The deal will result in a complete elimination of first-class letters (A-breve), thus making it impossible for Denmark residents to send and receive next-day post.
The current B-class letters will become the standard but the delivery time will be increased from the current three days to five.
Additionally, Post Danmark will only be required to deliver mail five days a week rather than the current six. The postal service itself can decide which day of the week it will drop.
The political agreement was supported by all parties except for the Red-Green Alliance (Enhedslisten) and The Alternative and was announced by Transport Minister Hans Christian Schmidt.
“We needed to make some improvements on the obligations that Post Danmark has,” Schmidt told reporters.
Under the deal, it will no longer be free to have mail redirected to summer homes within Denmark.
The parties behind the deal estimate that it will save Post Danmark 328 million kroner per year.
Rasmus Jarlov of the Conservatives, which supported the deal, said that the service cuts were unfortunate but necessary.
"It was either this or raise the price of a letter up to 50 kroner. And we of course didn't want to do that either," he told TV2.
Post Danmark has been hard hit by a massive drop in the volume of mail. The number of A-class letters has decreased by 82 percent since 1999 and today the average Danish household sends fewer than four A-letters per year.
According to TV2, Post Danmark has lost 596 million kroner ($93 million, €80 million) over the past four years.
In an attempt to make up for lost revenue, the postal service nearly doubled the price of first-class letters at the outset of 2016, taking them from ten to 19 kroner ($2.97, €2.55). B-class postage was increased from seven to eight kroner, while letters to Europe jumped from 14.50 (A-class) and 12.50 (B-class) kroner to 25 and 16 kroner, respectively. Letters to countries outside of the EU went up to 30 kroner (A-class) and 19 kroner (B-class).
By comparison, under the current price structure it costs nearly three times as much for Danes to send a letter across town ($2.97) than it does for an American to send a letter to Denmark from the United States ($1.15 for a first-class international letter).