Michael de Laine

CEPOS sees 30,000 new jobs from interest rate drop

By Michael de Laine, Copenhagen, 24th January 2009

The liberal think-tank CEPOS believes the recent fall in interest rates in Europe and Denmark could lead to 30,000 new jobs in 2010.

“Since the start of the financial crisis in the autumn, the European Central Bank (ECB) has cut the money market rates considerably and further interest rate cuts can be expected from the ECB in the coming months,” the liberal think-tank CEPOS said in a new note released on 23rd January.

The cut in interest rates has yet to make itself felt in Denmark, partly because of financial uncertainties and partly because of currency speculation against the Danish krone, CEPOS added. But it sees the relaxed monetary policy stimulating the Danish economy in 2009 and 2010, culminating in an overall positive impact on employment of about 30,000 people in 2010, including about 10,000 in the construction sector.

“The fall in interest rates is expected to increase gross domestic product by 0.5% in 2009 and by 1.9% i 2010,” CEPOS said. The think-tank expects the effects of the interest rate fall to make themselves felt towards the end of 2009, a suitable time for the economic developments in Denmark as the pressure on the labour market is expected to fall then.

“The considerable relaxation in monetary policy that can be expected in the Danish economy raises questions about the need for further fiscal easing, which is something that many politicians are calling for,” CEPOS said.

“There is a risk that fiscal stimulation by the government at the present time would be an overdose of economic policy resulting not in high employment but in increased pay and price inflation,” the think-tank said, adding that this would in fact cost jobs.

Click here to see the CEPOS note (PDF).