Lisbon Treaty and Danish opt-outs

1. How does the future of the EU after the Irish ‘No’ look like?

 

In gen­er­al, the solu­tion to the rat­i­fi­ca­tion cri­sis was met with great sat­is­fac­tion in Den­mark and was con­ceived as a sign that the EU, despite cri­sis, is still able to find a com­mon way for­ward. The renewed will to reach con­sen­sus and pro­duce results was inter­pret­ed as a result of the effec­tive lead­er­ship of the French Pres­i­den­cy, and as a result of the cur­rent finan­cial cri­sis and the eco­nom­ic reces­sion which have cre­at­ed a need for the mem­ber states to move clos­er together.[1]

Pri­or to the Euro­pean Coun­cil meet­ing, the Dan­ish Prime Min­is­ter, Anders Fogh Ras­mussen, voiced sat­is­fac­tion with Ire­land hold­ing a sec­ond ref­er­en­dum with con­ces­sions from the EU on the right to keep one Com­mis­sion­er per coun­try. The con­ces­sion was easy to grant for the Dan­ish gov­ern­ment as the Dan­ish debate on the Lis­bon Treaty had also showed con­cerns about reduc­ing the size of the Commission.[2]

The Dan­ish gov­ern­ment is con­cerned about a pos­si­ble ‘No’ in the sec­ond Irish ref­er­en­da. This will not only drag the Union into anoth­er cri­sis but would also have seri­ous con­se­quences for the pos­si­bil­i­ty of abol­ish­ing the four Dan­ish opt-outs. The Dan­ish gov­ern­ment has promised to hold a ref­er­en­dum on the opt-outs before the next nation­al elec­tions in 2011. Ras­mussen has on a num­ber of occa­sions declared that it is mean­ing­less to hold a ref­er­en­dum on the Dan­ish opt-outs before the rat­i­fi­ca­tion cri­sis is solved and the Lis­bon Treaty has come into force.[3]

A sec­ond Irish ‘No’, togeth­er with an anti-Euro­pean UK gov­ern­ment is like­ly to lead to a mul­ti-speed Europe. This might include the use of ‘enhanced coop­er­a­tion’ involv­ing clos­er coop­er­a­tion amongst small­er groups of mem­ber states (such as EMU and the Social Chap­ter inside the EU; and the Schen­gen and Prüm Treaties out­side the EU). The three most like­ly are­nas for such clos­er coop­er­a­tion are defence and secu­ri­ty pol­i­cy, the Eurogroup, and police and judi­cial coop­er­a­tion, all areas from which Den­mark has opt­ed out.[4]

A possible Euro-referendum

Mean­while, the finan­cial cri­sis has changed the opt-out agen­da of the gov­ern­ment as the fac­tu­al con­se­quences of being out­side the Euro­zone have been revealed. A polit­i­cal debate on join­ing the com­mon cur­ren­cy has been revived after the Dan­ish Nation­al Bank was forced to increase inter­est rates twice to defend the Krone’s peg to the Euro. This caused a record inter­est rate spread between the Dan­ish Nation­al Bank and the Euro­pean Cen­tral Bank of 175 basis points com­pared to 25 basis points in May. This sce­nario is threat­en­ing to push prop­er­ty prices fur­ther down, hurt indus­try and fur­ther depress the econ­o­my. In an inter­view with “The Finan­cial Times”, Nils Bern­stein, Direc­tor of the Dan­ish Nation­al Bank, declared that Den­mark is pay­ing the price of not adopt­ing the Euro even though last month’s rise in inter­est rates has been suc­cess­ful in stop­ping pres­sure on the Kro­ne. He not­ed: “The pres­sure on the cur­ren­cy seems to be over but you can´t be sure.” [5]

Accord­ing to esti­mates from the Dan­ish Indus­try Con­fed­er­a­tion (DI), Danes risk pay­ing 4.5 bil­lion Dan­ish Kro­nes for being out­side the com­mon cur­ren­cy due to the high inter­est rate spread. This is espe­cial­ly crit­i­cal for flex­i­ble mort­gage holders.[6] The Dan­ish Met­al­work­ers’ Union (Dan­sk Met­al) argues that the inter­est spread has caused a sig­nif­i­cant decrease in salary advances among met­al­work­ers and is there­fore rec­om­mend­ing a ref­er­en­dum on the Euro as soon as possible.[7]

