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Friday, 29 April 2011

More households drowning in debt in The Netherlands; paying behavior improves

Yesterday the Dutch Association for Indebtedness Relief and Social Banking (NVVK) came with their annual presentation (link in Dutch) on the state of the Dutch indebtedness over the year 2010.

This association helps people and families that are seriously indebted to put their life back on tracks again. It does this by mediating between indebted people and public and private creditors and by offering emergency loans, in combination with a pay back-arrangement that offers people temporary room to breath.

The figures worry chairwoman of the NVVK Joke de Kock:”The figures reconfirm that indebtedness is a broad societal problem. Debts have deeply penetrated into society”.

The NVVK presents some rather remarkable and disturbing figures on the indebtedness of Dutch people. The most remarkable figures and conclusions were:

  • 80,000 indebted households called in at Indebtedness Relief in 2010 (was 53,250 in 2009 in the ‘middle’ of the crisis.)
  • €47 mln was handed out in emergency loans (was €44 mln in 2009)
  • The number of working people that gets indebted is growing
  • The number of older people (above 65) that becomes indebted grows also substantially.
  • While there is a descending trend among people below average income (often non-working people) to become indebted, the number of indebted people well above average income is soaring.
  • The number of youngsters below 25 that becomes indebted grows substantially from 7% in 2007 to 12% in 2010 

There was also some relatively good news, coming from the 
Society of Bailiffs (GGN) (link in Dutch) in The Netherlands:
  • We pay our bills more in time: was in October 2009 the average amount of outstanding bills €850, in March 2010 this dropped to €817 and in March 2011 the outstanding amount was only €676.
  • The number of people that was involved with a debt-collection agency dropped in 2010, after a few years of rising figures .
  • Late payment in 2010 was often more a question of forgetfulness than of lack-of-money.
  • Restraint in expenses, in combination with better balancing of expenses and income and a rising income in general led in 2010 to less debt contracts, less late payments and less contacts with debt-collection agencies and bailiffs. 
These are the main conclusions: the whole report contains much more information about paying behavior per region and other interesting data.

At first glance the statement of the GGN seems to contradict with the statement of the NVVK, but that is not necessarily so:
  • Indebtedness is turning from a poor people’s problem into a wealthier people’s problem. 
    • The poor Dutch people learned seemingly their lesson, get less indebted in the first place, start to pay off their debts bit-by-bit and pay their bills in time. 
    • Richer people in general have more means to keep paying their most important bills while being heavy indebted (creditcards, overdraft loan arrangements; customer cards); that the amount of debt is rising then is a secondary problem 
  • The main reason for people above average income becoming indebted are excess mortgages in combination with interest raises or loss of income, due to unemployment and / or divorce. 
What some readers might surprise is that the situation of many people in 2010 deteriorated in comparison with the ‘official’ peak of the credit crisis, which was in 2008/2009. 

This is probably caused by the fact that the consequences of the credit crisis have been ailing in The Netherlands, due to all kinds of supportive measures from the government. It is the famous question (thank you, Toddo ( of choosing between the car crash and the cancer. Also the Dutch government chose the cancer.

All in all there is not much to be happy about with these figures and conclusions. I wrote a lot about the mortgage situation in The Netherlands and it keeps on deteriorating: 

  • The Dutch housing market remains firmly locked up
  • People that are heavily under water and want to move / have moved to a cheaper house keep on paying two mortgages because they can’t sell their first house. Not paying your mortgage is not an option in The Netherlands
  • The interest that have been relatively low over the last years, is slowly but steadily rising again, making it even more impossible to sell overpriced houses and pay off the excess mortgage.

Besides that youngsters are lured into taking student loans, going on expensive holidays, boozing themselves up every weekend and on weekdays and getting indebted through buying iPad’s, iPod’s, iPhone’s, Androids, game computers and other unnecessary stuff in these hedonistic times. And €250-plus phone bills per month do the rest. As long as mum and dad can foot the bill in the end, everything is cool. But if daddy suddenly can’t or won’t pay it anymore, then these youngsters get indebted for years and years to come.

Older people are eating into their savings, as the interest on these savings is still a disgrace and not enough to generate a sufficient monthly income. And pensions are not compensated for inflation and rising costs of life.

Thursday, 28 April 2011

Running for president… of De Nederlandsche Bank (DNB): Nout Wellink failed, so politics will probably choose his successor themselves.

Nout Wellink, the president of Dutch national bank De Nederlandsche Bank (DNB) is in the last stint of his presidency. Although his personal preference was initially to do another stint, this plan was tackled by politics. After Nout’s financial adventures during the last five years of his presidency, this was a wise decision, although I don’t know the exact motives behind it. But this means, it is time to choose a successor for Nout Wellink.

