Historical Sketch

The Danish monarchy succeeded the Viking states in the early 10th century. It extended throughout Iceland and Scandinavia in the dynastic union with Norway and Sweden, the so-called Kalmar Union of 1397 and northern Germany with the duchies of Schleswig-Holstein and Lauenburg ruled in personal union by the Danish crown. The Faroe Islands came under Danish rule in the late 14th century, and Greenland was colonized in 1721. Sweden left the personal union in 1523, Norway in 1814, and the German possession were were lost in the Prussian-Danish War of 1866. During the Second World War, Denmark was occupied by Germany. During this time, both the Faroe Islands and Greenland remained under the rule of the government-in-exile and were occupied by Great Britain and the United States. After the war, Faroe attained internal autonomy in 1948, while Greenland's colonial statute was terminated in 1953 and replaced by an internal autonomy, which was extended into self-rule in 1979.

Monetary History Overview

In 1671, Denmark passed a new coinage order that introduced the 1st Danish Thaler as specie coin in a silver standard based on the Cologne mark. The traditional accounting in "Danish Courant" remained in use with a fixed ratio against specie. A century later, in 1788, the Danish standard was introduced in the German duchies of Schleswig and Holstein, where the local accounting also got fixed against specie. In 1738, a Copenhagen based commercial bank began issuing paper money. It became widely accepted throughout mainland Denmark. During the Napoleonic Wars the Danish state expenditure expanded enormously. As it mainly consisted of banknotes the result was a paper inflation that turned into the state bankruptcy of 1813. The monetary systems of the outlying territories Norway and Schleswig-Holstein were not affected as the local issuing banks did not join in the prolific issuance of the Copenhagen bank. In the aftermath of the bankruptcy, the Danish monetary system was restructured and modernised. All issuing banks were closed and the depreciated Copenhagen paper money was withdrawn at a twelfth of the nominal specie value. New paper was issued by the newly founded State Bank on par with specie of the new 2nd Danish Thaler ("Rigsdaler") of half the size of the 1671 Thaler. The old accounting currencies were abolished everywhere except Schleswig-Holstein where they continued until 1854. The State Bank was closed in 1817 already when the issuance privilege for paper money went back to a Copenhagen based commercial bank, the National Bank. The silver standard of the three Scandinavian countries Denmark, Norway, and Sweden became increasingly outdated so that they concluded the Scandinavian Monetary Union in December 1872 to switch to a uniform gold standard. Beginning of 1875, Denmark introduced the Danish Crown and demonetized the Thaler within the year. The Scandinavian currencies remained stable for the next 40 years. At the outbreak of the First World War, the gold parity was suspended everywhere, and the mutual acceptance of banknotes and coins ceased. The post-war recovery of the Danish monetary system took until 1926 when the Scandinavian gold standard was re-instated. But the economic crisis of the early 1930s finished the gold standard for good. The Crown got pegged to the Pound Sterling and remained more or less stable, even during the German occupation of the 1940s. The Sterling peg remained in place after World War II, and the Crown also followed the 1949 devaluation. The second Sterling devaluation of 1967 was applied only halfway, and the Crown re-pegged to the US Dollar afterwards. In 1972, the Crown got floated, and Denmark joined the European currency system but not the European Monetary Union of 1995, a decision that was confirmed by the negative vote in the September 2000 referendum. However, the Danish Crown has closely followed the development of the European currency since then.

In the Faroe Islands, the Danish currencies have been used without local distinction. This changed when Denmark got occupied by Germany in 1940 and the islands remained under the rule of the London base government-in-exile and were occupied by Great Britain. Within months the circulating Danish banknotes were counter-marked and then withdrawn. In a British-Danish treaty of March 1941 the Faroe paper money was nominally pegged to the Pound, not the Danish Crown. Since the Danish currency re-pegged to the British Pound after liberation the distinction disappeared in mid-1945. The mainland paper money was not introduced back but since 1951, special banknotes in Danish Crown have been issued by the Danish National Bank replacing the wartime notes. Danish banknotes are not current in the Faroe Islands, but no local subsidiary coins have been produced.

Monetary economy in Greenland was introduced by the Danish colonial administration. The Royal Greenland Trade Office began issuing paper money in Danish currency in 1804 and continued issuance throughout time. The exploitation of the natural riches was mandated to chartered mining companies which occasionally issued metallic tokens and paper certificates for use in their domains. In 1913, the Danish Colonial Administration took over money issuance from the Trade Office, and all the previous paper money got withdrawn in 1927. In 1926, the first local subsidiary coins appeared in Greenland. The end of the colonial status in 1953 re-instated the Trade Office as issuing institution. New paper money and subsidiary coins were issued and circulated until end-1967, when all the local money got withdrawn and replaced by mainland banknotes and coins. A Danish law of 2007 statued the introduction of special banknotes in Danish Crown by the Danish National Bank, similar to the 1951 model for the Faroe Islands. This was, however, rejected by the Greenland parliament in 2010 for fear of excessive costs given the small population. The plan was finally abandoned in 2012.

Denmark joined the International Monetary Fund (IMF) on 30.03.1946.

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