The Dan­ish Prime Min­is­ter, Anders Fogh Ras­mussen, has ini­ti­at­ed talks with oppo­si­tion par­ties on the pos­si­bil­i­ty of hold­ing a ref­er­en­dum. On 22 Jan­u­ary 2009, a hear­ing on the Euro was held in the Dan­ish Par­lia­ment. The main obsta­cle for the Dan­ish gov­ern­ment is to get the left­wing Social­ist People’s Par­ty (SF) on board which ranks a strong third in opin­ion polls. The SF is still split on the issue. Ras­mussen had indi­cat­ed the begin­ning of 2010 as a good time for hold­ing a ref­er­en­dum, after the Irish vote and before the next Dan­ish Par­lia­ment elec­tions in 2011. The SF has put for­ward three demands on chang­ing the Euro con­struc­tion before rec­om­mend­ing a ‘Yes’. One is a demand for a stronger empha­sis on high employ­ment instead of low inflation.[8]

A new sur­vey car­ried out by “Capacent Opin­ion” shows that 50 per­cent of Danes sup­port the Euro while 39 per­cent are against it. Only 26 per­cent of the respon­dents said they want a ref­er­en­dum as soon as possible.[9]

The upcoming European Parliament elections

It is like­ly that one or more Dan­ish par­ties will lose their seats in the Euro­pean Par­lia­ment when the Dan­ish num­ber of par­lia­men­tar­i­ans will go down from 14 to 13.[10]

Den­mark also expects to see a gen­er­a­tional shift in the Dan­ish Mem­bers of the Euro­pean Par­lia­ment (MEPs) since a num­ber of cur­rent MEPs are not run­ning for re-elec­tion (Poul Nyrup Ras­mussen, Karin Riis Jør­gensen, Mogens Cam­re and Jens-Peter Bonde). The aver­age age of the youngest can­di­dates of the four largest par­ties is only 23 years.[11] The gen­er­a­tional shift might put an end to the notion of the Euro­pean Par­lia­ment as the last stop before end­ing the polit­i­cal career.[12]

The Euro­pean elec­tion cam­paign has not yet begun and there has hard­ly been any debate in the media. The Dan­ish Prime Min­is­ter, Ander Fogh Ras­mussen, from the Dan­ish Lib­er­al Par­ty has declared the pos­si­bil­i­ty of a pact between the Lib­er­als and the “Euro­pean People’s Par­ty – Euro­pean Democ­rats” (EPP-ED) after the 2009 elec­tions which would give the “Par­ty of Euro­pean Social­ists” (PES) a minor say: “I favoured strong­ly the past alliance between the EPP and the Lib­er­als in the Par­lia­ment […] in my opin­ion, this is the nat­ur­al coop­er­a­tion in the par­lia­ment. I will work in that direc­tion.” [13]

The formation of the new Commission and the appointment of the High Representative

Nei­ther top­ic has been sub­ject to intense debates in Den­mark. The Dan­ish gov­ern­ment has declared its sup­port for the re-elec­tion of José Manuel Bar­roso as Pres­i­dent of the Commission.[14] The Dan­ish media still por­trays the Dan­ish Prime Min­is­ter, Anders Fogh Ras­mussen, as a pos­si­ble can­di­date for the posi­tion as Pres­i­dent of the Euro­pean Coun­cil if the Lis­bon Treaty comes into force. Spec­u­la­tions about Ras­mussen as a pos­si­ble can­di­date for the posi­tion as the new Sec­re­tary Gen­er­al of NATO have also been highlighted.[15] Ras­mussen has not for­mal­ly announced his can­di­da­ture to any of the men­tioned inter­na­tion­al posts.

2. Transatlantic relations renewed after President Bush: top priorities

 

Denmark and the USA: allies under Bush – allies under Obama

The tran­si­tion from Pres­i­dent Bush to Pres­i­dent Oba­ma has been intense­ly dis­cussed in Den­mark in terms of Dan­ish-US rela­tions and transat­lantic rela­tions. The Dan­ish government’s close rela­tions to Bush had been demon­strat­ed by Dan­ish mil­i­tary par­tic­i­pa­tion in Afghanistan and Iraq – on his last day in office Bush spoke to Prime Min­is­ter Ras­mussen by phone.[16] But while Ras­mussen does not com­ment on Bush’s record as Pres­i­dent, his fel­low par­ty mem­ber, Søren Pind, described the Bush era as ‘moral­ly cor­rupt’ in ref­er­ence to alle­ga­tions of tor­ture and mis­treat­ment of ter­ror­ist sus­pects by US personal.[17] Dur­ing the elec­tion cam­paign Barack Oba­ma had been crit­i­cal of US allies, includ­ing Den­mark, for not doing enough to help the Iraqi refugee crisis.[18] Prime Min­is­ter Ras­mussen hoped to main­tain very close ties between the USA and Den­mark, but in the first week of the Oba­ma admin­is­tra­tion these hopes dis­solved as Den­mark (and the Nether­lands) did not want to help take freed detainees reset­tled from Guan­tá­namo Bay deten­tion centre.[19]

