Its industries could lose $1.6 billion a year if boycotts by Muslim countries hold firm.
COPENHAGEN, Denmark -- In the days when Villy Soevndal was traveling the world, the Danish flag on his backpack attracted friendly attention. Today, in much of the world, it would mark him as a target for violence.
Denmark long was regarded as an exemplar of tolerance and charity. Now, enraged protesters in many countries portray it as a locus of evil. Its embassies have been torched, its companies are losing millions in a boycott -- and Denmark is reeling with dismay.
In the furor erupting over a newspaper's caricatures of the Prophet Muhammad, Danes are groping for strategies to cool the anger and are re-assessing their self-image.
"Like many other young people, I traveled the world with a Danish flag on my rucksack. It opened doors because Denmark was known as a country that respected others, helped other countries," Soevndal, who leads the opposition Socialist People's Party, said Monday.
"This is scary," Lea Steen, a 28-year-old student, said of TV footage of shrieking protesters throughout the Muslim world burning Danish flags and setting fire to the Danish embassies in Damascus and Beirut. "We've seen it with U.S. or Israeli flags before, but it suddenly got a lot closer to our daily lives."
The effects are more than psychological for much of the business community. The Denmark-based dairy group Arla Foods says a boycott of its goods in some Islamic countries is costing it $1.6 million a day.
Overall, Danish industry could lose $1.6 billion a year if the boycotts in place or threatened in 20 Muslim countries hold firm, said Steen Bocian of Danske Bank.
Arla spokeswoman Astrid Gade Nielsen wondered whether the company can even win back consumers. "That will be a huge task," she said.
Denmark is also examining its own attitudes.
The country is proud of its freedom of speech laws. The last slander conviction was in 1938, when a group of Danes were found guilty of agitating against Jews.
Danes also tend to regard their nation as a paragon of reason and liberalism, pointing to the many immigrants it has accepted in recent decades, its willingness to take part in peacekeeping but not combat, and the presence of Danish aid workers in some of the world's most wretched places.
But Muslims in Denmark -- some 200,000 of the country's 5.4 million people -- often see a much different image. They complain of discrimination and being denied jobs because of their religion. Many were distressed by statements by Queen Magrethe II in an official biography last year.
There is "something scary about such totalitarianism that is also part of Islam," the queen said. "Resistance must sometimes be shown, although one risks getting a not-so-flattering label."
The remarks were widely interpreted as the queen's expressing outright opposition to Islam, although in Danish the statement implies argument rather than full opposition. Nonetheless, the comments added to tensions for Muslims in a country where the prevailing secularity, liberal sexual mores and affection for beer are deeply at odds with Islam.
Muslims began to feel further oppressed when immigration laws were tightened in 2002, followed by restrictions on bringing in foreign-born spouses. Prime Minister Anders Fogh Rasmussen's government won support for the measure in Parliament with votes from an anti-immigration party.
About 15,000 Muslims -- less than 10 percent of the Danish Islamic population -- are loyal to a group of outspoken Copenhagen imams who were key in spreading complaints about the Muhammad drawings to Muslims in the Middle East.
The rising tensions of the last month have made some Danes question the extent to which xenophobia may lurk under the country's cheerful surface.
"I don't want to live in a country that in order to love itself must look down on others," writer Carsten Jensen said at a rally Sunday outside the Copenhagen office of Jyllands-Posten, the newspaper that first published the caricatures.
The newspaper said it decided to solicit and print the drawings from various cartoonists in September as a gesture against what it perceived as a tendency to avoid criticizing Islam for fear of retaliation. A year earlier, Dutch filmmaker Theo Van Gogh was murdered in Amsterdam by a Muslim radical because he made a film critical of Islam.
The drawings touched a raw nerve, in part because Islamic law is interpreted to forbid any depictions of the prophet.
The newspaper has apologized for offending Muslims but not for the publication itself, which it justifies as permissible under freedom of expression laws.
That position makes too fine a distinction for many Muslims. The government, meanwhile, has said it cannot apologize on behalf of an independent newspaper -- words that have seemed only to stoke anger overseas.