The Danish economy and the financial sector are currently in a good place but is facing many disruptions while dealing with important issues such as geopolitical tensions, cyber threats, climate change and the green transition, said Christian Kettel Thomsen, governor of the National Bank of Denmark, in a recent speech.
These challenges also mean major public investments over the coming years, such as for defense, transforming energy systems and climate protection. Compared to many other countries, the Danish economy is well equipped to finance this task. But it is not just about funding, there must be room in the economy to absorb the major in-vestments. Otherwise, prices and wages will rise, with the risk of renewed inflationary pressure. And we do not want to go there.
In his remarks, Thomsen discussed improving the EU single market: “We must remember that every time a member state has special rules in the EU, it has an economic cost. What we economists call negative externalities.”
The International Monetary Fund, IMF, has found that trade costs within the EU are equivalent to an ad valorem tax of 44%. The interstate trade costs in the US are equivalent to an ad valorem tax of 15%. But removing barriers in the single market is a long haul. It is not a quick and easy solution.
“That is why it is crucial that the European Commission drives the agenda forward and that the Member States support it – even when things get difficult and national approaches need to be adjusted,” he said.
Geopolitical tensions have also increased the cyber threat to society because criminals are now more likely to be, or be supported by, state actors. They have far more sophisticated skills and destructive goals in mind. Denmark is among the most digitized countries in the world. And with digitalization comes increased vulnerability to cyberattacks.
In a survey, for example, the European Banking Authority, found that about a quarter of European banks experienced cyberattacks in the second half of 2023 that led to a serious operational incident. The year before, it was about a tenth of the banks.
“It is vital that we continuously work to increase cyber resilience. Not only in terms of preventive measures to counter cyberattacks, but also in terms of measures that ensure the ability to continue critical business activities after a serious cyberattack,” Thomsen said.
In four to five months, the central bank will join the pan-European payments infrastructure, TARGET Services. This means, among other things, joining forces with the euro countries in a common front against cyber threats.
“This is a huge investment for both you in the sector and for Danmarks Nationalbank, and the collaboration has been very successful. The other Nordic central banks also see TARGET Services as a future possibility. This means we can look forward to strong and increased Nordic and European collaboration on a common payments infrastructure with increased joint innovation in mind,” he said.