Beyond the war on ter­ror, the imme­di­ate Dan­ish pri­or­i­ty in transat­lantic rela­tions is the forth­com­ing Unit­ed Nations Cli­mate Change Con­fer­ence “COP15” in Copen­hagen in Decem­ber 2009.[20] The trans­for­ma­tion of the US posi­tion on glob­al warm­ing by Pres­i­dent Oba­ma has made pro­duc­tive talks at “COP15” far more likely.[21] The wider renew­al of transat­lantic rela­tions between the US and the EU beyond “COP15” has not been a big issue in Den­mark, reflect­ing Dan­ish dif­fi­cul­ties in deal­ing with major glob­al issues such as reform of finan­cial archi­tec­ture because of non-par­tic­i­pa­tion in EMU pol­i­tics.

3. Financial crisis and challenges of global governance: the EU response

 

Has the time come to join the Eurozone?

The glob­al finan­cial cri­sis has been of par­tic­u­lar impor­tance in Den­mark because of its small, open econ­o­my and its expo­sure to glob­al trade and invest­ment. Relat­ed to this, Denmark’s econ­o­my, like that of the UK, tends to be fur­ther ahead in the eco­nom­ic cycle com­pared to the rest of the EU. Den­mark was the first EU econ­o­my to enter tech­ni­cal reces­sion in the 2nd quar­ter of 2008 and spent much of 2008 in recession.[22] The vul­ner­a­bil­i­ty of the Dan­ish econ­o­my, based on glob­al expo­sure and inflat­ed hous­ing sec­tor, had been iden­ti­fied in 2007 as one of the three most frag­ile hous­ing mar­kets in the world, with sim­i­lar vul­ner­a­bil­i­ties in its bank­ing sec­tor – in mid-2008 the offi­cial for­eign reserves of the Dan­ish Nation­al Bank as a per­cent of GDP were only about 10 per­cent (less than Iceland’s).[23]

The bank­ing cri­sis hit Den­mark with Roskilde Bank’s col­lapse in August 2008 – dur­ing 2008 nine small Dan­ish banks were merged or wound up as liq­uid­i­ty tightened.[24] Dur­ing 2008 the Dan­ish Nation­al Bank was forced to repeat­ed­ly increase inter­est rates to sup­port the Dan­ish fixed exchange rate pol­i­cy – by Novem­ber 2008 the dif­fer­ence between the Euro­pean Cen­tral Bank (ECB) and Dan­ish inter­est rates were at an all-time high of 1.75 percent.[25] The Dan­ish eco­nom­ic prob­lems, down­turn in hous­ing mar­ket and con­sumer spend­ing, and the rel­a­tive­ly high inter­est rates have con­tributed to increased dif­fi­cul­ties for domes­tic shop own­ers and Dan­ish exporters with 2009 expect­ed to be a par­tic­u­lar­ly tough year for exports.[26]

