Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of Denmark and delivering a Council opinion on the 2020 Convergence Programme of Denmark
Date: 2020-05-20
Institutions: European Commission, Secretariat-General
Subjects: Denmark, economic policy, economic recovery, economic reform, epidemic, infectious disease, investment, money laundering, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 20.5.2020  COM(2020) 504 final  Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of Denmark and delivering a Council opinion on the 2020 Convergence Programme of Denmark  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2020 National Reform Programme of Denmark and delivering a Council opinion 
on the 2020 Convergence Programme of Denmark 

THE COUNCIL OF THE EUROPEAN UNION, 

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

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

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

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

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

(2) 

(3) 

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On  17  December  2019,  the  Commission  adopted  the  Annual  Sustainable  Growth 
Strategy,  marking  the  start  of  the  2020  European  Semester  for  economic  policy 
coordination. It took due account of the European Pillar of Social Rights, proclaimed 
by the European Parliament, the Council and the Commission on 17 November 2017. 
On  17  December  2019,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission  also  adopted  the  Alert  Mechanism  Report,  in  which  it  did  not  identify 
Denmark as one of the Member States for which an in-depth review would be carried 
out.  
The 2020 country report for Denmark2 was published on 26 February 2020. It assessed  
Denmark’s  progress  in  addressing  the  country-specific  recommendations  adopted  by 
the Council on 9 July 20193, the follow-up given to the recommendations adopted in 
previous years and Denmark's progress towards its national Europe 2020 targets. 

On 11 March 2020, the World Health Organization officially declared the COVID-19 
outbreak  a  global  pandemic.  It  is  a  severe  public  health  emergency  for  citizens, 
societies  and  economies.  It  is  putting  national  health  systems  under  severe  strain, 

OJ L 209, 2.8.1997, p. 1. 
SWD(2020) 503 final. 
OJ C 301, 5.9.2019, p. 117. 

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disrupting  global  supply  chains,  causing  volatility  in  financial  markets,  triggering 
consumer  demand  shocks  and  having  negative  effects  across  various  sectors.  It  is 
threatening  people’s  jobs,  their  incomes  and  companies’  business.  It  has  delivered  a 
major  economic  shock  that  is  already  having  serious  repercussions  in  the  European 
Union. On 13 March 2020, the Commission adopted a Communication4 calling for a 
coordinated economic response to the crisis, involving all actors at national and Union 
level. 

Several  Member States have declared  a state of  emergency or introduced emergency 
measures.  Any  emergency  measures  should  be  strictly  proportionate,  necessary, 
limited in time, and in line with European and international standards. They should be 
subject to democratic oversight and independent judicial review. 

On  20  March  2020,  the  Commission  adopted  a  Communication  on  the  activation  of 
the general escape clause of the Stability and Growth Pact5. The clause, as set out in 
Articles 5(1), 6(3), 9(1) and 10(3) of Regulation  (EC) 1466/97 and Articles 3(5) and 
5(2) of Regulation (EC) 1467/97, facilitates the coordination of budgetary policies in 
times  of  severe  economic  downturn.  In  its  Communication,  the  Commission  shared 
with the Council its view that, given the expected severe economic downturn resulting 
from  the COVID-19 outbreak, the  current  conditions  permit  activation of the clause. 
On  23  March  2020,  the  Ministers  of  Finance  of  the  Member  States  agreed  with  the 
assessment of the Commission. The activation of the general escape clause allows for 
a temporary departure from the adjustment path  towards the medium-term budgetary 
objective,  provided  that  this  does  not  endanger  fiscal  sustainability  in  the  medium 
term. For the corrective arm, the Council may also decide, on a recommendation from 
the Commission,  to  adopt  a revised  fiscal  trajectory. The  general  escape  clause does 
not suspend the procedures of the Stability and Growth Pact. It allows Member States 
to depart from the budgetary requirements that would normally apply while enabling 
the  Commission  and  the  Council  to  undertake  the  necessary  policy  coordination 
measures within the framework of the Pact.  

