why did denmark reject the euro course hero

What if Denmark had said yes to the Euro?

Had Denmark said Yes to the Euro we would have been part of the debt cancelling program to the poorly managed countries of the Euro zone.

How does the Euro affect the Danish krone?

When the mark was changed to the euro, the Danish central bank joined the ERM II (European Exchange Rate Mechanism). This mechanism fixes the currency exchange rate at 1 euro to 7.460 Danish krone with the possibility of fluctuation of 2.25 percent. Naturally, this limits the independence of the Danish central bank.

Should Denmark join the euro zone?

By the standards of the EU itself, Denmark is more than qualified to join the euro zone. All the criteria have been met, including the inflation rate, the size of the budget deficit, the Debt-to-GDP ratio, and more. But it looks like the Danish voters are not yet prepared to hand over control of monetary policy to the EU's central bankers.

When did Denmark vote against the Euro?

In 2000, the government held a referendum on introducing the euro, which was defeated with 46.8% voting yes and 53.2% voting no. The Danish krone is part of the ERM II mechanism, so its exchange rate is tied to within 2.25% of the euro.

What percentage of Danish people are against Euro?

According to the public opinion surveys in the European Union (research held in Spring 2018) only 29% of Danish responders were in favor of accepting the Euro as potential National currency. EU-wide, this number was 61%. The vast majority — 65 percent — of Danish responders were against monetary union. EU-wide, this number was 32 percent. The only area where the Danish are in line with European average is the 6% of respondents that do not have opinion on that topic. 1

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When did Denmark reject the Euro?

A referendum held on 28 September 2000 rejected membership of the eurozone. 87.6% of eligible voters turned out, with 46.8% voting yes and 53.2% voting no. Most political parties, media organisations and economic actors in Denmark campaigned in favour of adopting the euro.

Why did Denmark stop issuance of 500 euro notes?

On 10 January 2020, the 500 euro note was phased out in Denmark as part of the fight against money laundering and the financing of terrorism , meaning "handing out, handing in, exchanging, using as payment or transferring" the banknote in Denmark was made illegal. At the time, the banknote was worth 3,737 Danish kroner (DKK), more than three times the highest denomination of the domestic currency, the thousand-kroner banknote. The European Central Bank had stopped issuing the banknote in 2019, but was critical of the law. In an opinion published in February 2019, it argued that it conflicted with the principle of "sincere cooperation" set out in Article IV of the Treaty on European Union, and noted that no ban was planned for other high-value units of currency, such as the highest Swiss franc banknote, worth more than 6,500 DKK at the time.

What is the monetary policy of the European Central Bank?

The European Central Bank is conducting monetary policy independently from the national governments from the eurozone countries and has the aim of price stability. This means that the ERM II countries as well as EMU countries are giving up sovereignty in monetary policies to instead have price stability. When governments lose the autonomy in monetary policy, they lose the ability to respond to domestic economic shocks. Denmark's currency is pegged to the currency of the eurozone which is not an optimal currency area because the participating countries have asymmetric business cycles. Therefore, the monetary policy conducted in the eurozone is not necessarily beneficial for the economic situation in Denmark. The policy-aim of keeping a fixed exchange rate policy is to keep stable economic development and stable prices. Stable prices can be translated into low inflation. Fixed exchange rate policy based on the euro creates a framework for low inflation in the long run. The role of the ECB is set up in the Treaties and the monetary policy conducted should have price stability as its main aim. The ECB has defined price stability as a yearly growth in consumption prices under, but close to 2% in the middle to long run. The policy competences of the ECB are heavily influenced by the German Bundesbank policies and therefore have as main goal to have price stability and to be independent from national governments.

What is ERM II?

The ERM II is a fixed exchange rate regime, in which the Danish currency and other participating countries' currency are pegged to the euro . Currently Denmark is one of the three countries participating in the ERM II. This policy marks a continuation of the situation that existed from 1982 to 1999 with regard to the Deutsche Mark, ...

How does the ECB affect the exchange rate?

The ECB can also use adjustment of interest rates to influence the exchange rate of the euro. An exchange rate is determined bilaterally relative to other currencies. If there is higher interest in one country relative to another, it will attract foreign capital and therefore the value of the currency will increase.

What currency did Denmark use?

On 5 May 1873 Denmark with Sweden fixed their currencies against gold and formed the Scandinavian Monetary Union. Prior to this date Denmark used the Danish rigsdaler divided into 96 rigsbank skilling. In 1875, Norway joined this union. A rate of 2.48 kroner per gram of gold , or roughly 0.403 grams per krone was established. An equal valued krone of the monetary union replaced the three legacy currencies at the rate of 1 krone = ½ Danish rigsdaler = ¼ Norwegian speciedaler = 1 Swedish riksdaler. The new currency became a legal tender and was accepted in all three countries. This monetary union lasted until 1914 when World War I brought an end to it. But the name of the currencies in each country remained unchanged.

How did the Bretton Woods system affect the European economy?

The collapse of the Bretton Woods system destabilised European markets and delayed the wish to have monetary integration in the member states of the European Economic Community. (Today EU ). The Bretton Woods system was a system where exchange rates remained stable while having inflation under control. The dollar was pegged to the gold standard and the 14 European participating countries became convertible with the dollar. In the EU, further monetary cooperation and stable exchange rates were considered necessary to facilitate the creation of the internal market. The Werner Report was a draft proposal in the EU framework to have monetary cooperation to facilitate the internal market. This draft was based on a system where all participating countries’ currencies were already fully convertible, and when the Bretton Woods system collapsed, there were no central currency to peg the currencies on and therefore the idea for monetary integration was postponed. The first step toward a more integrated monetary system in Europe was the Basel agreement which created the European Currency Snake. The Smithsonian Agreement was an international agreement outside the EU framework which provided a new dollar standard to which the EEC currencies’ exchange rates were pegged to and where the European currency snake could fluctuate within. The currencies were though still allowed to fluctuate within 2.25% of the new dollar standard. The European Currency Snake entered into force on 24 April 1972 and was a tool to provide monetary stability. As the Currency Snake entered into force during the accession procedure of Denmark, United Kingdom and Ireland, those three currencies entered the system 1 May 1972. Shortly after, the Danish Crown came under speculative attacks and was forced to abandon the system but the joined again a few months later. The Smithsonian agreement collapsed in 1973 also due to speculative attacks and the US let the dollar float freely. This development made it unsustainable to maintain the European Currency Snake system. The snake cooperation was negatively impacted by exogenous pressures e.g. oil crises, the weakness of the dollar and differences of economic policy. Participants were forced to abandon the system and some even rejoined e.g. Denmark. In the last year of the operation of the snake, its area was only comprised Germany, the Benelux countries and Denmark.

Current Status – ERM II

See more on en.wikipedia.org

History

Consequences of Adoption of The Euro

Public Opinion

Danish Dominions

Possible Euro Coin Design