Probably all small countries should join

The stag­nat­ing Dan­ish econ­o­my, high inter­est rates, and bank­ing risks all con­tributed to the attempts by the Dan­ish Prime Min­ster, Anders Fogh Ras­mussen, and the major­i­ty of par­ties in the Dan­ish Par­lia­ment to move from a fixed exchange rate pol­i­cy to full mem­ber­ship of the Euro. Mount­ing eco­nom­ic evi­dence rein­force the argu­ments for the Euro in Den­mark, in par­tic­u­lar the risks of being out­side the Euro­zone, the costs of main­tain­ing the Kro­ne, and the trade loss­es out­side the Euro.[27] Paul Krug­man, the Nobel Prize win­ner for eco­nom­ics, had com­ment­ed in an inter­view that “the les­son of the cri­sis is that one should join the Euro […]. For good or evil should prob­a­bly all the small Euro­pean coun­tries join”.[28] Sydbank’s Chief Econ­o­mist, Jacob Graven com­ment­ed that the finan­cial cri­sis had “made it less attrac­tive for investors to hold Dan­ish Kro­ner rather than Euros”.[29] Niels Bern­stein, the Dan­ish Nation­al Bank Gov­er­nor argued that “over a longer hori­zon, adopt­ing the Euro will have a cer­tain pos­i­tive effect on growth in Denmark”.[30] The most com­pre­hen­sive eco­nom­ic evi­dence came in Jan­u­ary 2009 with the pub­lish­ing of the SNS Eco­nom­ic Pol­i­cy Group Report 2009 — EMU at Ten: Should Den­mark, Swe­den and the UK Join? which argued that Euro effect on exports (and anal­o­gous­ly on imports) for Den­mark join­ing can be cal­cu­lat­ed rough­ly as a 35 per­cent increase in trade.[31] The Report con­clud­ed that “Den­mark is well posi­tioned in terms of pub­lic finances, fis­cal pol­i­cy-mak­ing, labour mar­ket flex­i­bil­i­ty and the lev­el of unem­ploy­ment to par­tic­i­pate in the mon­e­tary union. It has lit­tle or no mon­e­tary pol­i­cy inde­pen­dence since it has tied the Kro­ne to the euro. It would there­fore clear­ly gain by join­ing the mon­e­tary union”.[32]

Beyond the dis­cus­sion of Den­mark ful­ly join­ing the Euro, there has been rel­a­tive­ly lit­tle Dan­ish dis­cus­sion of the EU response to the finan­cial cri­sis and chal­lenges of glob­al gov­er­nance, pos­si­bly reflect­ing Dan­ish non-par­tic­i­pa­tion in EMU politics.[33] Prime Min­is­ter Ras­mussen has argued that both the glob­al finance and cli­mate prob­lems have the “same solu­tion” – requir­ing “cre­at­ing far­sight­ed, long-term, sus­tain­able green growth”, but with­out ref­er­ence to the EU in this rad­i­cal trans­for­ma­tion already advo­cat­ed in Brussels.[34]

 

 

 

