Denmark uses the Danish krone as its official currency. While it is a member state of the European Union, it has not joined the eurozone or adopted the euro. The country negotiated the right to opt out from participation under the Maastricht Treaty of 1992. In 2000, the government held a referendum on introducing the euro, which was defeated with 53.2% voting no and 46.8% voting yes. The Danish krone is part of the ERM II mechanism, so its exchange rate is tied to within a 2.25% range of the euro.
Several Danish political parties favour adopting the euro, and a second referendum has been proposed several times since 2000. However, some important parties such as the Danish People's Party, Socialist People's Party, and Red–Green Alliance do not support joining the currency. Public opinion surveys have shown fluctuating support for the single currency, with the majority in favour for a few years before the 2008 financial crisis, with support falling further due to the euro area crisis in 2011.
International finance scholars generally consider currency pegs to be fragile; however, Denmark has been able to maintain the krone's peg to the euro consistently since its introduction in 1999.
Current status
Opt-outs The Danish government held a referendum in 1992 to approve ratification of the Maastricht Treaty, as required by the Danish constitution for any transfers of sovereignty which are not approved by 5/6 of parliament (Folketing). The coalition government of Denmark in 1992 consisted of the Conservatives and Agrarian Liberals, which together with the Social Democrats in opposition held approximately 80% of the seats in parliament leading them to believe that the referendum would be easily approved. However, the referendum resulted in 50.7% of the population voting against the ratification of the Maastricht Treaty, while only 49.3% voted in favour.
Ratification of the Maastricht Treaty required unanimous approval by all the member states in the European Union. The Danish "no", therefore, posed a significant issue for further integration. Denmark was not the only country issuing a referendum for the ratification of the Maastricht Treaty. In France, the public supported the treaty by only a small margin, while the Irish also voted in favour of the Treaty. The Danish "no" and the French "petit oui" are known in scholarly circles as the erosion of the permissive consensus regarding public support for European integration.
The solution to the lack of public support for further European integration in Denmark is known as "the National Compromise". 7 out of 8 parties in the Danish parliament came together in support a proposal to request 4 opt-outs: Union citizenship, Common Security and Defence, Justice and Home Affairs and participation in the last phase of the European Monetary Union. At the European Council summit on 11–12 December 1992 in Edinburgh, the European leaders agreed to these four opt-outs. This led to the Maastricht Treaty being accepted in a second referendum on 18 May 1993.
Exchange Rate Mechanism II While Denmark chose not join the eurozone due to its opt-out, it participates in the Exchange Rate Mechanism II (ERM II), a fixed exchange rate regime in which the Danish currency and other participating countries' currency are pegged to the euro.
The krone has been part of the ERM II mechanism since 1 January 1999, when it replaced the original ERM. This policy marks continuation of a similar peg from 1982 to 1999 with the Deutsche Mark. Following Bulgaria's adoption of the euro on 1 January 2026, Denmark is the only European Union member state participating in the ERM II.
Denmark is required to ensure that the kroner trades within 2.25% either side of a specified rate of 1 euro equal to 7.46038 kroner (making the lower rate 7.29252 and the upper rate 7.62824). However, in practice the exchange rate has kept within 0.5% of the defined rate, even less than the set limits. If the Krone goes beyond the limits, the Danmarks Nationalbank is mandated to intervene and bring it back within the fluctuation band, with the European Central Bank obliged to intervene if the Danish central bank is unable to do so. Two approaches are used to adjust the money supply and exchange rate. The first tool is intervention through the purchase and selling currencies to adjust the available money level. The second tool is an adjustment of the interest rates.
The European Central Bank conducts monetary policy independently of the national governments in the eurozone, resulting in loss of independence in monitary policy in favour of price stability. The ECB is committed to maintaining 2% inflation in the middle to long run. The decrease in fluctuations of currency reduces uncertainty for traders.
Denmark has had a fixed exchange rate since the end of the Second World War and has participated in several monetary cooperation systems. Therefore, participating in ERM II was not a change in this sense, and the lost autonomy in monetary policy and associated inability to respond to domestic economic shocks with monetary policy tools, had existed since the creation of the Bretton Woods system.
Convergence status
History
Early monetary unions in Denmark (1873–1914) On 5 May 1873 Denmark with Sweden fixed their currencies against gold and formed the Scandinavian Monetary Union, with Norway joining in 1875. Prior to this date, Denmark used the Danish rigsdaler divided into 96 rigsbank skilling. The union had the currency pegged to gold at the rate of 2.48 kroner per gram of gold, or 0.4032 grams per krone. An equal valued krone of the monetary union replaced the three legacy currencies at the rate of 1 krone = ½ Danish rigsdaler = ¼ Norwegian speciedaler = 1 Swedish riksdaler. The new currency became a legal tender and was accepted in all three countries. This monetary union lasted until 1914 when World War I brought an end to it.
