As Denmark tries to silence speculation that it may follow Switzerland and abandon its euro peg, the nation'sbusiness leaders are adding their voice to the debate.

The Confederation of Danish Industry, which represents about10,000 companies, says the long-term cost of discarding the europeg far outweighs any potential short-term benefit.

“It takes a long time to build up a credible fixed exchange-ratepolicy,” Klaus Rasmussen, the group's chief economist, said byphone. “We shouldn't throw that away and then have to start allover again just because of a potential short-term issue.”

Danish policy makers, economists, and now its business leadershave spent the past week voicing their disbelief over talk theircurrency peg might be at risk. Economy Minister Morten Oestergaardurged speculators to keep in mind that Denmark's peg is more thanthree decades old and backed by the European Central Bank (ECB).According to the ECB's agreement with Denmark, efforts to supportthe peg should “in principle be automatic and unlimited.”

Abandoning Denmark's currency peg would deprive the country'sbusinesses of the stable environment on which they're accustomed tobasing their strategies and forecasts, said Peder Holk Nielsen,chief executive officer of Novozymes A/S, the world's biggestindustrial enzyme producer.

“For our company, the main thing is that the krone is stableversus the euro,” he said in an interview at his office outsideCopenhagen.

FLSmidth & Co. A/S, the world's biggest maker of cementproduction plants, says one can't compare Denmark's euro peg withthe former Swiss regime.

“It's much stronger with a longer history, and the ECB issupporting the peg,” Pernille Friis Andersen, a senior vicepresident at the Copenhagen-based company, said by phone. “In thecurrent situation with the krone strengthening, the currency peg isdefinitely an advantage.”

The central bank fought back speculation it might run out ofammunition to defend its peg by delivering a surprise rate cut onMonday, lowering its benchmark deposit rate to minus 0.2 percent.Danske Bank A/S, the country's biggest lender, says the rate may becut again tomorrow, to minus 0.3 percent as the ECB prepares to unveil the details of its bond-purchaseprogram.

Danske, Nordea

Danske and Nordea Bank AB, Scandinavia's biggest bank, both sayit's pointless to speculate against Denmark's currency peg. It's amessage they say they've passed on to hedge funds calling in thehope of profiting from currency market turmoil. Even internationalbanks, including Goldman Sachs Group Inc. and Citigroup Inc., arguethe current Danish currency regime is unlikely to fall.

The central bank says it will do whatever it takes to defend thepeg, which can include non-standard measures.

Denmark relies on trade with the European Union for about 70percent of its total exports, meaning the country's de facto euromembership saves its companies billions in exchange-ratehedges.

“Like many big companies in Denmark, we have a relatively largecost base and relatively small income in Danish kroner,” HolkNielsen said. “If there were a decision to abandon the current peg,it probably wouldn't be replaced by a new one.”

If businesses were forced to exist under a floating currencyregime, that would create “instability and unpredictability” makingit “more difficult to run operations,” he said.

The Danish central bank targets a krone rate of 7.46038 againstthe euro, inside a 2.25 percent band. In practice it only allowsswings of no more than 1 percent around the tolerance band.

Business Minister Henrik Sass Larsen said yesterday thegovernment has full faith in the central bank's ability to dowhat's needed to defend the peg.

“It's difficult to find someone in Denmark who's against thefixed-currency policy,” Rasmussen said.

–With assistance from Peter Levring in Copenhagen.

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.