One should think: let’s hope that Dutch politics will find a better man for the job than Nout Wellink. The new president should be a heavy-weight financial expert with good macroeconomical knowledge and experience in / with the (global) banking world and global financial organizations, like the IMF or the World Bank. Someone of unimpeachable integrity that is unstained by the credit crisis and has the standing and guts to stand up to the Dutch banking world and Dutch politics.

Well, they might have found one:

Dutch politics decided to push the DNB’s favorite successor Lex Hoogduin to the side and add two people with the right party badge on the shortlist:

  • Kees van Dijkhuizen, VVD (conservative liberal party; party in government)
  • Jeroen Kremers, CDA (Christ-Democratic Alliance; party in government)
My first thought was: oh my god, they found two political nitwits to do one of the most important financial jobs in The Netherlands. But maybe my first thought was mistaken after all.

Lex Hoogduin, the candidate of the DNB has ample experience in a financial environment:

  • Senior executive at DNB
  • Chief Economist of the Robeco Group (a very large Dutch investment group), which is a full subsidiary of Rabobank
  • Personal advisor of Wim Duisenberg, the first chairman of the ECB

Lex Hoogduin during his time at Robeco / Rabobank was a strong proponent of heavily mortgage-financed homeownership in The Netherlands. He is seen in a video where he (poorly) defends the choices of banks to overload Dutch citizens with extremely high mortgage amounts. As this video is in Dutch, it is only advisable for Dutch-speaking, inquiring readers.

However, nowadays he sings a different tune, as he states that the Mortgage Interest Deduction in The Netherlands should be abolished, to unlock the Dutch housing market. I totally agree with him on this subject.

Kees van Dijkhuizen, the candidate of the VVD is the current Executive vice-president and CFO of the NIBC (Netherlands Investment Bank Capital). His resumee does offer some clues to why he has been picked as a candidate for following-up Nout Wellink at DNB:
  • Treasurer-general at the Dutch Finance Ministry and Ministry of Economic Affairs
  • Director-general of the Budget at the Dutch Finance Ministry and Ministry of Economic Affairs

I am not very enthousiastic on this candidate: This man can rather be considered a political ‘tiger’ than a banker, although he has ample experience at the NIBC. But the NIBC is only a relatively small bank with a fuzzy trackrecord and this fact does not ‘overqualify’ him for the job at the DNB. This might be a big problem if he is confronted with some stubborn banking guys of the likes of ABN AMRO, ING and Rabobank. They eat ‘desk-jockeys’ like Van Dijkhuizen for lunch and could manipulate him into loosening the reigns on the banks, which could be another disaster for the Dutch taxpayer. Besides that, he does indeed seem to lack some monetary knowledge.

Jeroen Kremers is the current CRO (Chief Risk Officer) of Royal Bank of Scotland and one of the two Dutch high-rank officers in the company. He has a very interesting resumee for the job:

  • Four years executive director at the International Monetary Fund (IMF)
  • Deputy Chairman of the OECD committee for Financial Markets
  • Corporate Executive Vice-President / Head of Public Affairs at ABN AMRO
  • Treasurer-General and Director Financial Markets at the Dutch Finance Ministry where he was nicknamed “ The Professor”
  • Visiting professor at the Erasmus University in Rotterdam
  • Considered a networker with immense analytical skills and diplomatically gifted
  • However, he is not considered a “people’s person” and tried in the past to outsmart his opponents in debates.
This morning the newspapers and business radio all stated that Jeroen Kremers (just as Kees van Dijkhuizen) lacks knowledge of monetary affairs (they share the same press agency), but I disagree: If you have worked for four years as executive director at the IMF, I guess you know a thing or two about monetary issues. To me he seems a very strong candidate.

Let me be clear: for me it is not a good idea to turn the election of a non-political job like President of DNB into a politicized process, where the members of the 2nd Chamber of Parliament (in general (economical) nitwits that ask the wrong questions) could make a politically motivated choice. This could turn quickly into a choice like: the CDA delivered the last president of DNB and the PVDA delivered the last chairman of the IMF, so it is now the turn for the VVD to deliver this president.

Especially not if you look at the challenges the new president of DNB is facing currently:
  • Necessary reforms on the Dutch housing market;
  • Reenforcing the Dutch banking world without looting the Dutch taxpayer again for billions of Euro’s
  • Getting rid of all kinds of international aid funds to save everybody and their sister from defaulting, only in order to save the globally operating banks.

But especially Jeroen Kremers seems like a very strong candidate to follow-up Nout Wellink. He has exactly the right background, brains and experience to do this job.

And DNB’s candidate Lex Hoogduin has been part of DNB for a number of years, which makes him part of the problem: the DNB has been underachieving for a number of years during the credit crisis. Besides that: if you have a bad doctor and want to get rid of him, it makes no sense to ask this doctor: do you know a good doctor to replace you?

