running at normal capacity would be of detriment to all parties. 2. 2 fiscal consolidation turning to fiscal consolidation, it is often stressed that such measures, together with structural reforms, would be too much of a burden. they would create a vicious circle of decreasing demand and further budget pressure that would eventually bring the economy down. but to the extent that the current output level was fuelled by an unsustainable ballooning of private and public debt, correction as such is unavoidable, and the only question that remains is that of the best timing. however, this crisis is a crisis of confidence. while, under normal circumstances, consolidation might dampen the economy, the lack of trust in public finances and in policymakers ” willingness to act is a huge burden for growth. thus, frontloaded, and therefore credible, consolidation would instead strengthen confidence, actually help the economy to grow and reduce the danger of the crisis spreading to the financial system. in addition, urgently needed structural reforms and consolidation are often hard to disentangle. for example, a bloated public sector or very generous pension system are both a drag on growth and a burden on the budget. the same applies to inefficient companies that are state - owned or operate in highly regulated sectors. the risks to growth emanating from immediate fiscal consolidation therefore have to be put into perspective. negative short - term effects cannot be ruled out. but to the extent that consolidation constitutes necessary corrections of an unsustainable development and brings about greater efficiency, the long - term gains do not only vastly exceed potential short - term pain, they also help to alleviate it now by restoring the lost credibility in the ability to tackle the root causes of the crisis. the role of monetary policy up to now, the picture has been mixed in this regard. we have seen substantial progress, often initiated by new, more reform - minded governments, but also some setbacks. a much clearer pattern has emerged with respect to the expectations placed on monetary policy. whenever a new intensification of the crisis looms, the first question seems to be “ what can the central banks do about this? ” to me, this is a worrisome development. monetary policy has already gone a very long way towards containing the crisis. but we have to be aware that the medicine of a very low interest rate policy, ample provision of liquidity at very favourable conditions and large - scale financial market intervention does not come without side effects

##marks nationalbank ecb - 1 - 2 note : key policy rates. source : thomson reuters og danmarks nationalbank. danish government bond yields comoves strongly with german yields per cent 2. 50 suspension of government bond sales 2. 00 1. 50 1. 00 denmark 0. 50 0. 00 germany - 0. 50 note : 9 - year par rates. source : nordea analytics. decline in long - term danish yields in line with core euro area countries basis points decline in 9 - year government bond yields periphery core floater denmark finland france germany netherlands italy portugal spain sweden uk note : aggregate decline in sovereign bond yields in two - day windows following 17 pieces of ecb communication. source : thomson reuters datastream, ecb and own calculations. households are largely exempt from negative interest rates on deposits rate of interest on bank deposits percentage share other types of deposits demand deposits excl. lending - related deposits non - financial corporations negative insurance and pension companies zero wage earners, pensioners, etc. positive note : ‘ other types of deposits ’ refer to time deposits, lending - related deposits, etc. source : danmarks nationalbank. share of cash payments in denmark is declining steadily per cent 2016 : 20 per cent cash payments cheque payments card payments note : payments made by smart phones are included in card payments. source : statistics denmark, danmarks nationalbank, finance denmark, nets and own calculations. danmarks nationalbank thank you!