UPDATE 1-Denmark agrees economic “saline injection” to boost consumption

(Adds quote by minister, background, retail data)

COPENHAGEN, Dec 2 (Reuters) – Denmark’s parliament on Wednesday agreed to inject $4 billion into its COVID-weakened economy, mainly through cash handouts, in an effort to stoke private consumption.

The handouts will extend a scheme giving Danes in paid employment early access to holiday allowances that were intended to be paid out as an additional retirement pension.

The allowances are accrued each month in lieu of paid vacations, which many Danish labour contracts do not include.

In June, the government offered Danes the option to withdraw 60 billion Danish crowns of those allowances, and the finance ministry estimated the new agreement would swell that figure by up to 24 billion Danish crowns ($3.88 billion).

“It’s a saline injection into the economy, so we’ll get through the crisis stronger together,” Finance Minister Nicolai Wammen said in a statement.

The government expects the economy, which has made a partial recovery since June, to shrink by 4.5% this year.

Under the scheme, more than 51 billion crowns has already been disbursed to around 2.3 million Danes, according to official data, and retail sales rose a record 8.2% in October following three months of declines.

Parliament also agreed to extend existing aid packages to businesses in the event that lockdown measures to curb the spread of virus were maintained.