A Q&A with Denmark’s prime minister

February 24, 2012

For the first six months of this year, Denmark holds the rotating presidency of the European Union, giving Danish Prime Minister Helle Thorning-Schmidt an unusually clear vantage point on the E.U.’s struggles to overcome its fiscal and economic challenges.

Thorning-Schmidt sat for an interview Friday at the Center for American Progress, where she gave a speech on the U.S.-E.U. relationship. A lightly edited transcript follows.

In your remarks, you said that Europe is suffering a “crisis of confidence.” Most economists I know say it’s suffering a crisis of growth and debt, and it’s not yet solved.

Helle Thorning-Schmidt: Let me be clear that I think the Europeans have acted rather fast, considering we are 27 sovereign nations. We have built a firewall. We have found a solution for private-sector investors. We have a new fiscal compact. And what we’re all looking at now and hoping is that the firewall will be sufficient to bring Greece out of the debt crisis. Do you need confidence for that? Yes. You need growth in other E.U. countries. We need growth in America as well. But don’t get me wrong. This is a European problem, and we need to solve it.

Almost every analyst I’ve spoken to has been extremely skeptical that this package has any chance of bringing Greece out of its debt crisis. The night it was released, the Financial Times reported on a confidential document distributed to many of the euro zone’s finance ministers that essentially said that this package wouldn’t work. The more optimistic voices say that if more needs to be done later, it will be.

My question back would be, aren’t we all in a situation of muddling through? In the American political system in an election year, perhaps the decision-making system is not as fast as you wish it was. In Europe, it’s not as fast as we wish it was. But there has been a tremendous solidarity in Europe from bigger countries towards a smaller country in need of help. These are sovereign nations that have to decide this in democratically elected parliaments. So you could always discuss whether it could be twice as big. But they have acted, and they have acted fast.

Labor-market reforms are critical in the European economic discussion but almost unknown in America’s economic discussion. So can you explain to an American audience the role labor-market reforms are playing in Europe?

I think the European countries are different when you compare [them] to the United States. The demographic challenges will be felt very hard in Europe, because we don’t have access to immigration, politically and for other reasons. That’s not the same in the U.S. You have access to almost unlimited labor. We need to find other ways to expand our labor force, and we can only do that by raising the pension age, as we have done, asking people to work longer hours and making other reforms in the labor market.

You mention that you’re trying to institute some of those reforms in Denmark. Which?

We will ask laborers to work longer hours. I believe everyone understands now that we need to tighten our belt and contribute to the solution. If austerity is applied fairly, it will be accepted by a lot of people. People want to make sacrifices, but they don’t want to be sacrificed. We need to have austerity and cuts, but in a fair way.

Denmark says that its presidency of the European Union will be characterized by a focus on growth. So what’s the growth agenda for Europe?

It means two things. Each member state has to get its economy sorted and make sure they don’t spend more than their income. That’s part of growth because it brings interest rates down, increases investment and so forth. And there’s labor-market reform, too. But on the European level, our biggest success over the last 20 years has been the development of the internal market, and there’s some low-hanging fruit there. For an example, we don’t have a European patent system yet. We have debated that for 30 years, but we intend to finalize that.

One slightly confusing element of the European system, at least for Americans, is that there is the European Union and the euro zone, which are different. Denmark is part of the E.U. but not part of the euro zone. But obviously your economy is very affected by what happens in the euro zone. So what’s your role in those discussions?

We have to accept that we have a Europe that is basically what we would call a two-speed Europe. We have 17 member states inside the euro zone, and they are the ones putting up the firewall right now. So we don’t have much influence on that discussion, because we are not paying for it. But we do have so much in common with the 27 members of the European Union — that’s where the internal market comes in, and it’s where Denmark will be focusing during its presidency.

In your speech, you talk about the difficulty of getting 27 nations on the same page but also warn that Europe will never be a one nation-state. Granting that, has this crisis led to more thinking about how Europe could streamline and speed its decision-making processes?

There’s always talk about streamlining political decision making. But in the last two months, we have undertaken more far-reaching decisions than perhaps in the last 50 years. This is big, what we’ve done. So yes, European decision making is not pretty. But it does work.

For more Ezra Klein columns, go to postbusiness.com.

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