Continued  action  is  required  to  limit  and  control  the  spread  of  the  pandemic, 
strengthen  the  resilience  of  the  national  health  systems,  mitigate  the  socio-economic 
consequences through supportive measures for business and households and to ensure 
adequate  health  and  safety  conditions  at  the  workplace  with  a  view  to  resuming 
economic  activity.  The  Union  should  fully  use  the  various  tools  at  its  disposal  to 
support  Member  States’  efforts  in  those  areas.  In  parallel,  Member  States  and  the 
Union should work together to prepare the measures necessary to get back to a normal 
functioning of our societies and economies and to sustainable growth, integrating inter 
alia  the  green  transition  and  the  digital  transformation,  and  drawing  all  lessons  from 
the crisis. 

The  COVID-19  crisis  has  highlighted  the  flexibility  that  the  single  market  offers  to 
adapt  to  extraordinary  situations.  However,  in  order  to  ensure  a  swift  and  smooth 
transition to the recovery phase and the free movement of goods, services and workers, 
exceptional  measures that prevent  the single market  from  functioning  normally must 
be removed as soon as they are no longer indispensable. The current crisis has shown 
the need for crisis preparedness plans in the health sector, which include in particular 
improved  purchasing  strategies,  diversified  supply  chains  and  strategic  reserves  of 

(4) 

(5) 

(6) 

(7) 

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COM(2020) 112 final. 
COM(2020) 123 final. 

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(8) 

essential  supplies.  They  are  key  elements  for  developing  broader  crisis  preparedness 
plans. 
The  Union  legislator  has  already  amended  the  relevant  legislative  frameworks6  to 
allow  Member  States  to  mobilise  all  unused  resources  from  the  European  Structural 
and  Investment  Funds  so  they  can  address  the  exceptional  effects  of  the  COVID-19 
pandemic. Those amendments will provide additional flexibility, as well as simplified 
and streamlined procedures. To alleviate cash flow pressures, Member States can also 
benefit  from  a  100%  co-financing  rate  from  the  Union  budget  in  the  2020-2021 
accounting year. Denmark is encouraged to make full use of those possibilities to help 
the individuals and sectors most affected by the challenges. 

(9) 

On 7 May 2020, Denmark submitted its 2020 National Reform Programme and, on 5 
May  2020,  its  2020  Convergence  Programme.  In  order  to  take  account  of  their 
interlinkages, the two programmes have been assessed at the same time. 

(10)  Denmark is currently in the preventive arm of the Stability and Growth Pact.  

(11) 

(12) 

In  its  2020  Convergence  Programme,  the  government  plans  the  headline  balance  to 
deteriorate  from  a  surplus  of  3,7%  of  GDP  in  2019  to  a  deficit  of  8,0%  of  GDP  in 
2020. The deficit is projected to decline to 2,4% of GDP in 2021. After decreasing to 
33,2%  of  GDP  in  2019,  the  general  government  debt-to-GDP  ratio  is  expected  to 
increase  to  40,7%  in  2020  according  to  the  2020  Convergence  Programme.  The 
macroeconomic and fiscal outlook is affected by high uncertainty due to the COVID-
19 pandemic.   

