Prime Minister Lars Løkke Rasmussen’s address at The Annual Meeting with Ambassadors in Denmark, Copenhagen, 23 April 2010

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Ambassadors, Your Excellencies,

Thank you for coming today. I have been looking forward to our meeting. I see these gatherings as an important channel of communication between the Danish Government and our partners and friends who are represented in Denmark. I am pleased that you have had the chance to meet with the new Foreign Minister and the new Minister for Development Cooperation.

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This is actually a particularly good time to have this meeting. A lot has happened in Danish politics over the last few months. In February, I presented a completely reorganized cabinet with many new ministers. And we launched an ambitious and proactive new work programme called “Denmark 2020”. This week, the cabinet held a retreat to discuss specific measures that the Government will be taking to turn this work programme into concrete action. We have also continued the important work of our national Growth Forum.

We have a lot of work to do. The list of challenges on our domestic and international agenda is long. Getting our economy back on a stable path of growth and employment is at the top of our to-do list. Like it is in most countries. This is not an easy task. Global competition has become more intense, particularly from Asia. This is indeed a challenge for a country like Denmark, as it is for all European countries.

I have been able to witness this first-hand. I visited Singapore, Japan and Korea in March. And only a couple of weeks ago I visited China. The goal was to strengthen bilateral relations, facilitate business contacts and get a better understanding of the challenges that we face in Denmark. Asia is truly a fast mover. Denmark might be a first mover in some areas. But Asia is a fast mover.

I met leaders, business executives and students full of drive, purpose, energy and commitment. We have a lot to learn from the Asian countries with their impressive growth rates and sharp focus on education, research and innovation and green growth. But there was also a clear interest in learning from us: What is the Danish take on education and research? How do we handle the transition to a green economy? I am pleased that my visits paved the way for new partnerships in some of these key areas.

In my remarks today, I will first address the current economic challenge facing Denmark. Then I will briefly touch on the green agenda. And finally I will turn to Afghanistan and conclude with a few general remarks on Danish foreign policy. After that, I look forward to your questions and comments.

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Tackling the most severe financial and economic crisis in decades remains the central domestic challenge for Denmark. A full recovery is still not secured. But there are encouraging signs. The Danish economy started to grow again in the third quarter of 2009. And we expect sustained growth at a modest rate in 2010 and 2011. Unemployment in Denmark has increased. But it remains relatively low compared with most other European countries.

The Danish government has taken extraordinary measures to counter the crisis. We have supported our financial sector. Our fiscal policy is among the most expansive among the OECD countries in 2010. We have increased public investments. And we have introduced fully financed tax cuts that will significantly increase household disposable incomes in 2010. This is why we are getting through the crisis with lower unemployment levels.

The crisis – and the many public initiatives to counter it – has left Denmark with a budget deficit of around 5.5 per cent in 2010. We expect to receive a recommendation from the EU later this year to reduce our deficit to less than three per cent in 2012.

20 EU member states have already received similar recommendations under the Stability and Growth Pact. And most of them face higher deficits and debt levels than we do. But that does not change the fact that consolidating our public finances will be a key challenge for Denmark in the coming years.

We are fully committed to meeting the EU recommendation. Our strategy is to implement the full consolidation on the expenditure side. The main element will be keeping public consumption constant until 2013. And since we still want to increase funding for highly prioritised areas such as health care, we will have to reprioritise.

The economic crisis has worsened a number of challenges that were present even before the crisis hit us: Due to demographic changes over the coming years, we will be experiencing a net loss of people on the labour market. And increasing global competition forces us to take a critical view of our productivity and growth potential.

The crisis has made it clear how fast the world’s economic gravity is shifting towards the emerging markets. While most developed countries have experienced low or even negative growth, countries like China and India have sustained growth rates in the range of 8-10 pct.

It is extremely positive that a growing number of people living in developing countries experience such rapid improvements in their standards of living. But for Denmark - and for Europe - it is also a wake-up call.

The truth – still not fully acknowledged – is that we now face tough competition in all parts of the value-chain, including innovation, research and development. Chinese engineers typically receive a much lower wage than their Danish colleagues. But often have equal or better skills.

