Economy of Denmark - Greenland and The Faroe Islands

Greenland and The Faroe Islands

Greenland suffered negative economic growth in the early 1990s, but since 1993 the economy has improved. A tight fiscal policy by the Greenland Home Rule Government since the late 1980s helped create a low inflation rate and surpluses in the public budget, but at the cost of rising foreign debt in the Home Rule Government's commercial entities. Since 1990, Greenland has registered a foreign trade deficit.

Following the closure of Greenland's last lead and zinc mine in 1989, Greenland's economy is solely dependent on the fishing industry and financial transfers from the Danish central government. Despite resumption of several interesting hydrocarbon and mineral exploration activities, it will take several years before production will begin. Greenland's shrimp fishery is by far the largest source of income, since cod catches have dropped to historically low levels. Tourism is the only sector offering any near-term potential, and even this is limited due to the short season and high costs. The public sector plays a dominant role in Greenland's economy. Grants from mainland Denmark and EU fisheries payments make up about one-half of the home-rule government's revenues.

The Faroe Islands also depend almost entirely on fisheries and related exports. Without Danish Government bailouts in 1992 and 1993, the Faroese economy would have gone bankrupt. Since 1995, the Faroese economy has seen a noticeable upturn, but remains extremely vulnerable. Recent off-shore oil finds close to the Faroese area give hope for Faroese deposits, too, which may form the basis for an economic rebound over the longer term.

Neither Greenland, nor the Faroe Islands are members of the European Union. Greenland left the European Economic Community in 1986 and the Faroe Islands declined membership in 1973, when Denmark joined.