In response to the COVID-19 pandemic, and as part of a coordinated Union approach, 
Denmark has adopted budgetary measures to increase the capacity of its health system, 
contain  the  pandemic,  and  provide  relief  to  those  individuals  and  sectors  that  have 
been  particularly  affected.  According  to  the  2020  Convergence  Programme,  those 
budgetary  measures  amounted  to  4,9%  of  GDP.  The  measures  include  strengthening 
health care services, temporary compensation for fixed costs of businesses, temporary 
wage  compensation  scheme  and  emergency  aid  for  distressed  sectors.  In  addition, 
Denmark  has  announced  measures  that,  while  not  having  a  direct  budgetary  impact, 
will  contribute  to  support  liquidity  to  businesses,  which  the  2020  Convergence 
Programmes  estimates  at  approximately  15%  of  GDP.  Those  measures  include  tax 
deferrals for personal and corporate income taxes and loan guarantees (3,7% of GDP). 
Compared  to  the  Commission  2020  spring  forecast,  the  main  difference  is  that  the 
Convergence Programme includes expected future losses stemming from COVID-19-
related State guarantees (0.5% of GDP). Overall, the measures taken by Denmark are 
in line with the guidelines set out in the Commission Communication on a coordinated 
economic  response  to  the  COVID-19  outbreak.  The  full  implementation  of  those 
measures,  followed  by  a  refocusing  of  fiscal  policies  towards  achieving  prudent 
medium-term  fiscal  positions  when  economic  conditions  allow,  will  contribute  to 
preserving fiscal sustainability in the medium term. 

6 
Regulation (EU) 2020/460 of the European Parliament and of the Council of 30 March 2020 amending 
Regulations  (EU)  No  1301/2013,  (EU)  No  1303/2013  and  (EU)  No  508/2014  as  regards  specific  measures  to 
mobilise  investments  in  the  healthcare  systems  of  Member  States  and  in  other  sectors  of  their  economies  in 
response to the COVID-19 outbreak (Coronavirus Response Investment Initiative) (OJ L 99, 31.3.2020, p. 5) and 
Regulation  (EU)  2020/558  of  the  European  Parliament  and  of  the  Council  of  23  April  2020  amending 
Regulations  (EU)  No  1301/2013  and  (EU)  No  1303/2013 as  regards  specific  measures  to  provide  exceptional 
flexibility for the use of the European Structural and Investments Funds in response to the COVID-19 outbreak 
(OJ L 130, 24.4.2020, p. 1). 

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(13)  Based on the Commission 2020 spring forecast under unchanged policies, Denmark’s 
general government balance is forecast at -7,2% of GDP in 2020 and -2,3% in 2021. 
The general government debt ratio is projected to remain below 60% of GDP in 2020 
and 2021. 

(14)  On 20 May 2020, the Commission issued a report prepared in accordance with Article 
126(3)  of  the  Treaty  due  to  Denmark’s  planned  breach  of  the  3%  of  GDP  deficit 
threshold in 2020. Overall, the analysis suggests that the deficit criterion as defined in 
the Treaty and in Regulation (EC) No 1467/1997 is not fulfilled. 

(15)  The COVID-19 pandemic affected Denmark heavily in the first half of 2020, putting 
the health system under pressure and markedly reducing economic activity in certain 
sectors.  Denmark  implemented  timely  measures  to  stem  the  pandemic  and  to 
strengthen the health system, including far-ranging initiatives to mitigate its economic 
consequences. The resulting economic downturn was addressed by a series of strong 
economic and financial measures by the government and the Central Bank, including 
direct  support  to  partly  cover  businesses’  fixed  costs  and  wage  expenditures,  tax 
deferrals  and  liquidity  provision  for  banks  and  firms,  credit  schemes  and  other 
monetary  policy  measures.  In  the  process  of  designing  and  implementing  these 
measures  the  resilience  of  the  banking  sector  needs  to  be  taken  into  account.  These 
measures effectively reduced the economic shock of the pandemic, but did not prevent 
a  significant  loss  of  output,  a  large  number  of  bankruptcies  and  insolvencies  and 
marked  increases  in  unemployment  and  persons  at  risk  of  poverty,  including  among 
those  in  vulnerable  situations  (e.g.  persons  with  disabilities).  According  to  the 
Commission  forecast,  unemployment  is  expected  to  moderately  increase  to  around 
6½% in 2020 before recovering to below 6% in 2021. 

