Identifier
Created
Classification
Origin
09COPENHAGEN260
2009-06-04 15:26:00
UNCLASSIFIED
Embassy Copenhagen
Cable title:  

DENMARK: MAY ECONOMIC HIGHLIGHTS

Tags:  ECON EFIN ETRD ELAB KTDB PGOV DA 
pdf how-to read a cable
VZCZCXRO0711
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHCP #0260/01 1551526
ZNR UUUUU ZZH
R 041526Z JUN 09
FM AMEMBASSY COPENHAGEN
TO RUEHC/SECSTATE WASHDC 4990
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS SECTION 01 OF 02 COPENHAGEN 000260 

SIPDIS

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

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

SUBJECT: DENMARK: MAY ECONOMIC HIGHLIGHTS

UNCLAS SECTION 01 OF 02 COPENHAGEN 000260

SIPDIS

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

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

SUBJECT: DENMARK: MAY ECONOMIC HIGHLIGHTS


1. Contents:
ELAB: Is Danish Bacon an Endangered Species?
ECON: Danes in the Red
EWWT: The Nation that Launched the Vikings no Longer Builds
Ships
ENRG: Danish Wind Goes West
ETTC: Novo Nordisk Settles Oil for Food Scandal Involvement
ECON: Denmark by Numbers

Is Danish Bacon an Endangered Species?
--------------

2. New estimates from the organization Danish Pig
Production show that the financial crisis combined with high
wages in the pig production industry is threatening the
business which accounts for roughly a fifth of Danish
exports. Pork producers have lost a projected DKK 7 billion
(USD 1.34 billion) since October 2007 due to German and
Polish competitors. The crisis and unfavorable wage
competition now have some questioning the continued
viability of pork production in Denmark. Total costs in the
industry run to more than DKK 250 (USD 48) an hour in
Denmark; in Poland, costs are a sixth of that amount.
Danish Pig Production is now calling for a wage reduction of
20 - 50 percent for pig processing employees, or suggests
replacing the current workforce with cheaper labor from
Poland. The trade unions in turn have threatened unrest if
the industry abandons its labor accord. Danish Crown,
Europe's largest meat processing and pig slaughtering
company, is pushing through a crisis plan projected to cut
costs by DKK 1.3 billion (USD 250 million). So far, Danish
Crown denies plans to switch to a cheaper labor source.


Danes in the Red
--------------

3. Danish households now hold their biggest debt burden in
25 years, with debts averaging 60 percent of the value of
people's houses, compared to only 40 percent at the height
of the housing market a couple of years ago. Recent studies
show that 7 percent of Danes aged 31 - 59 (an age group were
savings should have picked up after some years on the job)
have debts in the amount of twice their annual salary after
taking into consideration the value of their assets, and
that the poorest 10 percent of the population have an

average net debt of DKK 417,000 (USD 80,000). That equals
six years average pay for that group, a debt they in all
likelihood will never be able to repay. Some media have
reported large numbers of overextended consumers applying to
appear on the TV show "The Luxury Trap," to get free
economic counsel in hopes of a way out of their debt.

The Nation that Launched the
Vikings no Longer Builds Ships
--------------

4. Denmark's biggest shipyard, Lindovaerftet, owned by the

A. P. Mxller Maersk group and a source of many of Maersk's
container ships and tankers through the years (including the
world's largest container ship Emma Maersk),is in immediate
danger of shutting down. Lindovaerftet's order book is
running empty this year, since neither Maersk nor any other
shipping company has placed any new orders. The shipyard
has enough remaining orders to keep it running for the rest
of the year, but for mainly smaller ships that don't support
Lindovaerftets' current level of employment. With 3,000
jobs at stake, the shipyard's loss would translate into one
of the biggest closures in Danish business history. A
decision on continued operations is expected before the end
of the summer.

Danish Wind Goes West
--------------

5. The Danish Wind Industry Association is shifting focus
from the Chinese market to the American market. Many
subcontractors in the wind turbine industry are expected to
set up sales offices, production, or both in the U.S. in the
near future. Danish wind turbine giant Vestas is currently
building the world's biggest wind turbine tower factory in
Colorado, for a total investment of USD 1 billion. The
project is estimated to provide 2,500 new jobs. Vestas CEO
Ditlev Engel met with Secretary of the Interior Ken Salazar
in early May at a Chicago wind turbine conference and
commented that he was very happy to have a dialog with the
Interior Department, especially since the development of
U.S. electricity grids and wind turbine parks falls within
DoI's areas of responsibility.

Novo Nordisk Settles Oil for Food Scandal

COPENHAGEN 00000260 002 OF 002


--------------

6. The Danish pharmaceutical company Novo Nordisk
announced May 11 that it had settled a case out of court
with the U.S. Department of Justice and the U.S. Securities
and Exchange Commission related to violations of the UN Oil
for Food program in Iraq. Novo Nordisk was fined USD 9
million by DoJ and was required to pay an additional USD 9
million by the SEC in the form of returned profits. In 2000
- 2003 Novo Nordisk was suspected of 11 cases of "return
commissions" worth USD 1.4 million to Kimadia, the Iraqi
State Company for Importation and Distribution of Drugs and
Medical Appliances. Danish police have now reopened their
case against Novo Nordisk, a case that was closed just six
weeks ago. Novo's CEO commented that he was deeply troubled
by the damage to the company's image and to the morale of
its employees, and said that steps had been taken to
strengthen Novo's internal oversight procedures.

Denmark by Numbers
--------------

7. The Danish National Bank followed the ECB and lowered
the leading interest rate on May 7 to 1.65 percent, down
from 2.0 percent. The IMF projects a contraction of GDP by
4 percent in 2009, EU projects 3.3 percent, the Danish
Economic Council 2.9 percent and the government a 2.5
percent contraction. Projections for 2010 lie between zero
and 1 percent growth. Employment has dropped 3.6 percent
since April 2008 and twice that amount is expected to leave
the workforce before the current economic crisis is over.
Extrapolating from OECD's most recent March statistics, we
estimate the current unemployment rate in Denmark at around
6.2 percent. Changes in the labor market have not
manifested themselves in the development of wages yet as
average nominal wages increased annually by a surprising 4.3
percent in the first quarter of 2009. With inflation around
1.4 percent this should be good for disposable income, but
bad for overall Danish competitiveness.
McCulley