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Denmark's industrialized market economy depends on imported raw materials and foreign trade. Within the European Union, Denmark advocates a liberal trade policy. Its standard of living is among the highest in the world, and the Danes devote 1% of GDP to foreign aid. Denmark is self-sufficient in energy. Its principal exports are machinery, instruments, and food products. The U.S. is Denmark's largest non-European trading partner, accounting for about 5% of total Danish merchandise trade. Aircraft, computers, machinery, and instruments are among the major U.S. exports to Denmark. There are some 250 U.S.-owned companies in Denmark. Among major Danish exports to the U.S. are industrial machinery, chemical products, furniture, pharmaceuticals, and canned ham and pork. From 1982, a center-right government corrected accumulated economic pressures, mainly inflation and balance-of-payments deficits, but lost power in 1993 to a Social Democratic coalition government led by Poul Nyrup Rasmussen, who remained in office following the March 1998 elections. The current government has had success in cutting official unemployment, which peaked at 12.5% and is now below 7%. Average annual growth rates are now 2-3%. Danes are proud of their highly developed welfare safety net, which ensures that all Danes receive basic health care and need not fear real poverty. Over the last 20 years, however, the number of Danes living on transfer payments has grown to about 1 million working-age persons (roughly 20% of the population), and the system is beginning to show strains. Health care and care for the elderly particularly have suffered, and the need for welfare reform is increasingly discussed. More than one-quarter of the labor force is employed in the public sector. Greenland and the Faroe Islands Greenland suffered negative economic growth in the early 1990s, but since 1993 the economy has improved. A tight fiscal policy by the Greenland Home Rule Government since the late 1980s helped create a low inflation rate and surpluses in the public budget, but at the cost of rising foreign debts of the Home Rule Government's commercial entities. Since 1990, Greenland has registered a foreign trade deficit. Following the closure of Greenland's last lead and zinc mine in 1989, Greenland's economy is solely dependent on the fishing industry and Danish grants. Despite resumption of several interesting hydrocarbon and mineral exploration activities, it will take several years before production may materialize. Greenland's shrimp fishery is by far the largest income earner, since cod catches have dropped to historically low levels. Tourism is the only sector offering any near-term potential, and even this is limited due to the short season and high costs. The public sector plays a dominant role in Greenland's economy. Grants from mainland Denmark and EU fisheries payments make up about one-half of the home-rule government's revenues. The Faroe Islands also depend almost entirely on fisheries and related exports. Without Danish Government bailouts in 1992 and 1993, the Faroese economy would have gone bankrupt. Since 1995, the Faroese economy has seen a noticeable upturn, but remains extremely vulnerable. Recent off-shore oil finds close to the Faroese area give hope for Faroese deposits, too, which may lay the basis for an economic rebound over the longer term. |
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