Alter Euro: Denmark

Denmark still has its own national currency, the Danish Krone, which is pegged to the euro due to ERM II membership.
credit: Flickr

On January 1, 1973, Ireland, Great Britain and Denmark joined the European Union. Thanks to this first enlargement, there were now nine members of the European Union. Denmark was the first Nordic to integrate into the European organization at the time.

Throughout the history of European construction, the Nordic countries have been distinguished by their Euroscepticism. As demonstrated by their political solidarity with Great Britain at the European Congress in The Hague in 1948, these countries are reluctant to create a European supranational organization. Consequently, Denmark’s accession to the European Union in 1973 brought a significant innovation to its particular view of international relations. However, we can put this finding into perspective by noting that Denmark is not yet part of the eurozone.

A history full of upheavals for Denmark and her crown

Currently, the official currency of Denmark is the Danish Krone. The latter replaced the Danish dollar by the monetary law of 1873. At that time, Denmark decided to join forces with Sweden to form the Scandinavian Monetary Union. Norway will join this union in a few years. Thanks to this union, the States had the ambition to achieve some monetary stability in the region through a common exchange rate based on gold. Today, this monetary union no longer exists. Indeed, in 1914, especially due to Sweden’s economic difficulties, the three states decided to end this system. Later, in 1929, the Great Depression led to a major devaluation of the Danish krone. To overcome this, Denmark participated in the Bretton Woods agreements in 1944. These agreements aimed to organize an international monetary system through the free convertibility of currencies and the stability of exchange rates. Despite these efforts, the Danish crown suffered greatly from the war, as evidenced by the devaluation of the latter by more than 30% in 1949. In 1971, the Bretton Woods system ceased to exist and Denmark participated for the first time. , exclusively to the European monetary system.

After joining the European Union in 1973, Denmark benefited from the European money snake inherent in the European Economic Community. This system aimed to limit the exchange of European currencies between them, as allowed by the Bretton Woods system. This system will effectively allow to achieve certain European monetary stability. After that, various European heads of state naturally turned to a more ambitious policy, a single currency: the euro.

Danish euroscepticism is the basis of the reasons for not participating in the euro

On February 7, 1992, European heads of state signed the Maastricht Treaty. This agreement laid the foundation for the common currency policy, but did not allow the direct circulation of the euro. Only in 1995, during the Madrid European Council, the heads of state and government agreed on the creation of a single currency. Despite the almost unanimous will of the member states, Denmark quickly expressed its reservations about the project. Indeed, as early as 1992, the Nordic state negotiated an opt-out clause. This clause, popularized by British diplomacy, allows a state to withdraw from a specific obligation under a European treaty. So, on December 11 and 12 at the meeting of the Council of Europe by Denmark Denmark in Europe he expressed his reservations about the general monetary policy. For various reasons, the Danes were and remain shunned by this project, as evidenced by the referendum held that same year, where 50.72% of Danes voted against the adoption of the Maastricht Treaty. Various reasons lead Denmark to refuse to replace the Danish krone. This state, like its Northern neighbors, is famous for its Euroscepticism. This Scandinavian Euroscepticism is associated with a fear of bureaucracy and a commitment to direct, liberal democracy as well as a generous welfare state. Likewise, this distance towards the European Union is sometimes described by the doctrine as a result of the “small state” syndrome. This syndrome, described by the Norwegian historian Peter Munch from the beginning of the 19th century, ” The one and only request we have of Danish diplomacy is to keep quiet and do our best to remain as inconspicuous as possible. “. Denmark would thus be confined to its almost isolated peculiarity. As a result of the previous two factors, we can regard this distance from the rest of Europe as the result of patriotism and attachment to state sovereignty. It does not participate in European justice.

Is a refund possible?

For all reasons, Denmark prefers its historical currency, the Danish krone. Nevertheless, it seems that a change is taking place in the Danish political ranks. Currently, the majority of the country’s political parties are in favor of adopting a single currency. Referendum proposals are regularly brought up, but they are still not implemented, mainly due to the reluctance of some political parties and the uncertainty of the Danish population. Indeed, even though the euro is making headway among the Danish population, support for the euro declines with each economic crisis. After the June 1, 2022 referendum, Denmark initiated rapprochement with the European Union by deciding to join the common European defense policy. This progress would also be possible in the field of money. Indeed, most Danish economists believe that this change will not harm the Danish economy. A switch from the Danish krone to the euro may be envisaged in the future.

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