Governor Niels Bernstein of the Danish central bank Nationalbank says that the Liberal-Conservative government must shoulder some of the responsibility for the economic crisis having hit Denmark so hard.

“We should aim for an economic policy that does not independently strengthen the fluctuations in the state of the market. This is something we have not been good at. During the upturn, economic policy followed suit and strengthened the upturn. Not enough was done to hold back,” Bernstein said during today’s annual meeting of the Danish Bankers Association.

Bernstein added that developments on the housing market helped to strengthen the crisis through low interest rates, new borrowing, falling unemployment and a tax freeze – all of which pushed up housing prices.

“The increase in housing prices added fuel to the upturn. Equity grew and provided consumers with extra purchasing power. We saw a major expansion in construction and clear signs of overheating,” Bernstein says.

“The many and cheap borrowing facilities gave more impetus to the upturn, which was fed by public exports, private consumption and investments and in tandem with public consumption,” he adds.

Learning curve
Bernstein says he feels that Denmark is slowly emerging from a period of negative growth but warns that the lessons of the crisis should not be forgotten.

“The critical financial blow was an external one, but we had made ourselves vulnerable by the time the crisis hit. We cannot prevent new crises, but we can, and must learn from what we have been through,” Bernstein says.