Denmark’s Bernstein optimistic on consumption-led recovery

Nils Bernstein, the governor of the National Bank of Denmark, on Thursday said private sector savings in Denmark, the highest since World War II, reflected a solid consolidation by households and companies in the wake of the financial crisis.

At the publication of the central bank's Monetary Review for the second quarter of 2011, Bernstein said: "No one can say for certain when the turnaround in consumption and investment will occur, but the large savings surplus in the private sector constitutes a huge reserve of purchasing power. In the event of a positive reversal of the expectations of households and companies, a surplus of this size can, in no time, be translated into higher consumption and increased investment."

As a result, Bernstein said the central bank expected the recent downturn in the Danish economy to be replaced by renewed growth as private consumption and investment return to more normal levels. However, he said in order to ensure sustained and sustainable growth, it is important that the increase in the supply of labour and production capacity keep pace with the expected hike in private-sector demand.

"Fiscal policy should therefore remain prudent in the coming years. The need for fiscal consolidation also calls for prudent fiscal policy," he said.

Click here to read the speech.