(16)  The ongoing COVID-19 crisis underlines the need for Denmark to continuously work 
to strengthen the resilience of its health system. One issue of particular concern is the 
shortage  of  health  workers,  and  the  lack  of  specialised  doctors  and  nurses  in  e.g. 
intensive  care  (in  particular  nurse  anaesthetists).  Continuous  efforts  to  address  these 
labour  shortages  is  key.  In  the  short  term,  Denmark  should  work  to  ensure  the 
availability  of  critical  medical  products,  including  personal  protective  equipment  for 
health  workers.  Research  is  ongoing  to  find  not  only  an  antiviral  treatment  and  a 
vaccine, but also better and faster testing.  

(17)  To  foster  the  economic  recovery,  it  will  be  important  to  front-load  mature  public 
investment  projects  and  promote  private  investment,  including  through  relevant 
reforms. Denmark is performing well in the field of digitisation,  as evidenced by the 
European Commission’s Digital Scoreboard. However, to maintain this strong position 
in  the  long  term  and  to  ensure  its  competitiveness  and  benefit  from  the  digital 
transformation,  Denmark  would  need  investment  in  digital  infrastructure  as  well  in 
education,  training  and  upskilling.  Denmark’s  National  Energy  and  Climate  Plan 
reports  important  investment  needs  to  tackle  successfully  the  climate  and  energy 
transition.  The largest  investments  are required for the installation of new renewable 
energy capacity, while significant  investment  needs are  also  identified in  households 
(energy  efficiency  and  conversion  of  heat  supply),  sustainable  transport,  industry  as 
well as biogas and district heating. Denmark's climate policy objectives aim to reduce 
greenhouse gas emissions by 70% by 2030, compared with 1990, and achieve climate 
neutrality by 2050 at the latest. To reflect this, energy consumption would need to be 
put on a downward trend, requiring investments that follow a comprehensive approach 
and focus on sectors where energy savings are particularly promising. The economic 
recovery from the COVID-19 crisis could be fostered by front-loading planned green 

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investments  and  advancing  ambitious  environmental,  climate,  energy  and 
infrastructure  investment  projects,  such  as  in  housing,  offshore  wind,  energy 
connectivity  and  railway  electrification.  Transport  is  Denmark's  largest  source  of 
greenhouse  gas  emission,  making  further  policy  action  in  this  area  particularly 
pertinent. The government's "Green Transport Policy", which aims to allocate EUR 15 
billion (DKK 112,7 billion) mainly to transport infrastructure projects in 2021-2030, is 
currently  under  negotiation 
to  climate  and 
environmental objectives. The programming of the Just Transition Fund for the period 
2021-2027  could  help  Denmark  to  address  some  of  the  challenges  posed  by  the 
transition  to  a  climate  neutral  economy,  in  particular  in  the  territories  covered  by 
Annex D to the country report. This would allow Denmark to make the best use of that 
fund. 

to  give  greater  considerations 

(18)  Overall  research  and  development  (R&D)  spending  has  not  translated  into  higher 
productivity  growth  in  Denmark.  An  integrated  innovation  strategy,  which  clearly 
spells out what Denmark wants to achieve within the global innovation landscape, is 
missing. Research and innovation activity remains concentrated in a small number of 
large  firms  and  foundations  and  mostly  in  the  pharmaceutical  and  biotechnology 
sectors.  The  eight  largest  companies  account  for  almost  40%  of  total  private  R&D 
expenditure (vs. worldwide average of 19%). Overall R&D spending remains high, but 
the  absolute  number  of  companies  active  in  R&D  has  declined  since  2009,  largely 
because  smaller  firms  are  not  engaging  in  R&D.  Only  33%  of  SMEs  introduced 
product  or  process  innovations.  Therefore  further  policy  efforts  could  be  needed  to 
broaden  the  innovation  base  with  the  objective  to  include  more  companies. 
Responding  to  changing  skill  needs  after  COVID-19,  also  in  light  of  future 
technological  changes,  requires  sustained  investment  in  upskilling  and  reskilling 
schemes, including through adult learning 

