DENMARK: DEMARCHE ON EFFECTS OF THE FINANCIAL

C O N F I D E N T I A L COPENHAGEN 000138 SIPDIS E.O. 12958: DECL: 03/16/2019 TAGS: ECIN ECON EFIN PREL EU DA SUBJECT: DENMARK: DEMARCHE ON EFFECTS OF THE FINANCIAL CRISIS IN CENTRAL AND EASTERN EUROPE REF: STATE 23758 Classified By: Acting DCM Bill Mozdzierz. Reason: 1.4 (b) and (d). ¶1. (C) We discussed reftel points on March 16 with Jens Godtfredsen, chief of the MFA's EU Economic Policy office, and on March 17 with Steen Lohmann Poulsen, Head of the International Division at the Ministry of Finance. With both interlocutors, we urged European leadership and proactive flexible approaches to address the financial turmoil in some Central and Eastern European countries. Godtfredsen and Poulsen agreed with our points regarding rejection of protectionism, and emphasized that Denmark believes this to be particularly important in the banking sector context. Both interlocutors defended the approach of EU member states to deal with the economic downturn through national measures that reflect each country's unique circumstances, needs, and capacities. The MFA's Godtfredsen accepted our point that the EU needs to act more proactively, particularly in addressing vulnerabilities in certain Central and Eastern European countries, and noted that this is a topic of ongoing discussions among member states in Brussels. He pointed out that Denmark had moved quickly in recent months to join with other Nordic countries and the IMF to stabilize financial sectors in Iceland and the Baltics. ¶2. (C) In reply to our suggestion regarding EU expansion of assistance beyond the 25 billion euro Balance of Payments facility, the Finance Ministry's Poulsen stated that there is broad consensus among member states that the facility is sufficient and that changes are not necessary at the present time. What is necessary, he averred, is economic policy changes by certain Central and European nations that had blithely ignored EU and OECD advice and are now suffering the consequences of their "reckless" policies. He cited Latvia and Hungary as examples of countries that had previously followed "disastrous" economic policies but have since taken significant but painful policy measures to reverse course. Poulsen expressed polite chagrin that Denmark has been excluded from G-20 consultations and claimed that Spain and the Netherlands were somehow able to finagle a seat at the G-20 table even though they are not members. Poulsen suggested that if the G-20 format were to be expanded, even on a de facto basis, the Nordic/Baltic region should be represented. MCCULLEY