Business

Danish Demand Puts EU Budget on Hold

Danish Demand Puts EU Budget on Hold

The EU budget. JyllandsPosten has: The Danish PM Helle Thorning-Schmidt stands firm on her demand that Denmark gets a 1 bio. DKK discount in the contribution to the EU budget. The most known discount is the British that Margaret Thatcher once extorted swinging her famous handbag. That is just one of a multiple of discounts that has been institutionalised over the years. Denmark being one of the few countries left that hasn’t any one – Germany – naturally another.

Denmark is said to be rather alone with that demand. President of the EU council Herman van Rumpuyhas – according to rumours suggested a compromise with a discount of several 100 mio. DKK. This compromise was flatly rejected by Thorning-Schmidt. That indicated some understanding from the Dutch. Going Dutch is perhaps more than a coincidental pun – but more of that later. Danish opposition has no comment: “Nobody ever tells me anything!” as Old Forsythe keeps saying in Galsworthy’s Saga.

Actually Thorning-Schmidt is standing so firm as wanting to veto the budget unless she gets her way! As the EU budget demands unanimity the threat is harsh and very real – and unprecedented from Denmark.

Berlingske has:

EU-expert Professor Marlene Wind of Copenhagen University comments, that there must be a reason for this adamant attitude and Denmark will get something – though she won’t guess what.

Dagens Nyheter has:

Swedish PM Fredrik Reinfeldt has a glum view of his chances of securing the Swedish discount that was negotiated way back by PM Göran Persson – despite violent attitudes in Sweden that that right must be preserved.

I think, I might have a fair bid on the flimsy evidence presented. As my regular reader (still alive?) might have noticed there are two major infrastructural projects involving Denmark Germany and Sweden: The High Tension Direct Current power transmission net and the tunnel under the Femarn Belt.

Actually I think PM Helle Thorning-Schmidt has a more than strong case – in fact she has an unusually excellent case!

Taking the Fehmarn Belt connection first:

The tunnel has been agreed upon between Germany and Denmark for about a decade; but been held up by German procrastinations over and over again. As late as last winter a 1 bio. USD railway-bridge that sorely needs replacement (build before WW2) was emergency repaired but really solution is a new twin-track bridge and we are definitely approaching the end of life extensions both in capacity and ability to carry the weight of modern trains – not to mention the ferries that always have been overworked and have marginal harbour facilities. The German side does need substantial investments in road and especially rail modernisations the stretch between Puttgarten and Kiel has always been the stepchild of Bundesbahn – keeping diesel locomotives when all other places in Germany had electric traction.

Not only that but the entire rail and signal system is outdated all the way to the large shunting station at Hamburg Maschen. The maximum train length is 750 meters and the need and ambition of the Bundesbahn is 1500 meters train length – and no it is not only hooking up more cars after the locomotive: Braking distances and reaction time will need a remotely controlled locomotive in the rear as well as in front. There are other considerations as well, but there are more in the nature of obfuscation in technicalities – or rather: Bad excuses for not getting things done. There IS a considerable German investment to be done that among other things have been held up by the German reunification and the overhanging investments in the former German Democratic Republic.

The project is indeed in the common interest of all three countries:

Denmark will get huge tonnage of transit traffic that pays by the ton-mile on Danish rails without any Danish handling costs (Luxembourg and Switzerland has profited hugely for decades by transit rail). Freight by rail is not really an option in Denmark as the country is too small and businesses are small and medium size, so they rarely fill a railroad car. In fact most of Denmark’s export to China is through supplying German companies. So of course Germany and Sweden will pay for the connection eventually by normal usage.

Sweden is really in need of being tied up to Germany transport wise. The combined rail and road bridge Between Denmark and Sweden at Copenhagen has been build years ago. The urgency on the part of Sweden must come from the prospect of using Göteborg as a major port. APM Mærsk is conducting trials and simulations to see the requirements before Göteborg can actually handle an E-class containership!