Wednesday, 27 April 2011

Running for President… of the ECB: is Mario Draghi a ‘no-brainer’ as next president of the ECB? Or will Germany vote for a dark horse?!

In October 2011 the term of Jean-Claude Trichet as president of the European Central Bank is finished. This means that somewhere in June or July a new president of the ECB will be elected by the leaders of the European Union.

Over the last months a diverse gathering of (would-be) candidates came into the limelight. However, there was one clear favorite: Axel Weber, the president of the Bundesbank (the German national bank).

He was the German candidate and as Germany is the most influencial member of the EU and the mainstay of the Eurozone, he was THE candidate. But in February Axel Weber stated that he would resign as president of the Bundesbank on April 30, 2011 for ‘personal’ reasons and he would also withdraw from the presidential elections.

Since then some new names were added to the stack and initially there seemed to be no clear favorite. However, one name got the upper hand in the media: Mario Draghi, the current governor of the Banco d’Italia and a former employee of Goldman Sachs.

If you would go to your local bookie and put money on the person that has the best chance of becoming the next president, these would be your odds (on April 27)

Odds are obtained from the three mentioned bookmakers

That Mario Draghi is now such a clear favorite is due to:
·         An active lobby campaign of the Italian Government
·         The fact that he would be the first Italian in this position.
·         The fact that he has not an outlier opinion on the monetary policy, but is regarded as a centrist.
·         His public experience: he is the current chairman of the Financial Stability Board,in charge of coordinating global financial regulation
·         His private experience: he worked with Goldman Sachs. The bank that is Royal Warrant of US Finance Ministers and one of the most influential banks on earth.

Since yesterday the chances of Mario Draghi to become president have increased dramatically. After some shadowy horse trading between French president Nicolas Sarkozy and Italian Prime-minister Silvio Berlusconi, candidate-president Mario Draghi received the official support from the French government. This means in real terms that if Angela Merkel of Germany doesn’t ‘veto’  Draghi, he will become the next president of the ECB.

That the French support came at a price, is very clear: in practice this will probably mean that Italy will stop handing over Schengen-visa to Tunisian and other North-African refugees and that they will try to blast Berlusconi’s old ‘friend’ Moammar al-Kadhaffi to the past. Having friends is always good, but sometimes you have to get rid of some of your friends if they don’t fit in your strategy anymore. And Berlusconi is like an old fox: when he preacheth, then beware your geese.

Obtaining influence is never for free, but I guess that for Italy, governor Mario Draghi as ECB President will be worth every penny. I am afraid that Draghi will not keep the tightest monetary policy when Italy really comes into financial trouble: this is of course my personal opinion. And according to some respected people (Professor Mike ‘Mish’ Shedlock: this might be rather sooner than later.

Is it then already over-and-done with? I would not put MY money on it already:

·         First, the European Union is a very political arena were the dead-cert is often not the winner and where having no enemies is sometimes better than having a lot of friends

·         Second, it might be that Angela Merkel WILL veto Draghi, afraid as she might be of loose monetary policy where Germany foots the bill in the end

·         Third, it might be that Merkel is not happy that she is presented with a fait accompli by France and Italy and will veto Draghi for that reason.

·         Fourth, Goldman Sachs played a distinctive and quite controversial roll in the ‘credit adventures’ of Greece over the last five years and Mario Draghi has been at the helm of Goldman Sachs during parts of this period. It is doubtful if he kept his hands clean, when it comes to Greece.

And if Mario Draghi will not become the next president, who will be the most likely candidates then?

Klaus Regling might seem a logical choice: the current head of the European Financial Stability Facility holds a German view on monetary policy (‘tight’) and fiscal discipline (‘strict’). Although he lacks experience at central banks, he does have experience at the IMF and in the German Finance Ministry. But: if France’s candidate Draghi will not become the next president, then Germany’s candidate might also not become the next president. This is how it often works in Europe.

Who are the dark horses then:
  • Yves Mersch
  • Erkki Likanen
  • Nout Wellink
  • Mr. X

Erkki Likanen, the Finnish candidate and chief of the Finnish central bank has been a European Commissioner and is considered ‘moderate’ towards the monetary policy. He might be strict enough for Germany and loose enough for France and the PIIGS (Portugal, Italy, Ireland, Greece and Spain). This puts him in a good position. However, the victory of the Finnish party “Timo Soini” (True Fins) might reduces his chances dramatically, as Finland seems to travel an anti-Euro course.

Nout Wellink, the chairman of the Dutch national bank and my “personal favorite“ (this is indeed meant ironically) can be a good candidate for Germany, as he follows the German lead very closely. However, his (lack of) actions during the Icesave drama, the ABN AMRO-drama and the DSB Bank-drama make him in my opinion totally unfit to become the next president of the ECB. If he would become the next president, this would be a bad day for the Eurozone and the EURO.

