9th Jun 2023

Denmark: How a 'high-tax' state responds to coronavirus

  • Prime minister Mette Frederiksen. Denmark's salary package is just one out of many swift decisions taken by the government over the past weeks (Photo: Nordic Council of Ministers)

A week ago (Sunday 15 March), Danish companies could breath a small sigh of relief, as prime minister Mette Frederiksen announced a new economic help package.

The package was negotiated between the government and social partners in a record time of just 24 hours.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • Family hotel Dania in Silkeborg is empty due to the coronavirus measures. (Photo: Mie Olsen)

It offers to cover 75 percent of employee salaries in businesses under budget pressure from the Covid-19 pandemic. For staff paid by the hour, the maximum coverage is 90 percent.

"Hold back the walking papers [redundancy notices]", appealed Frederiksen during the press conference. Her initiative aims at avoiding mass firings in times of income uncertainty, where especially the hospitality industry, the export sector and trade markets suffer.

On Friday 13 March, Danish schools officially closed and most public-sector workers were sent home for a two-week period.

Four days later, the police prohibited public gatherings with more than 10 persons and ordered all restaurants, cafes and hairdressers to shut down until the end of the month.

Not surprisingly, that has been quite a blow for independent business owners in terms of their customer base.

Trying to keep staff on

One of them is Henrik Jørgensen, a successful restaurateur from Silkeborg. His family owns Hotel Dania, Hotel Himmelbjerget and the restaurant Underhuset. They are currently experiencing a near-total collapse in revenue due to the forced closures.

Jørgensen believes the government help to be vital for the survival of small businesses in times, where Danes stay home to prevent a national spreading of Covid-19.

"We sent all our staff home on the new compensation package, where we get 75 percent of their salary including benefits covered by the state," he says.

The only other alternative had been to un-employ his staff temporarily and leave them with their designated unemployment benefits [called "dagpenge" in Denmark] - an option that would obscure the cooperative relationship between owner and staff, as the latter would not be legally obliged to come back upon re-opening.

As part of the new package, everyone contributes to maintaining existing contracts. While the state pays three-quarters, Henrik provides the last 25 percent of the salary. In return, each of his around 30 employees give up five paid vacation days.

"It is important to support our workers. Now, they remain permanently on stand-by, until the wheels start turning again. A valuable way of showing, that we stand together," he explains.

The state's salary compensation runs from March to June, and the target group is companies, who have to lower their work force with 30 percent or fire more than 50 persons.

The monthly payment cap is set to 23,000 DKK [€3,077] for regular employees and 26,000 for the hourly-paid.

'Force Majeure': so many unknowns

Denmark's salary package is just one out of many swift decisions taken by the government over the past weeks.

On Thursday (19 March), all parties spanning from the Liberal Alliance on the right to the Red-Green Alliance on the left agreed to spend a potential three-digit billon amount to steer Denmark through the costs of the corona-lockdown.

That includes financial help to freelancers and students, compensation for fixed expenses such as rent and easier access to state-guaranteed loans.

Yet, the political speed seemingly comes at a cost of judicial and administrative transparency. Allan Nielsen, manager for Forenede Hotelservice who cleans hotels all over the country, still awaits the final details of the proposal.

"We are very much affected, and our active staff has been reduced to 85-90 percent. The current 'force majeure' [unforseen circumstances] lasts until 29 March. While the salary package is very attractive for us, we still need to calculate the pros and cons, once it is finalised," he says.

In his view, there is no doubt that the administrative burden for the public sector in the wake of these packages is going to be huge.

However, Denmark is privileged to have a pro-active government. "They are doing an amazing job addressing our challenges. It is encouraging to see our democracy working in unity," Nielsen notes.

Short-term vs Long-term

Currently, the public finances of the Danish welfare state are in good condition, according to economist Lars Christensen. In that light, the modest boost offered through the help package is insufficient, he believes.

