry  of  Taxation  (2018),  Afgifts-  og  tilskudsanalysen  på  energiområdet.  Delanalyse  4,  Afgifts-  og 
tilskudssystemets  virkninger  på  indpasning  af  grøn  energi  (https://www.skm.dk/media/1827216/Afgifts-og-
tilskudsanalysen-delanalyse-4.pdf). 

Ministry 
(https://www.ft.dk/samling/20182/spoergsmaal/s43/svar/1582790/2064090/index.htm). 

Boligudvalget 

Transport- 

Transport 

(2019), 

og 

of 

2018-19 

(2. 

samling) 

Morandini  M.  C.,  Thum-Thysen  A.  and  Vandeplas  A.,  Facing  the  digital  transformation:  are  digital  skills 
enough?, Discussion paper, forthcoming. 

OECD Economic Surveys (2019a), Denmark, January 2019.  

OECD (2019b), PISA 2018 Results (Volume I-II-III), OECD Publishing, Paris. 

OECD (2019c), Economic policy reports: Going for growth, Denmark, 2019.  

Økonomi- og Indenrigsministeriet (2018), Konkurrenceudsættelse – den bedst mulige service for pengene, May 
2018 

Pellegrino,  B.  and  Zingales,  L.,  (2017), Diagnosing  the  Italian  disease (No.  w23964),  National  Bureau  of 
Economic Research. 

Rambøll (2018), Evaluering af Integrationsgrunduddannelsen (IGU), June 2018, Copenhagen. 

Rigsrevisionen (2020), Statens indsats mod hvidvask og finansiering af terrorisme, January 2020, Copenhagen. 

Social  Democratic  Party  et  al.,  2019,  Politisk  forståelse  mellem  Socialdemokratiet,  Radikale  Venstre,  SF  og 
Enhedslisten:  Retfærdig  retning 
(https://ufm.dk/ministeriet/regeringsgrundlag-vision-og-
strategier/regeringen-mette-rasmussens-forstaelsespapir/retfaerdig-retning-for-danmark_2019-06-
25_endelig.pdf).  

for  Danmark 

Statistics Denmark (2019), Production abroad has an effect on Danish GDP, DST Analyse of 7 June 2019.  

The 
afgifter 
(https://klimaraadet.dk/da/analyser/fremtidens-groenne-afgifter-paa-energiomraadet).  

Fremtidens 

(2018a), 

Council 

Climate 

grønne 

på 

energiområdet 

The  Climate  Council  (2018b),  Klimarådet  roser  udspil,  men  kritiserer  kvotekøb  over  omstilling  af  landbruget 
(https://klimaraadet.dk/da/nyheder/klimaraadet-roser-udspil-men-kritiserer-kvotekoeb-over-omstilling-af-
landbruget).  

The  Climate  Council  (2018c),  Flere  elbiler  på  vejene  (https://klimaraadet.dk/da/analyser/flere-elbiler-paa-
vejene). 

Danish 

The 
(https://skat.dk/skat.aspx?oid=2234584). 

Customs 

and 

Tax 

Administration 

(2019), 

Fradrag 

for 

energiafgifter 

The Danish Economic Councils (2017), Produktivitet 2017, rapport fra produktivitetsrådet, December 2017.  

The Danish Economic Councils (2018), Økonomi og Miljø 2018, June 2018. 

The Danish Economic Councils (2019a), Dansk økonomi forår 2019, 2019. 

71 

 
 
The Danish Economic Councils (2019b), Økonomi og Miljø 2019, June 2019. 

The Danish Economic Councils (2019c), Produktivitet 2019, rapport fra produktivitetsrådet, March 2019.  

The  Energy  Commission 
(https://kefm.dk/media/8275/energikommisionens). 

(2017),  Energikommissionens  anbefalinger 

til 

fremtidens  energipolitik 

Thum-Thysen  A,  Voigt  P.,  Bilbao-Osorio  B.,  Maier  C.,  Ognyanova  D.  (2017),  Unlocking  Investment  in 
Intangible Assets, Discussion Paper of May 2017. 

Vandeplas A. and Thum-Thysen A. (2019), Skills Mismatch & Productivity in the EU, Discussion paper of July 
2019.  

Wanscher H. M., Online grocery shopping tripled in the last ten years (updated), DST analysis of 5 September 
2019. 

72