That leaves two candidates: Yves Mersch of Luxembourg and Mr. X

Yves Mersch has been president of Luxembourg’s central bank since 1998 and he is an adherent of a tight monetary policy, which is to the liking of Germany. As this candidate from a small, but rich country does not seem to have any ‘enemies’, he might be the ideal dark horse in such an important election. Also because he is probably multilingual and fluently in French.

Or maybe it is a totally unexpected Mr. X that will become the next president. This is after all Europe, where “nothing is as it seems and there is a place for anything”

Tuesday, 26 April 2011

Three recent trends in The Netherlands: Even if you don’t know what they mean, accept that they are there!

It’s just another week at the office: there is no real big news, except for the Q1 results of some large Dutch companies. Although these are interesting in their own right, I will ignore them for today to look into some interesting trends I noticed of late:

Mass Lay-offs

One glance at last months’ newspapers shows you a relatively new, but nasty trend: mass lay-offs. Although the general unemployment is dropping currently, there are a number of companies and organizations that are seriously cutting jobs (see table)

It could be that these job cuts are the beginning of a more serious trend towards less employment. I wrote a number of columns mentioning the Part time Unemployment Benefit (PUB). This was a 50% government subsidy on salaries for companies to keep people employed that had too little work. In this way the companies could keep experienced personnel on the payroll until better days arrived.

What I had against this PUB is that companies that made use of it, missed the chance to become ‘lean and mean’ again. They gathered their personnel in the 2000’s:  while there was a situation of excess consumption in the USA and Europe, this also caused excess production. This excess consumption came to a sudden halt in the year 2008 in Europe and it is improbable that this excess consumption will return within a few years.  By keeping your personnel on an excess level, you run the risk of returning to red marks as soon as the economy chokes again.

Update (April 28):
Although Panasonic is definitely not a Dutch firm, the following news fits perfectly in this topic: Panasonic/Sanyo is planning to fire 40,000 employees, mainly in factories outside Japan in order to cut cost and to better be able to fight the fierce competition. The amount of layed-off people is about 10,5% of the total amount of 380.000 employees for Sanyo and Panasonic combined.

That is a lot of unemployed people in one time: the crisis is far from over yet.

Pay increases for youngsters

Totally contradictive with the previous item is this one: youngsters are offered an increase in wages. The labor unions and the employers associations are currently reaching an agreement on getting rid of the ‘minimum youth salary’ and instead replacing this by the normal minimum salary, while looking at the years of experience of the youngster in question.

This is not as odd as it seems: there is a strong gulf of obsolescence ahead in The Netherlands and the generation that needs to capture this gulf is the generation that is currently in their teens and twenties. This is also a generation that needs to struggle for getting a good pension when they retire. The labor unions and employers decided not to wait for the salary demands of this group, but to anticipate it.

It is also a fair decision to raise the salary of experienced youngsters, instead of paying them the minimum youth salary: now a youngster of 19 with two years experience was paid less than a starter with no experience of 22.  Not only was it unfair towards the experienced youngsters, but it did lead in numerous cases to employers firing their youngsters as soon as they became 21 and hiring 16-year olds instead. Especially supermarket chain Albert Heyn ( had a reputation for doing this.

SME-enterprises can’t find follow-up for their company

Small and Medium Enterprise (SME)  entrepreneurs have a very hard time in finding a follow-up for their companies. They are sometimes forced to ‘eat it up’ (liquidate it) instead.

The FD writes about this quiet drama for entrepreneurs (link in Dutch). Here are some pertinent snips of this very interesting article:

Thousands of aging entrepreneurs are “reduced to beggary”, because they can’t sell their company in time.

“They find the tenders of interested parties too low, continue their company against their desire and start to be ailing. As a consequence they eat up their pension and are forced to accept social security in the end” according to investigator Lex van Teeffelen, who got an assignment of the Dutch Chamber of Commerce to investigate this problem.

He speaks of a quiet pension drama that is threatening to happen for 17,500 baby boomers. The group contains entrepreneurs of 50 years and older, mainly active in SME who combined offer 50,000 jobs. They want to sell their company to retire from business, but notice that the value of their company has diminished as a result of the crisis. Instead of accepting a lower price, they continue hoping for better times. “An unwise decision”, according to Van Teeffelen, who is connected to Hogeschool Utrecht (Utrecht College) .

In many cases the entrepreneurs performance drops and the chances of a successful sale diminish accordingly. In the worst case the entrepreneur has to close-down his company without any yields. As far as transactions are accomplished, the price is 20% to 30% lower than the pre-crisis level, according to product manager Sevkan Cevirgen of the Dutch Chamber of Commerce.

For Dutch readers this article is an absolute must-read, as it also emphasizes the roll of the large banks (or lack thereof) in the quest for a good follow-up for entrepreneurs who are planning their retirement. Although the average success-rate for the restart of an existing company is much higher than a start-up, the banks are in general not interested: the reason for this? The amount of money they can make with it in comparison with the amount of work that needs to be done.

