The European presidency — technically the presidency of the Council of the European Union — rotates among the European Union's member states every six months. As the union has edged toward a more federal makeup, and created a separate presidential post in the Brussels bureaucracy, the rotating presidency has become less relevant. Denmark assumes the presidency in January. In Stratfor's view, this will be the final semester in which the rotating presidency holds any power.
Rounds of enlargement in 2004 and 2007 brought newer and smaller member states into the union, and some of these will take up the presidency over the next few years. Only Poland among the new members has real political heft, and Warsaw’s presidential term expired in December 2011 without leaving a meaningful mark. After Denmark's term, the presidency will rotate among states either too small to make their voices heard in Europe or too financially distressed to chart a course independent of the major EU powers. Not until the first half of 2016 does another significant state — the Netherlands — hold the office. If the presidency still exists by that time, its powers will be purely ceremonial.
Denmark's presidency comes amid tough financial times for the European Union, as the eurozone's financial crisis continues. Copenhagen is in a difficult position: Denmark wants to see the crisis resolved but is not a eurozone member. Copenhagen can use its diplomatic standing to harness the concerns of the union’s non-eurozone countries, but in order for this to be effective, the union's Franco-German core would have to see that grouping as a legitimate force.
Denmark's Standing in Europe
At first glance, Denmark seems ill-suited to navigate a financial crisis centered on overcredited eurozone states in Southern Europe. While not in perfect financial health, Denmark faces neither funding constraints nor an onerous budget deficit. It is also neither physically near, nor heavily exposed via trade, to the most troubled states. Since Denmark is not even in the eurozone, most of the important recent summits charting Europe's future course have occurred without Danish representation. The idea that a country of 5 million people that is geographically, financially and politically removed from the epicenter of the crisis can lead the bloc back to stability – or even help chart the course — seems dubious.
But the Danes still have substantial interests in making the most of their presidential opportunity. Denmark's position in the EU is not widely understood. Most of the attention paid to Europe goes to the Franco-German core, the United Kingdom's euroskeptics, debt-laden Spain and Italy or defensive Poland. Yet Denmark, rather than the United Kingdom, is the most euroskeptic state in Europe. Denmark is also the richest state in the union (although technically the financial statelet of Luxembourg is richer) and Europe's oldest established entity — the first Viking state — was established there in the 8th century. Denmark's strong imperial past is also overlooked. At various times young Denmark controlled territories in what eventually would become France, the United Kingdom, Norway and Sweden – a remarkable feat considering how small Denmark is and how large its neighbors are.
Thinking of the Danes as an island people rather than a mainland people helps sketch a more accurate picture of the country and its history. Denmark's core is not the Jutland Peninsula, but the island of Zeeland. Islanders are forced — as the English were — to excel at maritime activity. Their navy allowed the Danes to choose the time and place of combat, thus maximizing the strength of their small population. With their merchant marines the Danes greatly expanded their wealth. And from their position on the Skagerrak — the narrow waterway that separates the Baltic and North seas — they profited greatly from any trade among their neighbors. (And for the better part of a millennium, they sank what ships they could not profit from.)
Denmark and the European Crisis
Denmark joined the European Union largely for the same reason (and at the same time) as the United Kingdom did: to gain a voice within, if not outright veto power over, the developing European institutions that could threaten its long-term security. Like the British, the Danes have not hesitated to stall key European developments. For example, a Danish referendum shot down the first draft of the Maastricht Treaty on Monetary Union, delaying the creation of the euro by a year.
Denmark does not want the eurozone crisis to spin out of control. While Copenhagen is nervous about Germany's ongoing efforts to rewire Europe more to Berlin’s liking, Denmark's economy, which has struggled recently, is of greater concern. A homegrown housing bubble burst in 2006, not long before the global financial crisis struck the Danish banking sector. Denmark — rather than providing ongoing state support — is the only EU state forcing its banks, through a framework of firm regulations and credit controls, to adapt to the new circumstances. This has already shrunk the number of Danish banks by a third, with deep consolidations continuing.
As one might infer from Denmark's location, the country is tightly lashed to the European economy, more so even than some eurozone states (including France and Germany). Fully 45 percent of its exports — representing about 23 percent of Denmark's gross domestic product — go to its immediate Northern European neighbors. Denmark is extremely dependent on those exports in particular, and on its export sector in general; only two EU states have a smaller domestic sector than does Denmark. So in the midst of deepening European economic problems, Danish economic growth has lagged behind even the lackluster performance of its European peers. Of the non-eurozone states, Denmark would suffer most from euro dissolution. On the up side, so much money is fleeing the eurozone that the Danish government is paying negative real yields on its debt, allowing Denmark an option few other European states have: borrowing its way out of economic difficulties and avoiding deep austerity.
This puts Denmark in a difficult position. Copenhagen strongly favors crisis measures, including bailouts for the Southern European states, to stabilize the eurozone — but as a non-eurozone state, it does not want to contribute to those bailouts. Denmark wants tighter economic integration of the various European states, including limits on budgets, in order to prevent the Southern European debt crisis from recurring. But Denmark would prefer to not sign away its sovereignty and wants any such limitations to be fixed firmly within existing European structures, rather than handled through new bailout-related funds de facto managed by the Germans. In short, Copenhagen broadly supports Germany's efforts, so long as Denmark does not have to participate in them, and so long as the European Commission holds regulatory power, both legally and in practice, and does not share it with Berlin.
Hindrances for the Danish Presidency
Denmark's biggest strength in the contemporary struggle is that it is extremely well positioned to harness and funnel the concerns of non-eurozone countries — doubly so for those of the Baltic region. Regional powerhouse Sweden, formerly a foe of Denmark, has over the centuries evolved to become a friend. Copenhagen enjoys excellent relations with not only Nordic and Baltic states, but also with all the new EU members, mostly because of shared concerns regarding the increasing power of Russia and Germany. The British and Danes share a mutual respect based largely on their reservations about the European Union. The Danes are also perhaps the friendliest Europeans in the United States’ regard, as they see U.S. naval power as the core guarantor of their physical security.
The biggest challenge for the Danes is making that diplomatic position resonate in the European core. German-Danish relations can be best described as cool and professional, not warm and constructive. And when the new Danish prime minister, Helle Thorning-Schmidt, spoke at the last EU summit about the importance of incorporating the participation of non-eurozone states into any new treaty, French President Nicolas Sarkozy reportedly responded, "You're an 'out,' a small out, and you're new. We don't want to hear from you."
Denmark's efforts in the rotating EU presidency will also face scrutiny at home. The current coalition government in Denmark is weak and can only rule with the help of outside parties. Those parties are either euroskeptic or want fresh elections in exchange for their support.