An E-class has a capacity of roughly 15.000 TEU or 20’ containers which in a rough “back-of-envelope” estimate is 90 kilometers (or 60 miles) of train length – or 60 trains of 1500 meter length per call of port! This obviously isn’t for the domestic need of neither Denmark nor Sweden – even combined – that amount of freight needs to go further and deep down into Europe. Before embarking on a major investment Sweden just might like to know if Germany is serious about the EU! Or Poland is?

That amount of freight will never get through the Danish straits, knowing the waters in the Baltic roughly no port will be able to handle anywhere that size of ship nor volume of freight for that matter.

Germany is in need of port capacity as both Hamburg and Rotterdam are large, and in various ways hampered capacity-wise besides suffering from a remoteness to the eastern part of Germany, Poland and Czech Republic – and the road and rail system of West Germany is creaking under the present strain. Of course the full range of benefits will not be available immediately, but demand further investments. So far Germany has been a lot of excuses.

Leading to the second issue is the opportunity to connect Sweden to the German power-grid through said HTDC grid. Sweden does not have a great generating capacity – especially as the nuclear power plants are being phased out (one of them placed smack across Øresund from Copenhagen – Danish/Swedish relations have always been radiant about that one)! The limitation of the Swedish hydro-electrical  generating capacity is partly due to precipitation and partly to water-magazine limitations (3 weeks is normal in Sweden); but what it does have is a high peak performance that is invaluable in regulating the dismal quality of solar panels and wind turbines (they generate at weird and unpredictable times).

The other major HVDC investment is connecting Norwegian hydroelectric plants (No, not everything in Norway is oil) with the windmills of Denmark and Northern Germany with same reasoning as before.

Certainly the inner German power transmission system is in dire need of several tender and loving billions of EUR. The present situation is anything but satisfactory in the north-south transmission way. At the moment power is dumped into the Netherlands (I did return to Holland, as promised – they have a problem powering up and down all the time) an onwards towards France, from where it is transmitted back into Germany. Same thing in the east as Poland, Switzerland and the Czech Republic are straining to cope with the wastages and insufficiencies of the German power production and transmission.

Certainly the states of Schleswig-Holstein and Hamburg are broke and in need of the jobs and cannot finance their part of the investments, which is why the option of common Bund- und Länder bonds has come up. Considering the world wide scarcity of high quality securities it is out of proportion that a Länder bond pays 3% interest where a comparable Bundes Anleihe gets away with 1%.

Certainly Bundeskanzlerin Angela Merkel is being thwarted – not by the parliament – but by the second chamber (the Bundesrat). It could have a reason. Certainly there is quite some internal shuffling in areas of responsibility to be done; but that is a domestic German problem that should not be an EU concern. It just might be that the government of Angela Merkel – in an election year – is standing in the way of securing German industry cheap energy and competitive suppliers? Why? Just because some jerks in southern Europe –tactfully avoiding mentioning France – has a destroyed financial sector (no ours is definitely not in a good way either!) and has squandered money on cathedrals in the desert.

Certainly there are outstanding issues with major German suppliers – such as Siemens that really has made a dogs dinner out of their latest series of trains. I again tactfully omit the explicit pointing to the new airport in Berlin.

Conclusion:

Danish PM Helle Thorning-Schmidt most certainly has Germany over a barrel – possibly to the unfettered delight of the entire Mediterranean coastline:

It can’t be Demarks problem that Germany is procrastinating due to internal squabble –postponing productivity improvements – not only in Germany; but Sweden as well, not to mention Germany’s other neighbours – hampering growth in the EU that is desperately needed.

It is out of all proportion that Denmark has paid full fee for decades – and now when we actually need our own money to invest in infrastructure most needed for German purposes. We are expected to pay for the third time for investments Germany needs more than ever, but can’t lift their amble bottom to make. Some time the comedy has to stop!

Most certainly the prospect for Denmark is leaning back and counting the money hanging on the power-lines and thrown off the fully loaded trains taking German exports to Danish ships sailing them across the globe. But honestly? Is there a cheaper solution to Germany’s pressing problems?