"We need to separate between a fix of the immediate issues and supporting the economy at large. The salary package is all about the former. The government hasn't initiated any fiscal stimulus. I believe it should in order to create trust amongst consumers and investors that this crisis won´t be long-term," he says.

Specifically, Christensen suggests to increase the purchasing power of each individual Dane by releasing frozen holiday allowances and issuing a check for 1,000 DKK per month until the country experiences two quarters of production growth.

He projects that the corona virus can cost Danish society a GDP drop of six percent.

According to a recent survey by the organisation SMVdanmark, more than two-thirds of small companies (up to 20 employees) risk bankruptcy within the next 10 weeks.

The organisation criticises the current government plan for not allowing people to work while receiving compensatory salaries and for not covering 100 percent for stores on forced closure.

Jørgensen remains optimistic. To him, the help package sends a strong symbolic signal. "It creates positivity and a national community feeling of being able to cope with this crisis collectively," he says.

As of writing, the current number of infected people in Denmark is 1396 with 13 fatalities, according to the Statens Serum Institut.

Author bio

Mie Olsen is a Danish freelance journalist and writer specialising in EU-affairs, climate stories and macroeconomic reporting.


Time of coronavirus shows importance of being European

Covid-19 showed how little it means to be European in times of crisis. But it makes one thing clear: the eurosceptic mantra of the 'European Superstate' becoming more ridiculous by the day.


How reliable is WHO coronavirus data?

The numbers that the World Health Organisation publishes, the numbers that journalists and governments around the world refer to, are contaminated with politics. They are not useless, they tell us something, but they paint a skewed picture. How so?


Sweden did it differently - but is it working?

It is too soon to deliver a verdict on the Swedish 'non-lockdown'. However, should Stockholm succeed in containing the virus without bringing its economy to a standstill, Sweden will enter the looming economic recession in a much better shape.


Beijing using lack of EU 'solidarity' to seize leadership

Italy is not the only European country turning to China for help in fighting the crisis, and the Chinese authorities consistently use European requests for self-aggrandisement. Europe should be wary of being used to advance an authoritarian state's propaganda.

EU countries unable to follow WHO's call for mass testing

As many European countries face coronavirus-testing shortages, health authorities have warned that there are not enough resources to follow the World Health Organization's recommendation to test as much as possible. Meanwhile, China is providing 50,000 testing kits to Europe.


Final steps for EU's due diligence on supply chains law

Final negotiations on the EU due diligence law begin this week. But will this law make companies embed due diligence requirements in their internal processes or incentive them to outsource their obligations to third parties?

Latest News

  1. Belgian bâtonnier on Russia: 'You can have a client you don't like'
  2. EU's proposed ethics body 'toothless', say campaigners
  3. Study: 90% of Spanish inflation 'driven by corporate profits'
  4. If Spanish economy is doing well, why is Sanchez poised to lose?
  5. EU lawyers for Russia: making 'good' money?
  6. The 'BlackRock exemption' has no place in the EU's due diligence directive
  7. Europeans don't see China as a rival, but weapons to Russia is a red line
  8. Cleaning workers urge Parliament: 'Europe should lead by example'

Stakeholders' Highlights

  1. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations
  2. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  3. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  4. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  5. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  6. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics

Stakeholders' Highlights

  1. EFBWWEFBWW calls for the EC to stop exploitation in subcontracting chains
  2. InformaConnecting Expert Industry-Leaders, Top Suppliers, and Inquiring Buyers all in one space - visit Battery Show Europe.
  3. EFBWWEFBWW and FIEC do not agree to any exemptions to mandatory prior notifications in construction
  4. Nordic Council of MinistersNordic and Baltic ways to prevent gender-based violence
  5. Nordic Council of MinistersCSW67: Economic gender equality now! Nordic ways to close the pension gap
  6. Nordic Council of MinistersCSW67: Pushing back the push-back - Nordic solutions to online gender-based violence

Join EUobserver

Support quality EU news

Join us