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Monday, 14 November 2011

A warning by the Dutch Central Planning Bureau: an important part of Dutch prosperity is to be thanked to the EU and the Euro.

Today, a book was presented by the Dutch Central Planning Bureau ( This is the state bureau that composes the official outlooks on the Dutch economy and calculates the financial impact of (future) government policy for all political parties.

Although this public body is supposed to be neutral, that doesn’t mean that its directors don’t have an opinion on important political and economic subjects.

One of this subjects is the EU and the Euro and that is what this book was all about. I’ll write here the important snips of the press conference, accompanied by the main conclusions of the book.

An important part of the Dutch prosperity can be thanked to ‘Europe’. An implosion of the Economic and Monetary Union (EMU) would be accompanied by large expenses and would harm our prosperity. To keep up the EMU, it is important to delegate more functions to Europe. This is not only about preventative European supervision on the budgets of all member-states, but also on reinforcing the European supervision at the banks. The current crisis is namely as much a banking crisis as a debt crisis of a number of Euro countries (the PIIGS).

The book describes how the current crisis evolved and what the most importants steps are to stop such a crisis in the future.
The debt of the (mostly) Southern-European countries is not only the consequence of government budgets getting out of hands. Also the private sector got involved with substantial debts, through f.i. real estate in Spain and Ireland. The banking industry in Northern Europe added to these problems by lending excess money to the mentioned Euro-countries. This emphasizes better banking supervision.

Delegation of functions is also not without liabilities for The Netherlands. We are now at the ‘right side of the crisis’, but this can be different in the future. The Netherlands has a very large financial industry and vast mortgage debt. Regulatory requirements concerning the retirement age or the law on termination can also have effects on our country.

The crisis surrounding the EMU can hardly be stopped. It is already far beyond the budget deficit of the Greek government; the future of the mutual European currency is under jeopardy. Where did things go wrong? What happened since then? And what to do now?
The main conclusions of the book:

·       The EMU was more a political than an economic project.
·       The internal European market led to large prosperity growth, especially for The Netherlands. The advantage is now one month’s salary and will further increase in the coming years.
·       The Euro delivered a profit of one week’s salary, as the profits are less clear. The expenses of an implosion of the EMU and reintroduction of national currencies are vast.
·       The European debt crisis is as much a banking crisis as a government debt crisis and therefore can’t be blamed on the peripheral euro countries alone.
·       The EMU would function better when the budgets of the individual member states were much smaller than now, while the EU budget would be much bigger, just like in the US.
·        Resistance against restructuring of Greek debt at the expense of private creditors is hard to understand and is contrary to the no-bailout clause.
·        Although there are valid reasons for delegating functions to the European institutions, there is hardly any country in advance of this concept.
·         For a structural solution of the crisis, the comeuppance of one European banking supervision and one European bail-out fund for banks is necessary.
·    A permanent European rescue fund should prevent that countries in a time of crisis should suffer from immediate liquidity problems, beyond their responsibility.
·        A preventative European supervision on national budget policy is necessary. The disciplinary actions brought by the capital markets are too slow and too unpredictable.
·        The political stalemate seems hopeless. However, when looking at the legislative history of Europe, this crisis could also lead to an institutional break-through.

I agree with almost all conclusions that are printed here and I hope these conclusion will be shared as ‘lessons learned’ by the government leaders of the European countries and especially the Euro-zone.
However, a few things can be said about these conclusions:
The first thing that strikes me is that – of the mentioned political leaders – NOBODY is operating from a position of strength. All of the leaders here are more or less under fire at their home front, and operate like cornered cats, in order to secure their reelection. This situation makes that national priorities currently even more prevail over international priorities.
  • The socionomic mood in almost all European countries (especially the ones that are currently ´at the right side of the crisis´) is not in favour of more Europe. Earlier the other way around.
  • I´m not particularly happy about the permanent rescue fund mentioned in the conclusions. When will a fund be big enough to prevent this kind of cataclysm from happening? With €1000 bln? Or €3000 bln? Or even more?
But as a big fan of the EU and the Euro I understand that a shift of responsibilities towards Brussels is inevitable in the end. In 1992 we said ´yes´ to the open borders of the Schengen-zone and in 1999/2002 we said ´yes´ to the Euro.

There is now almost no other possibility than to say ´yes´ to a further united Europe: a Europe that might be a nightmare for all populist/nationalist parties, but that will eventually bring tremendous prosperity and growth to all European countries involved; even to the now scorned peripheral countries.

It is time for politics to tell this to our European ´Joe the Plumber´s ´: not as a bad excuse, but with the pride of politicians that are building on something in the benefit of all. 


  1. The "prosperity" has been rented with mountains of unpayable debt. The bill is now due. Are you really willing to sacrifice your sovereign identity just so you extend the debt repayment a few more months. True prosperity comes from the creation of valuable goods and services not from borrowing and printing money.

  2. In case of The Netherlands this is only partially true. The Dutch economy is largely based on the creation of valuable goods that have been exported to the Euro-countries and others. This exports would not have been so successful without the Euro. The importing countries have paid our exports with debt; there you are right

  3. Ernst, I like your blog and you are a smart guy, but come on think this through. If the importing countries now cut debt and spending through austerity measures the Dutch economy will feel the effects, but now as part of the Euro Union you also have to help the poor members pay their debts which further reduces what the Dutch can spend on their sovereign interests. So you face numerous economic problems and loss of sovereign identity just so the Dutch can save a little in cross border transactions. Life was better in Holland under the guilder. How can you support the money that is being wasted on EU parliament members? Also the mock prosperity you speak of would never have occurred if importing countries had been more fiscally responsible. By the way the housing bubble in Holland is enough to bring the Dutch economy down, but throw EU austerity on top of that I don't see how continued prosperity comes from that.

  4. Patrick, You name a number of facts that are true. The mortgage bubble is terrible and might bring Dutch economy to its knees. And yes, we will pay for the poor Euro members. And yes, the loss of sovereignty does make a lot of people feel miserable.

    But I know one thing for sure: a Europe that is split up again will be the victim of both China´s and the US´ machinations and will have no voice in the world. A united and unified Europe will be strong enough to fight for its own interests. You may or may not agree on this with me, but this is how I think about it!

  5. For centuries the Dutch have favorably made their mark in the world without the assistance of other countries. If you are concerned about the machinations of control you should look to the border on the east. Mr. Farage put it well:
    You don't need people that think like this:
    “Germany sees the need in this context to show the markets and the world public that the euro will remain together, that the euro must be defended, but also that we are prepared to give up a little bit of national sovereignty,” Merkel said."