VZCZCXRO4241
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHCP #0201/01 1211059
ZNR UUUUU ZZH
R 011059Z MAY 09
FM AMEMBASSY COPENHAGEN
TO RUEHC/SECSTATE WASHDC 4922
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

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