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Denmark is a constitutional monarchy with a representative parliamentary system. It is a member of the European Union (except its two autonomous constituent countries: the Faroe Islands and Greenland).

The Danish economy is a typical example of the Nordic economic model, combining high living standards and low-income inequality. In purchasing power parity, GDP per capita is more than 25% higher than the average of the European Union (EU). Tax rates are amongst the highest in the EU.

‘Flexicurity’, a portmanteau of flexibility and security, is the corner stone of the Danish economic model combining flexibility in the labour market, social security and an active labour market policy with rights and obligations for the unemployed. It necessitates close co-operation between government, employers and employees on economic policy – roughly two-thirds all workers are members of a trade union.

This high degree of inclusion and protection actually helped the economy to hold up during the Covid-19 crisis. The GDP contraction was limited (-2.1% in 2020, five time less than in Italy or Spain…) and followed by a strong rebound in 2021; the unemployment rate kept rather unchanged, at around 5.5%.

Even though Denmark has not joined the euro, the country does not have an independent monetary policy. The Danish National Bank maintains a narrow fluctuation band of +/- 2.25% around the euro central rate of DKK 7.46. As a result, Denmark’s monetary policy is linked to that of the European Central Bank (ECB).

Household indebtedness is one of the key weaknesses of the Danish economy. The household debt to income ratio in Denmark is the highest among OECD countries.