The article shows that the economic crisis in SME companies is far from over yet and the chance it will be over in 2011 is negligible, is my opinion. Although this situation could indeed lead to some silent dramas, stating that these people are “reduced to beggary” is a little bit exaggerated in a country where nobody starves and everybody still has a minimum amount of income to live from. No tent camps in The Netherlands!

Monday, 25 April 2011

ABN AMRO aiming to scrap “a few hundred jobs”: Making more possible… with less people? Or just `making less possible… with much less people´?!

The Dutch bank ABN AMRO is planning to scrap a few hundred jobs (all links in Dutch), according to Dutch newspaper DeTelegraaf ( 
“ABN AMRO scraps hundreds of jobs”  
State bank ABN AMRO will scrap ‘at least hundreds of jobs’.  This number is on top of the 6500 jobs there were already lost due to the integration of the bank with Fortis. This is stated by multiple sources. ABN CEO Gerrit Zalm sent all personnel members a memo, in which he states that costs within the bank are too high. Ten thousands of employees of the bank went into the Easter weekend with a miserable feeling.
 The chief executive is preparing the bank for a return to the stock exchange in 2014. According to multiple sources at least a few hundred jobs will disappear. Professor Jaap Koelewijn of Nyenrode Business University states: “a few hundred jobs seems on the low side. I rather think of thousand to two thousand jobs.

The Financieel Dagblad ( adds up the following to this story: 
Gerrit Zalm didn´t mention any jobs to be lost. However, in the meantime the personnel has been informed of jobs that will be lost. The labor unions “FNV Bondgenoten” and “De Unie” were already taking this into account. “When I read that unnecessary procedures will be cut away and junctions will disappear, we can expect loss of jobs”, according to executive Erwin Rog of labor union De Unie.

In the aforementioned memo Gerrit Zalm mentions that the bank is not ambitious enough towards its customers: 
`It gives a feeling we could do better, especially in servicing our customers. Our service can be better, quicker, with less mistakes and less complaints. This requires more efficient processes, less junctions, more cooperation, the elimination of unnecessary procedures, the full usage of our knowledge on the shop floor and a head office that is considered ´supportive´. […]
Also financially we should perform better than in the initial plans. That is necessary for creating an as-strong-as-possible position in order to decide over our own future. Our current cost level is problematic: no matter how it is measured. Even after realization of the ´charcoal sketch´ and the savings coming from the merger, we are not yet ´up to standard´.
 This does not change the A of ambition in the C of cuts. We are also aiming at possibilities for yield raises. And with realistic proposals the cost may even go before the yield. But the A for ambition is also about efficiency […] Especially the combination of cost savings in combination with better customer service offers plenty of possibilities.[…] We do put an extra accent on `putting the customer in center´, efficiency and probably successful possibilities to raise the yielding potential of the bank.

It´s no wonder that personnel of the bank didn´t have a relaxed Easter weekend after reading this memo. If you read between the lines, you don't expect that Gerrit Zalm thinks very highly of yield raises or the ´realistic proposals´. You better get hold of your boots and sit still while you get a haircut…

I don´t know yet, as it has not been officially confirmed, how many jobs will be cut, but my guess is that professor Jaap Koelewijn of Nyenrode Business University might be more right than the guys that predict the loss of a few hundred of jobs.

The position of the bank is still very awkward: when ABN AMRO was sold to the troika of RBS, Fortis Bank and Banco Santander, the bank was a global player with global ambitions and a portfolio of derivatives that was ready for `outer space`.

Now the bank is especially aimed at servicing Dutch customers in The Netherlands and abroad, except for a few profitable and high-profile activities where the bank still is considered a global player. How´s that for a down-to-earth ambition.

And on top of that the bank is still in the middle of a merger with Fortis Bank in which at least 6500 jobs need to be scrapped before 2013, due to double manned positions and banking activities that are abolished.

If you then state as ABN AMRO that you are planning to return to the stock exchange in 2014, in my opinion you are busy with a ´mission impossible / implausible´:

·         The amount of state support that ABN AMRO received is estimated at about €25 bln, including the state support for rescuing Fortis Bank:
o    The chance that an IPO in 2014 will yield this amount of money for the state is about 0,00000000001%, especially if you read what the target customer groups of the bank are.
o    I don´t know if Jan Kees de Jager (finance minister) or PM Mark Rutte are ready to tell the Dutch taxpayers that they can wave goodbye to at least €15 bln in state support when the IPO is over and done?
o    Fact is that if the state remains a partial owner by majority of the bank, the other shareholders know they don´t stand a chance when the bank comes into trouble again. The state comes first.

