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 
 
¶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