Danes last night delivered a heavy blow to the beleaguered euro when they decisively rejected joining the European single currency.

With all the votes counted, 53.1 per cent of Danes had voted against the euro, and 46.9 per cent in favour - on a high turnout of over 85 per cent of an eligible 4m voters.

The result dismayed political and business leaders, as it could further damage the ailing euro and negatively influence the euro debate in other countries, particularly Sweden and the UK, which are planning referendums on joining.

Romano Prodi, European Commission president, insisted the euro would not be affected. But he said: "The Danish people have confirmed that they do not want to adopt the euro as their currency. The Commission regrets this decision and I firmly believe that a positive vote would have been in our common interest."

The outcome is particularly damaging because Denmark was the first country to put membership of the euro to a public test.

It is also a crushing blow to Poul Nyrup Rasmussen, the prime minister, who battled doggedly in the face of opinion polls that suggested he was facing defeat. Mr Rasmussen, facing his first defeat since coming to power in 1993, said he accepted full responsibility for the result, but refused to answer questions about whether he would resign.

"It was a defeat for us and for me, but democracy has spoken."

He said the krone would continue to shadow the euro, as it has done since January 1999. "Denmark is not turning its back on Europe, Denmark is staying with Europe," he said.

After an emotional speech conceding defeat, and with tears in his eyes, he led workers from his Social Democratic party in a rendition of the party's anthem, When I see the red flag flying in the wind.

"No" campaigners celebrated by playing Danish national songs. Pia Kjaersgaard, leader of the populist Danish People's party, and one of the main No campaigners, said: "It's a great, great victory."

European governments had been hoping for a Yes vote as a way of rebuilding confidence in the battered euro. Instead, markets will be braced today for new pressure on the euro, although analysts said any downside was likely to be limited by the recent international intervention to support the currency.

Danes may now face higher interest rates, pressure on the krone, and a possible reduction in foreign investment in the country, even though their economy is strong.

Economists also believe the Danish central bank could lift its main repurchase rate today by up to 50 basis points to head off any attack on the krone. "We'll be a bit poorer, we'll get fewer foreign investments and our international reputation will be damaged," said former Conservative prime minister Poul Schluter.

Nearly all parts of the country voted against the euro and there were signs of a protest vote against the unpopular Mr Rasmussen. Indeed many of his own supporters voted to reject the currency.

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