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Covid-19: Denmark to Use $9 Billion Holiday Fund to Stimulate Economy

Denmark appears to be looking to develop a progressive, capital-intensive plan that will help to keep the economy afloat as it deals with the coronavirus pandemic.
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Denmark appears to be looking to develop a progressive, capital-intensive plan that will help to keep the economy afloat as it deals with the coronavirus pandemic.

The Danish Finance Ministry confirmed in a statement that the government and parliament had agreed to release 60 billion Kroner (about $9 billion) in vacation pay funds into the economy.

Replacing Government Palliatives

The objective of this plan will be to help improve consumer spending and boost employment in the country. The funds will be made available to workers in both the public and private sectors, and the government hopes to get it done by October.

The vacation funds amount to about 1.5 percent of the country’s entire GDP. Lars Olsen, the Chief Economist at the Danske Bank, argued that the move should provide sufficient capital injection into the Danish economy. In the statement, he explained:

“Even if it’s just half that will be used for consumption, it will still make a significant difference to total growth. It won’t change the fact that 2020 will be a year of sharp economic contraction, but it will lessen the decline and it may in particular improve the rate of progress in 2021.”

Danish workers usually get 12.5 percent of their gross salary in the form of holiday pay. Over time, these funds have formed a government reserve that is worth about 100 billion kroner ($15.14 billion). According to the new plan, Danes who are either retired or unemployed will get a one-time payment of 1,000 kroner ($151.4).

The Danish government has been particularly proactive in terms of saving the economy from the coronavirus’ effects. It already injected over 300 billion kroner ($45.42 billion) to keep the economy afloat, and it hopes that this will be the last aid package.

As expected, this new financial aid package will effectively mean the end of the government’s financial relief plan. Danish Minister of Finance Nicolai Wammen explained in the statement that the Danish economy is opening up again, so there won’t be a need to continue with the initiative.

Thorough Containment Approach Begins to Pay Off in Europe

Denmark has enjoyed the benefits of a thorough, proactive approach to the spread of the virus. The Nordic country was one of the first in Europe to close down its public space. As of mid-March, borders, schools, and restaurants, amongst others, were already out of commission in Denmark.

The country didn’t stop at closures. Denmark steadily ramped up testing and was disciplined with its lockdown plans. The results were impressive, as Danish primary schools reopened last month. As The Financial Times noted, the country has opened other establishments, including restaurants, hairdressers, shops, museums, and zoos.

Denmark is hardly the only country to be coming out of the coronavirus storm gradually. New Zealand is reportedly free of the virus now, after reporting no active cases for weeks.

Last week, the government of New Zealand reopened the country finally after months under lockdown. Over 40,000 sports fans packed a stadium in the country over the weekend, while economic work appears to have also begun in the country.

At the same time, most governments that are beginning to lift sanctions are also cautious about reopening. When Prime Minister Jacinda Ardern announced the lifting of most sanctions, she explained that her administration was still preparing for more possible cases

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Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works. jimmy@moneycheck.com

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