By Marc Jones
COVENTRY, England, Feb 9 (Reuters) – The transatlantic crisis over Greenland and latest stock market rout of weight-loss drug giant Novo Nordisk are not expected to seriously dent Denmark’s economy, one of its central bank governors has said.
The tightly managed Danish crown fell to a 6-year low against the euro last month when U.S. President Donald Trump threatened to seize Greenland, while fears about increasingly fierce competition in the obesity drug sector saw Denmark’s biggest company lose a fifth of its value last week.
Denmark has been one of Europe’s strongest economies over the last two years, in part driven by Novo Nordisk, but Danish central banker Ulrik Nødgaard said neither its turbulent start to the year nor the Greenland row was likely to have seriously hit growth.
“The Danish economy has been quite resilient,” Nødgaard said in a weekend interview at the Warwick Economic Summit in Coventry, England.
“In our last forecast from September, we envisioned something like 2% growth this year. That can certainly change, but it’s not like we have a completely different outlook.”
EUROPEAN AUTONOMY ‘FOR THE LONG HAUL’
Nødgaard would not comment on how the central bank had approached the Greenland crisis, whether there had been any contact with the U.S. Federal Reserve, or even Greenland’s longer-term economic struggles.
But he said there was little doubt that Europe must now strengthen its own hand.
“There’s a broader issue in these times of Europe having to think about standing on its own and looking at dependencies and reaching for strategic autonomy,” Nødgaard said.
“That’s for the long haul. It’s not something you change from day to day, but that’s certainly on the agenda,” pointing even to basic examples like payments systems.
Nødgaard said there had been no change in the Danish central bank’s approach to dollar assets in its reserves, while recent decisions by some Danish pension funds to divest some U.S. Treasuries were up to them.
SELF-CORRECTING CROWN MARKETS
Nødgaard was cagey about the crown’s fall last month.
The currency is pegged at a central rate of 7.46038 crowns per euro and only allowed to fluctuate by 2.25% either way. Last month’s drop to 7.4729 though was close enough to its lower limit to trigger market speculation about possible intervention.
“We have a policy of keeping the crown fixed. The financial markets know that,” Nødgaard said. “And we also saw the market sort of correcting itself as the crown was approaching weaker levels.”
He said the bank didn’t see the drop as connected to the Greenland tensions, but more due to other market flows and because Denmark’s 1.6% interest rate is lower than the ECB’s.
However, FX analysts who do see a link point out that the rate gap has existed since 2023 and that Danish crown forwards – used by investors to hedge currency positions – saw their biggest spike as the Greenland crisis escalated since last year’s global trade tariff concerns.
Nødgaard, a former market regulator, also touched on the selloff in global tech stocks and whether it might turn serious.
“I think the financial sector is pretty robust to deal with shocks of this size and magnitude,” he said, adding that if there was a major market correction and associated rise in risk premia “of course it will have an impact on the economy”.
Nødgaard is also pushing for an emergency system to be built in case one or more of Denmark’s banks is hit by a cyberattack.
It would be an offline data vault that can be switched on if a bank is taken down so that people and firms can still do basic banking tasks, such as withdrawing money.
“It will require legislation and all in all will probably take a couple of years,” Nødgaard said. “We certainly hope it will succeed.”
(Reporting by Marc Jones; Editing by Aidan Lewis)
Comments