SAVERS AND BORROWERS

Historically low interest rates (this is Denmark, not Greece) are terrific for borrowers such as myself, who have seen the cost of their mortgages fall over the past four years (mine will fall again this coming 30 June).

However, as with most things economic, there are two sides to every coin. What is very good for borrowers is not at all good for savers. Indeed, so low are the available returns for savers that it is becoming critical for pension funds that have guaranteed their members a minimum rate of return. A guaranteed 5% a year might have seemed parsimonious ten years ago; but when the maximum available return on Danish Government bonds today is only 2.5%, then that target suddenly looks all but impossible. Some funds may end up going bust.

Another financial headache for the Danish Government to have to think about.

Walter Blotscher