·         The state support excludes the bank from being a price fighter or an interest stunter, due to European Commission regulation. This reduces the chances of the bank on becoming a national champion. This reduces also the value of the bank during an IPO.

·         The chance that the world economy is healthy and growing again in 2014 is very small, if you read the latest signs. This further reduces the chances for a successful IPO.

To be clear about it: the ABN AMRO is my personal bank and I´m quite satisfied with the services they offer. Besides that I have worked there as an ICT consultant. That means I am sympathetic towards that bank. But I wonder now if they will charge me more than the current €40 per year already for just keeping up my account and my internet banking. And I saw over the last years that the amount of service given at the banking shops has reduced strongly, instead of increased. And I am very doubtful towards the possibilities of the bank to yield more money from its customer, while at the same time keeping it in center.

Every attempt of ABN AMRO to earn more money from its customers is currently very suspicious: in The Netherlands still multiple lawsuits are running on the `usury policies´ (insurance policies with an extreme amount of hidden costs in it), the effects of the Madoff fraud and the Lehman bankruptcy. People are very suspicious against all kinds of derivative investments. On top of that, the bankers are in the current envious and resentful political climate considered to be at a level, somewhere between the fly and the cockroach, with their ´bonus culture´ and their ´heads, I win. Tails you lose´ attitude.

So as far as I´m concerned the chances of ”making more possible… with less people” are very slim. I think it will be “making less possible… with much less people”.

Saturday, 23 April 2011

Vodafone already blocks the possibility for their customers to use VOIP and SMSoIP services

In my post of yesterday describing KPN, I mentioned that KPN was planning to block SMS and internet services for their mobile internet customers:

Yesterday afternoon, it became clear in which way KPN wants to compensate the losses it makes as a result of the social networks: the company wants to charge extra costs for the usage of social networks, like Facebook, Twitter, WhatsApp, Skype and Ping on their mobile internet subscriptions. It does this by putting access to the social networks in a special mobile portfolio.
Today proves once more that stinginess, stupidity and customer-unfriendliness are ubiquitous: Vodafone is already blocking VOIP and SMSoIP services. According to their conditions (translated to English by me):
With this subscription you can´t use VoIP en SMSoIP-services. Usage in combination with PC or Laptop and excessive usage of audio and videostreaming are also not allowed. If you want to make usage of VoIP services, then is that only possible from the `Calling + SMS + Web 275 subscription´ and higher with ´Internet Calling Blox`. 
It will be a good thing when other, more customer-friendly alternatives arise among the smartphone providers. Then we can show KPN and Vodafone the sole of our boots and kick them out.

Friday, 22 April 2011

Dutch telecom behemoth KPN lost track of trends in telecom landscape: scraps 5000 jobs (25%) in The Netherlands alone.

The Dutch financial newspaper Financieel Dagblad ( opened yesterday, March 21 with the news that former state monopolist in the telecom business and current market leader KPN Telecom scraps up to 5000 jobs (link in Dutch) in The Netherlands: 25% of the total amount of personnel. Here are some pertinent snips of the article:
KPN is until 2015 going to scrap 4000 to 5000 jobs, due to unexpected headwinds on the main Dutch telecom markets. These numbers are about 20% to 25% of total personnel in The Netherlands. The stock is currently moving 7.5% lower. The company announced that this morning in a press release. The company also submitted a profit warning: did the company forecast last month that profit for 2011 would amount at least €5.5 bln, now this number is reduced to €5.3 bln. Directly after opening of the AEX (Amsterdam Exchange) the equity dropped 7.5%.
The lowered profit has also to do with necessary new investments of €2 bln, according to KPN. KPN speaks in the press release of ‘accelerated change’ of consumber behavior and of increasing price pressure in the very important business-to- business market.
The growth of communication via social networks, like Facebook and mobile apps, led to a considerable drop of the traditional phone and SMS traffic, according to KPN. The company will compensate this trend by changing their portfolio of subscriptions and by focussing on mobile data traffic. 
“We see negative trends in The Netherlands”, according to CEO Eelco Blok, who took office recently after long-term CEO Ad Scheepbouwer stepped down. But he added that German pricefighter E-Plus, a subsidiary of KPN, is doing fine on the German market. Last month when the devolution took place, Blok stated that he would not make a U-turn with the company, but now he is clearly retracting from this statement. 
The loss of jobs needs to be compensated by large-scale outsourcing and offshoring of support services.
The ebitda  dropped in Q1 with 4.1%, compared to Q1 last year, to a level of €1.269 bln. The turnover dropped with 1.3% to €3.24 bln.…

Yesterday afternoon, it became clear in which way KPN wants to compensate the losses it makes as a result of the social networks: the company wants to charge extra costs for the usage of social networks, like Facebook, Twitter, WhatsApp, Skype and Ping on their mobile internet subscriptions. It does this by putting access to the social networks in a special mobile portfolio.