(19)  Denmark has taken steps to strengthen its anti-money laundering (AML) framework. 
In 2019, new legislation was adopted and national authorities and regulators started to 
implement a range of measures to strengthen Denmark's preventive AML framework. 
The  Financial  Supervisory  Authority  has  been  granted  sanctioning  powers  and  a 
higher  budget  to  enhance  its  AML  supervisory  capacity.  The  Financial  Intelligence 
Unit has also received additional staffing and funding. It is crucial that the enhanced 
AML  framework  is  translated  into  effective  supervision  and  enforcement.  In 
particular, the AML supervisor will need to fully implement the risk-based approach. 
The  enhanced  capacity  of  the  Financial  Intelligence  Unit  will  need  to  show  that 
weaknesses, highlighted by the Danish Court of Auditors report, have been adequately 
addressed. 

to  address  medium- 

(20)  While the present recommendations focus on tackling the socio-economic impacts of 
the  pandemic  and  facilitating  the  economic  recovery,  the  2019  country-specific 
recommendations adopted by the Council on 9 July 2019 also covered reforms that are 
structural  challenges.  Those 
essential 
recommendations remain pertinent and will continue to be monitored throughout next 
year’s  European  Semester  annual  cycle.  That  also  applies  to  recommendations 
regarding investment-related economic policies. The latter recommendations should be 
taken  into  account  for  the  strategic  programming  of  cohesion  policy  funding  post-
2020, including for mitigating measures and exit strategies with regard to the current 
crisis. 

long-term 

to 

(21)  The  European  Semester  provides  the  framework  for  continuous  economic  and 
employment  policy  coordination  in  the  Union,  which  can  contribute  to  a  sustainable 

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economy.  Member  States  have  taken  stock  of  progress  regarding United  Nations’ 
Sustainable  Development  Goals  (SDGs)  implementation  in  their  2020  National 
Reform  Programmes.  By  ensuring  the  full  implementation  of  the  recommendations 
below, Denmark will contribute to the progress towards the SDGs and to the common 
effort of ensuring competitive sustainability in the Union.  

In  the  context  of  the  2020  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Denmark’s  economic  policy  and  published  it  in  the  2020 
country  report.  It  has  also  assessed  the  2020  Convergence  Programme  and  the  2020 
National  Reform  Programme  and  the  follow-up  given  to  the  recommendations 
addressed  to  Denmark  in  previous  years.  It  has  taken  into  account  not  only  their 
relevance for sustainable fiscal  and socioeconomic policy in  Denmark, but  also  their 
compliance with Union rules and guidance, given the need to strengthen the Union’s 
overall  economic  governance  by  providing  Union-level  input  into  future  national 
decisions.  

(23) 

In  the  light  of  that  assessment,  the  Council  has  examined  the  2020  Convergence 
Programme and its opinion7 is reflected in particular in recommendation (1) below, 

HEREBY RECOMMENDS that Denmark take action in 2020 and 2021 to: 

1. 

2. 

3. 

In  line  with  the  general  escape  clause,  take  all  necessary  measures  to  effectively 
address the pandemic, sustain the economy and support the ensuing recovery. When 
economic  conditions  allow,  pursue  fiscal  policies aimed  at  achieving  prudent 
medium-term  fiscal  positions  and  ensuring  debt  sustainability, while  enhancing 
investment.  Enhance  the  resilience  of  the  health  system,  including  by  ensuring 
sufficient critical medical products and addressing the shortage of health workers. 

Front-load  mature  public  investment  projects  and  promote  private  investment  to 
foster the economic recovery. Focus investment on the green and digital transition, in 
particular on clean and efficient production and use of energy, sustainable transport 
as well as research and innovation. Support an integrated innovation strategy with a 
broader investment base. 

Improve  the  effectiveness  of  anti-money  laundering  supervision  and  effectively 
enforce the anti-money laundering framework. 

Done at Brussels, 

For the Council 
The President 

7 

Under Article 9(2) of Council Regulation (EC) No 1466/97. 

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