DENMARK: APRIL ECONOMIC HIGHLIGHTS

UNCLAS SECTION 01 OF 02 COPENHAGEN 000201

SIPDIS

STATE FOR EEB/IFD/OMA AND EEB/TPP/ABT
TREASURY FOR DAVID WRIGHT
COMMERCE FOR PAUL DACHER

E.O. 12958: N/A
TAGS: ECON EFIN ETRD ELAB KTDB PGOV DA

SUBJECT: DENMARK: APRIL ECONOMIC HIGHLIGHTS

REF: COPENHAGEN 105 (TAX REFORM MOVES
FORWARD),COPENHAGEN 51 (BANK BAILOUT PLAN)


1. Contents:

EAGR: Danes Must Pay to Live Longer
ECON: Don't Stimulate, Regulate?
ECON: Denmark by Numbers
EIND: U.S. Now Novo Nordisk's Biggest Market
EFIN: Slow Lending Even After Bank Bailout
ENRG: Vestas Registers Big Profit But Cuts
Workforce

Danes Must Pay to Live Longer
--------------


2. A blue-ribbon governmental health
commission has put forward 52 recommendations
that aim to increase the expected average
lifespan of Danes by three years within the
next ten years. The centerpiece
recommendation is increased duties on
unhealthy products like tobacco, alcohol and
sugar. For example, the commission
recommended a new 50 percent duty on tobacco
products (tobacco use is the cause of 25
percent of Danish deaths) and also proposed a
total ban on indoor smoking in public
buildings. The commission also seeks to slap
a new 100 percent duty on sugar-laden
products such as candy and soft drinks.


3. The Commission's recommendations built
upon the recently-enacted tax reform bill
that included increased taxes on saturated
fats and sugar (Ref A). The commission has
no authority to implement these
recommendations, many of which are not
considered politically viable. However, at
least some of the recommendations will likely
come to pass in the future, and hefty
increases in duties on items such as candy
and carbonated beverages could have a huge
impact on U.S. brands such as Pepsi and Coca-
Cola.

Don't Stimulate, Regulate?
--------------


4. New Prime Minister Lars Lxkke Rasmussen
has said he wants to see how the domestic and
global economies are faring before initiating
any new public stimulus spending, but has
also stated that new stimulus packages in
2010 may be an interesting option for his
government. The head of the Danish National
Bank, Nils Bernstein, has also stated
publicly that the time is not right for
stimulus spending: rather, Bernstein suggests
that counter-cyclical rules and regulations
be put in place now so that banks are less
tempted during good times to increase their
appetite for risk. In particular, he has
proposed stricter regulation of risk and
liquidity management systems, including
regulation of rating agencies. Bernstein has
also proposed a restructuring of incentive
pay schemes, since they have been proven to
lead to overly-risky behavior.

Denmark By Numbers
--------------


5. New estimates from OECD put Danish GDP
contraction at around 4 percent in 2009
compared to the local consensus estimate of a
2.5 - 3 percent fall. House prices plunged
10.8 percent between first quarter of 2008
and first quarter 2009, the biggest drop
since World War II. Housing sales are down
41 percent since the height of the housing
market in 2007. Unemployment is increasing
at a faster-than-expected rate, with a 50
percent increase in March compared to
February. Extrapolating from OECD's most
recent February statistics, we estimate the

COPENHAGEN 00000201 002 OF 002


current unemployment rate at around 5.8
percent.

U.S. Now Novo Nordisk's Biggest Market
--------------


6. Novo Nordisk put up great first quarter
numbers, with after-tax profits of DKK 2.7
billion (USD 482 million) and an 18 percent
jump in sales. About 44 percent of this new
sales growth took place in the U.S. market,
making the U.S. the biggest region for the
company. One of the company's future cash
cows, the Type-2 Diabetes drug Victoza, was
recently approved for consumer by the EU's
European Medicines Agency and is expected to
hit European markets within two months. The
U.S. FDA gave the drug a neutral review in an
early April finding due to concerns about the
risk of pancreatic cancer found in clinical
trials using rodents. Novo Nordisk has
stated that it will work to show there is no
risk involved with the product through
further clinical testing. The drug is
expected to generate sales between DKK 7 - 15
billion yearly (USD 1.25 - 2.68 billion) if
allowed into the American market.

Banks Bailed Out But Still Slow Lending
--------------


7. Designed to stimulate bank lending to
businesses, the government's January bank
bailout seems to have failed its purpose.
The initiative provided DKK 100 billion (USD
17.85 billion) to the banking sector with the
express intent to facilitate new lending (Ref
B). In December 2008, the Confederation of
Danish Industry found that 37 percent of its
members experienced increased trouble getting
access to credit: that number has now jumped
to 42 percent. In an April survey, only one
company reported an increase in access to
credit. The Danish National Bank reports
that 60 percent of Danish banks have
restricted credit access in the first three
months of the year, after 70 percent
restricted access in the last three months of

2008. Minister for Economics and Business
Affairs Lene Espersen has criticized banks
for not fulfilling their civic duty by
lending more, and is looking to see if
anything in the bailout package can be
changed to make credit flow more easily.

Vestas Puts Up Q1 Profit and Lays Off 9
Percent of Workforce
--------------


8. Vestas, the world's largest wind turbine
producer, announced layoffs of 1250 workers
in Denmark and another 650 in Northern
Europe, which amounts to 9 percent of the
global workforce. The stated reason for the
layoffs was lagging demand in the Northern
European markets. On the same day the pink
slips were handed out, however, Vestas
announced fabulous first quarter results, and
rumors abound that cash-rich Vestas seeks to
buy-out a competitor or supplier. While
Vestas is trimming its production staff in
Europe, it is gearing up to expand in its
priority growth markets of China and the U.S.
Vestas has a wind turbine production facility
in Colorado.

McCulley