This is but one example. I saw this trend throughout Asia where you clearly see how fast things are progressing. I was impressed - but honestly also a little worried on behalf of Denmark. I sometimes fear that we take Denmark’s position as one of the most prosperous countries in the world for granted. That would be a mistake. If we are to maintain our prosperity and way of life, we need to improve our productivity and our ability to compete on the global stage.

My government has set the goal that Denmark should be one of the ten most prosperous countries in the world in 2020. This is a very ambitious goal, which can only be achieved if we make bold choices. To assess the challenges and suggest solutions, I have established a national Growth Forum with participants from the business, academic and political community.

One important topic on the Forum’s agenda is the green economy. Danish companies have a strong position in green technology. In the coming years, demand for green tech will increase substantially. Danish companies should be at the forefront of the new green markets. We have set the goal that Denmark should be among the three leading countries in the world with regard to energy efficiency and renewables by 2020.

Good framework conditions are the key to realizing this potential. But the competition in the green tech sector is getting tougher, not least from emerging economies. There is no room for complacency. We need to continue to invest for the long-term in research, innovation and development.

The Growth Forum is also addressing how Denmark can become better at attracting foreign investments and skilled labour. And it is taking a new look at our education system – especially our primary school system. We have set the goal that Danish pupils should be among the top five by international standards in 2020. Human resources are our most vital asset in this era of intensified global competition. Finally, we will have to take a closer look at our productivity gap which is increasing compared to other countries.

In short: we need a reform agenda that is both broad and deep.

For a small and open economy like Denmark, international cooperation – not least within the EU – is crucial. Through the EU’s internal market, Danish companies gain direct access to 500 million European customers. Instead of just 5 million in Denmark. This illustrates in all simplicity why Denmark can only be a “winner nation” if Europe is a “winner region”.

Throughout the crisis, the EU countries have cooperated closely to get the economy back on track. This is extremely positive. We have co-ordinated our national crisis measures within a common framework for economic recovery. We have taken a wide range of measures to strengthen the EU’s common rules on financial regulation. And we are coordinating our fiscal exit strategies within the Stability and Growth Pact.

I also see a strong role for the EU when it comes to improving long-term growth and job-creation. At the latest European Summit in March, we launched a new European growth strategy – the 2020 Strategy. We agreed that the strategy should be more ambitious, more focused and more effective than its predecessor – the Lisbon strategy. And from a Danish perspective, we welcome the prominent role that transformation to a knowledge-based and green economy plays in the strategy.

I would also stress the crucial importance of close transatlantic cooperation and concerted action at the global level to address the crisis. Through the G20 and other foray, we have managed to avoid the worst effects of the global crisis. We have to a large extent avoided protectionist measures which could have deepened the downturn. And we are establishing international rules to strengthen regulation and supervision of global financial markets.

We have already taken many important initiatives to tackle the economic challenges ahead of us – in Denmark, in the EU and globally. But the reality is that the scale and the urgency of the challenges we face are not always fully acknowledged and understood in all parts of our societies.

To sustain our long-term prosperity and welfare systems, we need to bring our public finances back on track. We will have to prioritise even more and provide public services even more efficiently. We need to implement further reforms of our labour markets to ensure future labour supply. And in order to keep jobs in Denmark, we need to ensure that our productivity and our wage levels are better aligned.

I believe that many European policy-makers – including myself – face the same central dilemma: On the one hand, there are the economic realities. On the other, there is the need to gain broad public support for strong policy measures. In that context, European cooperation can – to some degree at least – help to create a better understanding of the problems and the necessity to confront them.

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I will now turn to the green agenda and our efforts to address climate change.

In essence, we are confronted with what I have called a dual challenge: Countries must continue to deal with the global economic crisis and find new ways to create sustainable growth and employment. At the same time, we must transform our societies into low-carbon economies to address climate change and future energy security.

In this new global landscape, we have chosen to see this as an opportunity, rather than a problem. In our view, the transition to a green economy is not only good for the planet, it is also good for business. There are no quick fixes or easy solutions. But with a sustained focus on a green recovery, I see a potential win-win situation to the benefit of our economies and the global climate.

Without concerted global action, however, we will not be effective in addressing climate change. This is what was at stake at COP15 in Copenhagen last year – and still is. And this is why the outcome of COP15 – the Copenhagen Accord – is so important.

