in our supply chains. and we must not be blind to the fact that in a more unstable world, there may be good reasons from a security perspective why we in the eu, for example, should be able to produce more of the energy we need ourselves. or reduce our dependence on individual countries for raw materials and products that are important in many sectors. however, this must not become an excuse for classic protectionism and broad - based government subsidies. and our analyses show that small open economies are particularly vulnerable to such developments. the single market, globalisation and the danish economy we must always be aware of the benefits that denmark has gained from globalisation. many danish companies have excelled at taking advantage of globalisation, and in several sectors they have become leaders in the world market. at the same time, access to cheap imports has helped keep price increases down. it has also benefited employment, among other things. globalisation has helped increase productivity by allowing companies to locate their production where it is most efficient. at the same time, technological advances and innovation have spread faster globally because countries and companies have had to adapt to global competition. but if government subsidies and other trade barriers become more wide - spread it will reduce efficiency, increase costs and hinder innovation. all in all, this will result in lower productivity and real economic growth, both here in denmark and globally. this is in a reality where productivity in the eu is challenged and where fac - tors such as demographics and the green transition are already contributing to low structural growth in the coming years. the so - called draghi report contains many relevant proposals on what eu - rope needs to do to become more productive and competitive vis - a - vis the us and china. i would like to emphasise one proposal in particular. it is not that extraordi - nary, but it has great potential. 2 / 6 bis - central bankers'speeches the proposal is about improving the eu single market. we must remember that every time a member state has special rules in the eu, it has an economic cost. what we economists call negative externalities. the international monetary fund, imf, has found that trade costs within the eu are equivalent to an ad valorem tax of 44 per cent. the interstate trade costs in the us are equivalent to an ad valorem tax of 15 per cent. but removing barriers in the single market is a long haul. it is not a quick and easy solution. that is why it is crucial that

hugo frey jensen : creating relations in a digital new ( banking ) world speech by mr hugo frey jensen, governor of the national bank of denmark, at the director ’ s conference of the danish bankers association, copenhagen, 8 september 2014. * * * thank you for inviting me to speak here today. the heading of today ’ s conference – “ creating relations in a digital new ( banking ) world ” – shows that the banks now have the strength and resources to look forward after a few years in the shadow of the financial crisis. this is positive and on the whole tallies with danmarks nationalbank ’ s assessment of the economic situation and the general condition of the banking sector. the danish economy is recovering after some difficult years. admittedly, the most recent figures show a small decline in gdp in the 2nd quarter, but viewed in a larger context, activity has grown since the end of 2012. it is important to stay focused on the underlying trend and not to become hypnotised by quarter - on - quarter fluctuations. decreasing north sea oil output is reducing overall production these years. if this factor is disregarded, value added in the danish economy is now 2 per cent higher than in 2012 – and rising. the increase in activity has also been reflected in the labour market, where employment has been picking up over the last year or so. employment is developing at a steadier pace than production. as a result, productivity development is a little jerky, which is quite normal for the danish economy. as the economy has improved, pressures on the danish banks have gradually eased. but a few banks are suffering from the repercussions of the crisis and several banks are still struggling with low return on equity. the sector has ample excess liquidity cover, and for this reason danmarks nationalbank has phased out the temporary measures introduced to boost the banks ’ liquidity. these included the option to raise 6 - month loans from danmarks nationalbank and to pledge sector company shares and credit claims as collateral. the financial crisis is over, but it has left its mark. above all, the crisis has reduced the number of banks in denmark. as the chart shows, it has amplified a trend that has been evident for many years. in our monetary review from the 4th quarter of 2013, we examined productivity and cost efficiency in the financial sector. in terms of the cost - to - income ratio, denmark seems to differ from comparable countries. the figures indicate that resource consumption within the sector has