[1] Berlingske Tidende: Krisen bringer det bed­ste frem i EU, avail­able at: http://www.berlingske.dk/article/20081212/kommentarer/712120119 (last access: 23 Jan­u­ary 2009).
[2] Berlingske Tidende: Ny irsk afstemn­ing skal løse EU-krise.
[3] Jyl­lands Posten: Irland på vej mod ny afstemn­ing.
[4] Mette Buskjær Chris­tensen and Ian Man­ners, DIIS Brief: The Irish opt-outs from the Lis­bon Treaty?: lessons of the Dan­ish expe­ri­ence, avail­able at: http://www.diis.dk/sw69770.asp (last access: 23 Jan­u­ary 2009).
[5] Finan­cial Times: Den­mark is bear­ing the cost of being out­side euro, avail­able at: http://www.ft.com/cms/s/0/e8f45eb0-b05b-11dd-a795-0000779fd18c,_i_email=y.html (last access: 26 Jan­u­ary 2009).
[6] DI Busi­ness: Euro-for­be­hold giv­er mil­liardreg­n­ing, 3 Novem­ber 2008.
[7] 3f.dk: Euro-for­be­hold­et koster meta­lar­be­jderne dyrt, avail­able at: http://forsiden.3f.dk/article/20090122/NEWSPAQ/901220382 (last access: 26 Jan­u­ary 2009).
[8] Kris­teligt Dag­blad: Søvn­dal og Fogh i kamp om euro –grundlov, avail­able at: http://www.berlingske.dk/article/20090121/politik/901210422/ (last access: 26 Jan­u­ary 2009).
[9] Ritzaus Bureau: Danskerne: Vent med euroaf­stemn­ing, 21 Jan­u­ary 2009.
[10] Jyl­lands-Posten: Europæiske væl­gere sæt­ter dag­sor­de­nen, 31 Decem­ber 2008.
[11] Ritzaus Bureau: Unge stiller op til Europa­parla­mentet, 31 Decem­ber 2008.
[12] Poli­tiken: Unge danskere er vilde med EU, 21 Jan­u­ary 2009.
[13] Euractiv.com: Inter­view: Dan­ish PM warns against ’abuse’ of cri­sis, avail­able at: http://www.euractiv.com/en/eu-elections/danish-pm-warns-abuse-crisis/article-176888 (last access: 26 Jan­u­ary 2009).
[14] Ritzaus Bureau: Fogh støt­ter gen­valg til Bar­roso, 15 Octo­ber 2008.
[15] Poli­tiken: Statsmin­is­ter med træls udlængsel, 17 Decem­ber 2008.
[16] Bri­an Knowl­ton: ‘Oba­ma cel­e­brates hol­i­day with ser­vice’, Inter­na­tion­al Her­ald Tri­bune, 19 Jan­u­ary 2009.
[17] Copen­hagen Post: ‘For PM, in the Oba­ma means out with an ally’, 21 Jan­u­ary 2009.
[18] Copen­hagen Post: ‘Oba­ma: Den­mark has done ‘lit­tle’ for Iraqi refugees’, 10 Novem­ber 2008; Natal­ie Ondi­ak: ‘Keep­ing faith with our Iraqi allies’, Guardian, 21 Jan­u­ary 2009.
[19] Poli­tiken: ‘Amnesty vil have en lukkeda­to for Guan­tanamo’, 8 Jan­u­ary 2009; Copen­hagen Post: ‘No help for ter­ror sus­pects’, VOA News, 21 Jan­u­ary 2009; Lisa Bryant: ‘Euro­peans in dilem­ma over Guan­tanamo prison clos­ing’, 22 Jan­u­ary 2009; Jim Bruns­den: ‘EU to start talks on Guan­tá­namo reset­tle­ment’, 23 Jan­u­ar 2009.
[20] Michael McCarthy: ‘UN Cli­mate Con­fer­ence: The count­down to Copen­hagen, The Inde­p­den­dent, 9 Jan­u­ary 2009.
[21].Tony Bar­ber: ‘Action is vital for a good transat­lantic rela­tion­ship’, Finan­cial Times, 23 Decem­ber 2008; Bibi Häg­gström: ‘Kli­matet het­tar till i dan­s­ka poli­tiken’ Sydsven­skan, 10 Jan­u­ary 2009.
[22] Robert Ander­son: ‘Den­mark heads towards reces­sion’, Finan­cial Times, 1 Decem­ber 2008.
[23] Copen­hagen Post: ‘Den­mark is one of the top three most frag­ile hous­ing mar­kets in the world’, 1 August 2007; Willem Buiter and Anne Sib­ert: The Ice­landic bank­ing cri­sis and what to do about it, Cen­tre for Eco­nom­ic Pol­i­cy Research, CEPR Pol­i­cy Insight No. 26, Octo­ber 2008.
[24] Lex: ‘Bank fail­ures: Roskilde’, Finan­cial Times, 25 August 2008; Robert Ander­son: ‘Den­mark unveils bank loan pack­age’, Finan­cial Times, 19 Jan­u­ary 2009.
[25] Copen­hagen Post: ‘Cen­tral bank opts for inter­est rate rise’, 22 May 2008; Robert Ander­son: ‘Dan­ish PM seeks back­ing for euro ref­er­en­dum’, Finan­cial Times, 4 Novem­ber 2008.
[26] Poli­tiken: ‘Shop own­ers want out’, 20 Jan­u­ary 2009; Julian Ish­er­wood: ‘Mar­kets drop Dan­ish goods’, 27 Jan­u­ary 2009.
[27] Ian Man­ners: Small, open €uro economies, Dan­ish Insti­tute for Inter­na­tion­al Stud­ies, DIIS Brief, Jan­u­ary 2009.
[28] Johan Ander­berg: ‘Paul Krug­man – Nobel­prista­garen – näs­tan som en sven­sk betong­sosse’, Sydsven­skan, 16 Novem­ber 2008.
[29] Copen­hagen Post: ‘Cen­tral bank opts for inter­est rate rise’, 22 May 2008.
[30] Joel Sher­wood: ‘Dan­ish Cen­tral Bank Rein­forces Euro Adop­tion Sup­port’, Dow Jones Newswire, 22 Jan­u­ary 2009.
[31] SNS Eco­nom­ic Pol­i­cy Group Report 2009: EMU at Ten: Should Den­mark, Swe­den and the UK Join? (Stock­holm: SNS För­lag, 2009), pp. 86–87.
[32] SNS Eco­nom­ic Pol­i­cy Group Report 2009: EMU at Ten: Should Den­mark, Swe­den and the UK Join? (Stock­holm: SNS För­lag, 2009), p. 16.
[33] Berlingske Tidende: ’Krisen bringer det bed­ste frem i EU’, 12 Decem­ber 2008.
[34] Copen­hagen Post: ‘PM: Finance and cli­mate prob­lems have ‘same solu­tion’’, 27 Jan­u­ary 2009.