European Monetary System and pre-euro monetary co-operation The collapse of the Bretton Woods system destabilised European markets, and monetary integration among the member states of the European Economic Community (now European Union). Under the Bretton Woods system, the dollar was pegged to the gold standard. Following the collapse of the Bretton Woods system, the European Currency Snake system came into force on 24 April 1972 with Denmark joining on 1 May 1972. Shortly after, the Danish Crown came under speculative attacks, and was forced to abandon the system, but the joined again a few months later.
The European Monetary System was established in 1979 to maintain stability in EEC countries with Denmark being one of the 8 participating countries. The EMS created an Exchange Rate Mechanism with fixed bands for currencies of participating countries. The Danish economy experienced recession in 1980, forcing the government to introduce several economic reforms. The most significant reform was the decision to opt for a fixed exchange rate policy in 1982 and stopping currency devaluation by pegging it against the German D-mark.
As the Danish people did not vote in favour of the 1992 Treaty, it did not adopt the euro, However, in 1998 Denmark agreed to participate in Exchange Rate Mechanism II with a narrow fluctuation band of ± 2.25% (instead of the ± 15%, which is the standard fluctuation band in the mechanism). The agreement was negotiated and finalised in the ECOFIN Council 25–27 September 1998. The difference between ERM and ERM II is that the currencies participating in ERM II are no longer linked to bilateral parities with other participating currencies as they were in the original ERM system, but rather they are pegged to the euro instead.
Euro referendum (2000)
A referendum was held on 28 September 2000, proposing that Denmark join the eurozone on 1 January 2002. While most political parties, media organisations and economic actors in Denmark campaigned in favour of adopting the euro, the referendum was rejected. Turnout was 87.6%, with 46.8% voting in favour of adopting the euro and 53.2% voting against. Some analysts believe that the significant weakening of the euro against the US dollar preceding the referendum directly contributed to its rejection.
Possible second euro referendum
On 22 November 2007, the newly re-elected Danish government declared its intention to hold a new referendum on the abolition of the four opt-outs, including the opt-out from the euro, by 2011. It was unclear if people would vote on each exemption separately, or if people would vote on all of them together. However, the uncertainty, both in terms of the stability of the euro and the establishment of new political structures at the EU level, resulting first from the 2008 financial crisis and then subsequently from the related euro area crisis, led the government to postpone the referendum to after the end of its legislative term. When a new government came to power in September 2011, it decided to not hold a referendum.
As part of the European elections in 2014, it was argued collectively by the group of pro-European Danish parties (Venstre, Konservative, Social Democrats and Radikale Venstre), that a euro referendum would not be held until the "development dust had settled" from the establishment of multiple initiatives in response to the euro area crisis. When a new Venstre-led government came to power in June 2015, its manifesto did not include any plan for holding a referendum on euro adoption. During the referendum to abolish the defence opt-out in 2022, the prime minister of Denmark, Mette Frederiksen, promised not to hold an additional euro referendum during her tenure as prime minister. No plans for holding a euro referendum were included in the government manifest of 2022.
There has been some speculation that the result of a Danish referendum would affect the Swedish debate on the euro.
Usage today The euro can be used at some locations in Denmark, usually in places catering to tourists, such as museums, airports and shops with large numbers of international visitors. However, change is usually given in kroner. Double krone-euro prices are used on all ferries going between Denmark and Germany.
On 10 January 2020, the 500 euro note was phased out in Denmark as part of the fight against money laundering and terrorism financing. At the time, the banknote was worth 3,737 Danish kroner (DKK), more than three times the highest denomination of the domestic currency, the thousand-kroner banknote. The European Central Bank had stopped issuing the banknote in 2019, but was critical of the law. In an opinion published in February 2019, it was argued that it conflicted with the principle of "sincere cooperation" set out in Article IV of the Treaty on European Union, and noted that no ban was planned for other high-value units of currency, such as the highest Swiss franc banknote, worth more than 6,500 DKK at the time.
Impact of potential euro adoption If Denmark were to adopt the euro, the monetary policy would be transferred from the Danmarks Nationalbank to the ESCB, limiting its ability to have an independent monetary policy. However, a study of the history of the Danish monetary policy shows that, "while Denmark does not share a single currency, its central bank has always tracked changes made by the ESCB".
While outside the euro, Denmark does not have any representation in the ESCB direction. Non-participation in the eurozone has been criticised by the former Prime Minister Anders Fogh Rasmussen, who stated that: "De facto, Denmark participates in the euro zone but without having a seat at the table where decisions are made, and that's a political problem". The ESCB has no obligation to defend the Danish krone exchange rate, which is the responsibility of the Danmarks Nationalbank and Danish government. In a crisis, a small country's national bank can defend the exchange rate only to a limited extent.