Denmark may be a small, out-of-the-way European nation, but as the first country to guarantee the deposits and liabilities of all its banks, its experience is sobering. The unwinding of the current financial crisis, Danes have found, will not come quickly or easily.
Closely integrated into the global financial system, Denmark has discovered that ice-cold credit markets cannot warm up without easing elsewhere, too. And the same may prove true not just of smaller countries, but even some of the largest as well, like the United States, Japan and Britain.
"This is a global phenomenon," said Tonny Andersen, the chief financial officer of Danske Bank in Copenhagen. "The unfreezing will be challenging."
A sometimes skeptical member of the European Union that has so far refused to abandon its krone for the euro, Denmark is finding out what going it alone really means. Being a well-governed nation with a gilt-edged credit rating, however impressive in normal times, is not enough when global markets falter.
On Monday, the National Bank of Denmark and the European Central Bank cemented the latest in a string of global currency swap agreements, emergency measures aimed at replacing a currency market that no longer functions. The ECB in Frankfurt will provide Denmark with €12 billion, or $15 billion, "as long as needed," the two central banks said in a statement.
Denmark already has a swap line worth $15 billion with the U.S. Federal Reserve.
The Danish experience has underscored what American and European governments achieved with monumental bailout packages for banks - and what they did not.
Standard & Poor's, the ratings agency, said in a report after the bailouts were passed that the disintegration of the financial system had been avoided. Economies would not go off a "credit cliff," but neither would bank lending resume quickly.
"All these actions should restart the market," said Scott Bugie, managing director for financial services at Standard & Poor's. But, the report added, "it will take time to sink in."
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