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Wednesday, 16 November 2011

Dutch Minister De Jager is constantly sending the wrong signals

The Dutch Finance Minister Jan Kees de Jager, although he is not a bad Finance Minister at all, is someone that is constantly broadcasting the wrong signals at the wrong moments.

With this behavior he does not only alienate other government leaders that are targeted by his proposals and remarks, but he runs the risk of being overlooked by the true leaders of Europe, when the important decisions are taken.

His enduring request for a Budget Czar and his threats of expelling countries from the Euro-zone are useless and even dangerous at this vital moment in the history of the EU.

Reuters printed yesterday a story on Jan Kees ´Sancho Panza´ De Jager and his struggle to get a budget czar appointed. I show here the pertinent snips of this article:

With upheaval in Italy and Greece threatening the euro zone's very existence, the critical issue for the Netherlands is creating a 'budget tsar' with powers potentially to expel unruly members and prevent future debt crises.

At emergency meetings from Poland to Luxembourg, Dutch Finance Minister Jan Kees de Jager has rarely missed an opportunity to make his point -- that only intense oversight of others' budgets can prevent another meltdown.

"You can't solve a debt crisis with more money, that is the lesson from this crisis," the 42-year-old minister said earlier this month. "You need more tools, you need budget oversight."

Back in September, Dutch Prime Minister Mark Rutte and De Jager proposed creating an EU budget authority run by a powerful commissioner who could intervene in government budgets if countries ignored debt targets, gradually taking over their finances and potentially expelling them from the euro zone.

Going beyond newly-approved, tougher EU budget rules, Amsterdam wants aggressive, automatic sanctions for those that break debt and deficit rules and a budget tsar with the power to withdraw EU subsidies and force countries to raise taxes.

Undeterred by initial resistance from France, Germany and smaller euro zone nations including Spain, Dutch insistence appears to be winning backing from Berlin and Helsinki. German Chancellor Angela Merkel on Monday again reiterated the need for automatic sanctions for those that break debt and deficit rules.

But at a time when the euro is fighting for its life, Dutch insistence on sensitive future steps probably involving European Union treaty changes risks appearing misguided.

Investors are already skeptical of European leaders' ability to act after two years of half-hearted emergency measures to solve the sovereign debt crisis and any signs that the 17-nation euro zone might not be entirely focused on the problem at hand could damage already gravely weakened confidence.

"This is all very useful in principle but it is not the solution," said Hans-Werner Sinn, a German economist and president of the Ifo economic research institute. "Debt constraints are useful when markets are willing to finance countries, but for now they don't contribute anything."

The Dutch government rejects that, saying a clear framework for the future is crucial to rebuilding investor confidence. From the Dutch point of view, such rigidity is required if lax countries are to be prevented from "throwing a party" on the euro zone's money, as one opposition Dutch MP has put it.

In countries such as Britain, where any transfer of power to Brussels alarms the electorate, there is deep-seated opposition to 'eurocrats' overseeing a nation's finances. If widespread, that sort of animosity could put paid to the Dutch plan.

In the first (red printed) paragraph of this article, there is again speculation on expelling countries from the Euro-zone, when these fail more than once to meet the demands in the Stability Pact. Also Dutch Prime-Minister Mark Rutte had repeating outbursts on expelling the Greeks and the Italians and whoever would miss the Stability Pact in the future, from the Euro-zone.

These are the same politicians that are totally in denial on the grave situation on the Dutch housing and mortgage market, although the IMF warned them repeatedly. See De Jager kicks the can down the road and Hundreds of thousands of families in danger of defaulting on their mortgage.

These ‘blind’ politicians fail to see that The Netherlands might be economically strong now, but could be in a far worse situation in the future, when the mortgage bubble finally implodes. The PIIGS will remember this probably, when The Netherlands calls them to be rescued.

Besides that, all remarks and hints on countries being forced to leave the Euro-zone will feed speculations on exactly this to happen in the future. You could call this expulsion threat the ‘nuclear option’ or ‘Mutually Assured Destruction’: it is only useful when it never has to be used in reality. The results are devastating for all parties involved, just like in a real nuclear war. 

But Finance Minister De Jager and Dutch Prime Minister Mark Rutte talked and talked about this option and now more government leaders start to see this as an acceptable option for the future. In reality it is not an acceptable option as the consequences are too grave for debtor and creditor countries and the whole financial system at the same time, as it would create a financial and monetary chaos.

And now about Dutch Finance Minister De Jager’s plan of the budget czar. It is like trying to prevent the current crisis from happening, when it is already well on the way: almost like yesterday´s newspaper where the fish is packed in today.

Apart from the fact that many countries (like f.i. the UK) just don´t want to have Europe looking in their financial kitchen, it totally ignores:
·         the huge problems that the peripheral countries have almost nought economic growth and/or suffer from (extremely) high (youth) unemployment and a total lack of perspective.
·         the fact that these countries must import so much goods from The Netherlands and Germany, because their factories and workers can´t compete in price and production facilities with the factories and workers in the North-European countries.
·         the fact that Germany and The Netherlands do virtually nothing to stop their trade surplus and create a more equal trade and capital balance within Europe
·         the fact that the large Dutch, German, French and British banks have always been the elephant in the room with their export loans and loans to the peripheral countries, that brought these countries and themselves into enormous financial trouble.
·         the fact that the Greek crisis could turn from a spark into a forest fire, setting Europe ablaze, due to the indecisiveness, irresponsibility and selfishness of the Dutch, German, French and other EU leaders.

The consequence will probably be that Mark Rutte and Jan Kees de Jager turn into Don Quixote and Sancho Panza; fighting the windmills in Europe with their request for a budget czar. 

The inevitable end-result will be that The Netherlands might be silently expelled from the meetings that really matter: the ones where the solutions are discussed, before being presented as 'undebatable' decisions. 

There have already been some meetings where The Netherlands was not invited. Is this a hint?!

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