Business failures predicted to cost 26,000 jobs in 2012

The EU’s economic problems could make 2012 a catastrophic year for Denmark, say analysts

Some 26,000 Danish workers stand to lose their jobs in 2012 due to their employers going bankrupt, according to the latest prognosis from the unemployment insurance and pension fund Lønmodtagernes Garantifond (LG).

“We thought that we were just about done with all the bankruptcies, but then things took a turn and began to go the wrong way,” Mogens Højland, an LG account manager, told Politiken newspaper.
Analysts expected that the number of bankruptcies would taper off in 2011 – and indeed that was the case through the end of summer. But then the trend line took a u-turn. For the past couple of months, the number of employees who lost their jobs because of business bankruptcies has been rising with unsettling speed.

“We have to admit that the very serious problems in several EU countries will rub off on Denmark. We are therefore now expecting that in 2012 we will be helping 26,000 Danes who have lost their jobs,” said Højland.

He predicts that LG will spend some 800 million kroner in unemployment insurance payments next year.

In 2009, LG paid out some 1 billion kroner in benefits to 31,000 unemployed people. Alarmingly, this record-high outlay nearly emptied LGÂ’s own bank accounts.

The head advisor at the Danish economic council, Det Økonomiske Råd, confirmed LG’s worrying prognosis.

“LG’s numbers suggest that there hasn’t been any growth in the job market,” said Hans Jørgen Whitta-Jacobsen. “At the beginning of the year, we thought that we would see a slow recovery that would gradually bring us out of the crisis. But since summer there’s been a shift. We’re headed into the danger zone again.”

NordeaÂ’s senior analyst Henrik Drusebjerg said that LGÂ’s forecast was a worrisome indication for the economy in general.

“Neither politicians in the US nor Europe have come up with solutions for the debt problems. Now we’re paying the price,” Drusebjerg said.

The finance minister Bjarne Corydon (Socialdemokraterne) agreed that 2012 would, in all likelihood, be a tough year economically.

“The figures from LG come on top of a string of bleak prognoses we’ve been getting. LG’s prognosis underscores that the prudent thing to do is to support growth and employment in 2012 with the kickstart,” Corydon said, referring to the government’s 17 billion kroner package to stimulate job growth through public works projects.

Nevertheless, the minister for the economy and the interior, Margrethe Vestager, emphasized that without improvements in the other European economies, the Danish kickstart would only have limited effect.

“The Danish kickstart alone can’t bring higher growth to Denmark. We’re dependent on the European countries making decisions that will create stability in Europe,” Vestager said in Brussels last week.

Denmark is among the five European countries where business bankruptcies have risen the most since 2007. The other countries in that group are Ireland, Spain, Italy and Portugal.





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