I went into COP15 with high ambitions. In our efforts to reach an agreement, we tried to build a bridge between the complex national economic interests of the Parties and the equally complex international agenda relating to reducing global emissions and distributing the costs. This had never been done before. And the negotiations were every bit as difficult as we expected. But despite the twists and turns, we got an agreement, a global deal. In my view the best possible deal, in light of the circumstances.

The Copenhagen Accord provides the fundamentals of a global framework to combat climate change. It sets out the target to limit global warming to below 2 degrees Celsius. And it creates a critical link between
- this goal, which was first defined by science and since then acknowledged by politicians,
- the international cooperation to achieve it, and
- the contributions of individual countries.
The Accord also includes important elements related to technology development and transfer as well as financing.

So far, 122 countries have associated themselves with the Copenhagen Accord. This represents around 90% of world GDP and 83% of world emissions. This sends a strong signal. Denmark is working closely with the incoming Mexican presidency to ensure that the current momentum is translated into concrete action at COP16. In fact I had the chance to discuss this with President Calderon just yesterday.

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Moving from the green agenda, I will now turn to one of the most critical security challenges in front us, namely Afghanistan. This is an absolute priority for Denmark. As it is for NATO and for the international community.

I see Denmark’s military engagement as a fundamental question of our own security. To prevent Afghanistan from once again becoming a safe haven for terrorists. And the means to do so is first and foremost to introduce a viable Afghan security regime.

We have been fighting in Afghanistan for nearly ten years now. The last four years at the very forefront in the Helmand province, primarily with the UK. Our engagement has not been without sacrifices and it is not over yet.

Denmark remains fully committed. But status quo is no longer an acceptable situation – neither for us nor for the international community. Significant progress in the remainder of 2010 is required. I therefore welcome the additional US and international forces.

The Danish engagement still enjoys a wide political and public support. It is a reflection of the importance of the task and a clear sign of the deep respect for the Danish men and women who risk their lives every day in Afghanistan. But continued political and public support clearly comes with a price tag – progress.

We have just presented a new plan for our engagement in Helmand Province – the so-called Helmand Plan 2010. The focus is on capacity-building. The plan enjoys wide support among the political parties. But it also reflects this strong political demand for progress.

It is my sincere hope that we can begin to transfer lead security responsibility over to the Afghans within a foreseeable future. This is our goal. A goal that is shared by the Afghans and the rest of the international community.

Our security engagement in Afghanistan goes hand in hand with our development assistance. This is absolutely key to the long-term stability and reconstruction of Afghanistan. In general, our development assistance remains a central part of our foreign policy. We have just presented a draft strategy that lays out a new, forward-leaning strategic framework for our development assistance effort.

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Let me conclude with a few general remarks on Denmark’s foreign policy:

There will always be continuity in our foreign engagement. Nuances might change. But at the core, Denmark’s international involvement is based on cooperation and partnerships with friends and allies and strong rules and institutions such as the EU, NATO and the United Nations.

In my view, Denmark must maintain an active foreign policy engagement. Our goal is to make a difference in the world. To help find solutions. To carry our share of the burden, also when the going gets tough. Our policy must be guided by both our fundamental values and our national interests.

It is when the public can see that we are promoting both values and interests – and generating concrete results – that the support for our international involvement is the strongest. You see this in Afghanistan where we are among the top contributors measured per capita, despite suffering high casualties. And you see it in our development assistance where we remain among the leading donors in the world, despite the economic downturn.

Globalisation is bringing together our domestic and international agendas. Simply put, our domestic policies will not be effective without a strong foreign policy. Pursuing economic recovery at home does not make sense without an active international effort to promote economic development, growth and trade. As we look to the long-term challenges, it is clear that we are faced with some tough choices. We need to confront these head-on today.

A clear lesson from the economic crisis is that we need more international cooperation, not less. We need more exchanges and sharing of experiences to the benefit of our businesses and our people. And we need more effective and concerted multilateral action to counter global challenges.

The global map is changing. New centres of power are emerging. For a country like Denmark, it is vital to maintain strong relations with all the key players. I am pleased that I have had the chance to meet with leaders and strengthen cooperation with a broad range of countries. I see this close dialogue as the most effective way of generating results and promoting Danish values and interests abroad.

Thank you for your attention. I look forward to our discussion.

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