For people that don’t know the Dutch telecom situation: KPN was a company you loved to hate in the past. It was a state monopolist that didn’t know the word “customer care” and charged ridiculous prices per minute for calling abroad with a fixed phone and for using mobile phones in the nineties. It had the manoeuvrability of a supertanker and the flexibility of a T-beam.

Only after competition was allowed in mobile phone and internet subscriptions (about 1996) from the likes of Vodafone, Orange, Tele2 and T-Mobile, the company started to move. Initially by trying to take-over or squeeze their competition and after that by becoming a little bit more customer friendly.

The company was almost bankrupted in the European UMTS auctions (2nd generation mobile internet) that took place in the year 2000. KPN paid an excess amount for their concessions in Germany and The Netherlands and were punished for this by almost defaulting.
Under former CEO Ad Scheepbouwer the company recovered some lost ground by rolling out broadband internet in The Netherlands. However, KPN was accused of blocking their internet network for the competion. The company tried to do this by installing glassfiber telecom distribution frames in residential areas in such a way that the service switches of the competition would become useless. This plan failed ultimately.

And now the company pays the price for being too rigid and too much a former monopolist to see that the world around it has changed. I can’t blame the company for trying to outsource and offshore support services to (probably) India, Indonesia and Suriname. This is a sensible thing to do if you want to survive as a company in a low-margin market.

But please don’t try to overcharge the customer for the fact that you – as a company – didn’t see the changes coming in mobile internet and telephone usage. You better think of ways to make honest money with your mobile phones. Otherwise you might be wiped out by the competion.

Happy easter holidays…

Thursday, 21 April 2011

Mortgage Interest Deduction revisited: letter from a reader

Today I received a letter from a reader. ‘Anna’, who works for the German-French TV-station Arte writes the following. My answers are put between the italic questions:
I am a journalist working for the french-german public cultural TV station "Arte". For our program, called "the blogger", we concentrate on socio-political topics. We show how people live in other european countries, what shapes their daily lives and how their cultures are different. This week, we are preparing a reportage about housing problems and answers in Europe. In this context, we will come to the Netherlands to investigate two questions:96% of all house-owners in the Netherlands are paying a mortgage and deduct this from tax. Is this policy of the government sensible, or is the next real-estate bubble preparing? What is the IMF-warning all about?

This is a very good question. The mortgage interest deduction was (in a different) form invented in 1893 and went since then through some changes. I think that the mortgage interest deduction especially made sense in the difficult years after World War II when the Dutch people were relatively poor and a lot of homes had been destroyed. With this deduction they were able to receive a higher mortgage and this enabled them to buy a better home.
But like a lot of political decisions that were made with good intensions, it has some nasty side effects. I can show this with an example:

Someone with an average income can pay €700 interest per month for a house (no amortization). When the interest is 5% and cannot be deducted, the maximum that this person can borrow = € 168,000. Hence, the price of an average house for people with his kind of income will be around €160,000 - € 170,000.

But now this person can deduct 40% of his interest from his income. Suddenly this person cannot pay €700, but €1166 (0.6 * €1166 = €700) per month for his house. But as this person still has an average income, the price for an average house will be around €270,000 - € 280,000. This is because the people have not become richer, compared to others, but can only borrow more money. This proves that the mortgage interest deduction is a very inflatory force.

Two other nasty side-effects are:
  • People don’t want to amortize their mortgage amount in order to keep their maximum mortgage interest deduction. This happened with the amortization-free loan.
  • Once you have started with this system, it is almost impossible to get rid off: people have too high loans and can’t possibly pay those without mortgage interest deduction

In my opinion the next real-estate bubble is not preparing: it is already fully there. Look at the ridiculous average housing prices, compared to Germany, Belgium and France. And look at the fact that nobody wants to sell their houses for a lower price although the housing market is totally locked-up. This is because their current high mortgage is hanging around their neck like a millstone. But in the end something ‘s got to give and then the Dutch housing market will blow up skyhigh. This is what the IMF’s warning was all about.

The Netherlands have a very long-standing tradition of social housing, and have the best-developed social housing system in the world. This is put in danger now, with buildings being demolished and access being limited for people who earn more than 33.000 per year. What does this mean for the country?

The populist-rightwing cabinet that we currently have tries to maintain the status quo on the private housing market, especially for the wealthy part of the population. This is the reason they don’t want to get rid of the mortgage interest deduction (MID).The richest people can deduct the most interest as their tax rate is higher than for not so wealthy people (50% vs. 40-30%). So every Euro of mortgage interest returns 50 cent in tax deduction,
Social housing is often seen by the liberal VVD as a leftwing hobby that needs to be battled. The rightwing approach is that everybody needs to own their house, instead of renting it. Renting would only remain for the poorest people. Hence: the maximum income of €33,000. But they forget that with the current housing prices someone with an income of €35,000 can hardly buy a single-family dwelling.

