by Laura Conaway

Let's consider Greenland for a moment. Currency strategist Mark Chandler did, in a note just now from Brown Brothers Harriman. Chandler writes:

Some 39,000 inhabitants of Greenland will go to the polls today and are expected to approve of great autonomy from Denmark and may lay the ground work for independence ultimately. Currently, Denmark would have to consent to Greenland's independence.

There will likely be an economic price for Greenland's independence. Subsidies from Denmark account for roughly half Greenland's public spending or DKK3.2 bln. Most of the political parties in Greenland support greater autonomy, except the Democrats the 4th largest party on grounds that the costs for running a government could be twice the current budget of roughly DKK305 mln (~$52 mln).

The conceit is that Greenland would be a commodity economy.

 

If you've been following the bust in the commodities market, you know where Chandler's going. He continues:

However, commodity based economies, as we are seeing, are prone to booms and busts. Canadians who run Greenland's only gold mine have pulled out. A UK mining company suspended construction of a new zinc and lead mine in late Aug because it could not secure financing. A local company that partnered with Rio Tinto raised half the amount it intended back near mid-year. Foreign oil companies have been exploring for oil off Greenland's west coast. Some optimists suggest there may be more oil there than in the North Sea, but the cost of production may be nearer $50 a barrel.

Greenland is the only member to have withdrawn from the EU. It had joined,along with Denmark in 1973, but quite in 1985 in a dispute over fishing quotas.

The passage of the referendum today, which opinion polls suggest is likely, will set the stage for a vote on full independence. The Premier says a referendum on full independence would be held by 2020, but some stakeholders, including the largest labor union of pushing more a vote sooner—2012.