I am not aware that a lot of social housing is demolished currently. In my opinion the only buildings that are demolished are long-term vacant company buildings and buildings in depressed urban areas. That is not necessary a bad thing, as long as affordable renting / private-owned houses do return at the same spot and not expensive houses for yuppies and dinks (double-income no kids). But maybe I am wrong in this matter.

I read several articles on your blog that relate to these problems, most of all mortgages and prices being too high. You seem to know a lot about this subject and tell things very competently! Since I am a bit handicapped by not speaking dutch, I wanted to ask you if you could point out the main actors in this theater to me:  Is there someone who is advocating upholding the state-subsidies for mortgages? 

Yes, there is. The main advocates for this subsidy are:
  • Vereniging Eigen Huis (; homeowner association): Spokesman Hans André de la Porte 
  • Nederlandse Vereniging van Makelaars NVM (; realtors association). Spokesman: Roeland Kimman 
  • VVD (political party) 
  • CDA (political party) 
Is there someone famous in public life or an association or movement against the deductibility of mortgages?

Yes, there is too:

  • Kees de Kort, blogger and macroeconomist with a daily column on Business News Radio ( He is the strongest advocate against this mortgage interest deduction
  • Arnold Heertje. Macroeconomist and former professor University of Amsterdam.
  • D66. Political party
  • PvdA. Political party
  • GroenLinks. Political Party
  • Ernst Labruyère (just joking) 
Is there someone who is warning about a real-estate bubble that could burst soon?

  • Kees de Kort again.
  • Ernst Labruyère too.

It is not only to be joking that I mention my own name, but a lot of famous / well-known people are really afraid to get rid of the MID and they don’t want to hear about a housing bubble. Instead they give you at least five excuses why the houses in The Netherlands are in reality not too expensive. But believe me: they are!

I am very interested in the documentary that Arte will come up with.

Wednesday, 20 April 2011

The European Union (2): Will there be a lost generation of youngsters in the EU ?

Yesterday the news was on Dutch Business News Radio station BNR ( that unemployment under the Spanish youth has risen to a staggering 43,2%. That means that from every five youngsters in Spain at least two are unemployed. These are really depressing figures and it doesn’t stop there:

Youth Unemployment
United Kingdom

Notice that Germany and The Netherlands are rarities here. I can explain the Dutch situation only by taking three circumstances into account:
  • The Netherlands had the parttime Unemployment Benefit (a 50% government subsidy on the salary of workers that temporarily had not enough work in a company). This enabled companies to keep personnel that they otherwise should have fired. Although I was against it (I still am), it might have worked quite well in some companies that suffered from a temporary setback, due to the credit crisis.
  • Quite a lot Dutch youngsters in technical professions (carpenters, construction workers or plumbers) and ICT personnel have become freelancers. When they lose their job/assignment, this doesn’t count in the unemployment statistics. So there might be some hidden unemployment
  • The Netherlands and Germany have their exports soaring currently (to the southern European countries) and this might help to prevent a strong growth of youth unemployment.

Further the figures for youth unemployment are ranging from bad (United Kingdom) up to disastrous (Spain and Greece) and this indeed raises the question whether you could talk of a ‘lost generation’?! This doesn’t have to be true yet, but it is about time for the European Governments to take combined, decisive action to fight youth unemployment. If they won’t, there will be a lost generation indeed.

The problem in situations like these is that companies when they hire workers, want two kinds of workers:
  • Young workers that require little salary and that are able to learn their new jobs ‘on the job’
  •  Experienced, older workers that can start at full speed from the beginning and don’t have to learn their jobs anymore.
Companies are not pleased when jobseekers are older (30+), but don’t have any job experience or an education that can make the difference for them. When the current generation of 15-24 remains unemployed for the coming 5-10 years there IS a lost generation.

Therefore the European Governments should do a number things to prevent a lost generation from arising under the current 15-24 youngsters:
  • Start educational projects that raise the level of knowledge under the youngsters.
  • Start (subsidized) projects to train youngsters ‘on the job’, possibly in combination with extra education one or two days per week.
  • Give unemployed youngsters a small bonus when they start working in heavy or dirty hands-on jobs: in the greenhouses, factories, distribution centers, medical centers and all other companies and institutions where personnel is still scarce in spite of the bad economic times.
But what especially the south of Europe needs to do, is to develop their own industries and services organizations and become less dependent on German and Dutch imports. Their industrial and services economy needs to become more competitive to win the battle against the West-European countries. The Dutch and German export surplus is their import surplus.

Whatever you say: 40% youth unemployment is a disgrace and it is something that the Spanish and Greek governments should be ashamed about. No more blubberers’ stories, but a Marshall plan for the economy is what those countries need. And the EU should help them enabling these Marshall plans.