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Thursday, 1 May 2014

“The Netherlands will leave the Euro-zone if …”. Dutch PM Mark Rutte confused his personal interests and frustrations for the Dutch national interests, against chairman of the European Council Herman van Rompuy.

Yesterday, the Dutch newspaper Volkskrant published a peculiar story about an event that allegedly happened in June, 2012: Dutch Prime Minister Mark Rutte threatened that The Netherlands would leave the Euro-zone if Chairman of the European Council, Herman van Rompuy, would not put a halt to his blueprint plans for the European transfer union.

Here are the pertinent snips:

The resistance of Dutch PM Mark Rutte against further European unification had been more fiercely, than the general public was aware of. In a conversation with EU-president Herman Van Rompuy in 2012, Rutte threatened to leave the Euro-zone if Van Rompuy would stick with his blueprint plans for it, according to various insiders in the matter.

No other government leader ever put the Euro-membership of his country on the line, according to Van Rompuy in an interview with De Volkskrant. He was ‘puzzled’ about the stance of Rutte. Other persons present at the meeting were completely flabbergasted. 

In public, the Dutch prime minister had advocated the economic importance of the euro, in reaction to the public call of Geert Wilders’  Party for Freedom (i.e. PVV), to let The Netherlands immediately leave the Euro-zone and the EU.

PM Rutte reacts on his behalf that a threat to abolish the euro was never under discussion. Rutte did made clear to Van Rompuy, however, ‘in very firm and unambiguous words’, that he would shipwreck the plans of the latter with a veto, when necessary.

Partially due to the resistance of The Netherlands, the reform contracts between Brussels and the national capitals have not yet been realized. The government leaders will further discuss those in October of this year.

The exchange of words between Rutte and Van Rompuy took place in Het Catshuis [the official, ceremonial domicile of the Prime Minister in The Netherlands - EL] on 5 June 2012. Van Rompuy stated that he moved on, since this remarkable event between him and the PM.

The anger of Rutte was triggered by Van Rompuy’s idea that member states would enter into firm agreements (contracts) with Brussels, about necessary economic reforms. Countries, which would meet their obligations, would be rewarded. Rutte was very much opposed against this overture towards – what he called – a ‘transfer union’.

Van Rompuy’s ideas were part of the blueprint for the future of Europe, which he wrote at special request of the government leaders. [For more extensive info about these chaotic days, please refer to this contemporary article –EL]

The outburst of Rutte is explained by others, who were present at the meeting, as ‘election fever’. Only three months later, there would be parliamentary elections in The Netherlands and Europe – more precisely the financial support for Greece – played an important role in the campaign. Rutte felt being reeled in by the ‘tractor beam’ of Geert Wilders and his populist Party for Freedom, according to one of the table-companions.

And that’s that…

“ It was a one-off event. In those days, Rutte was stuck between a rock and a hard place. Both parties Rutte and Van Rompuy had it out and now they can laugh about it. Let’s move on past this”.

That would be the most logical reaction to this event, wouldn’t it?

Still, I want to think about the implications of what happened in those days.

First, the fact that Rutte did not categorically deny this event yesterday and stated that Van Rompuy had not told the truth about his threat, and the fact that it has been confirmed by others present at the meeting, tells me that it may indeed have happened exactly as Van Rompuy stated.

Second, the implications of this very event could have been far stretching, would chairman Mario Draghi of the ECB not have stepped in on the 26th of June 2012, with his famous ‘ I will do whatever it takes…’ speech. In those days, the financial/economic situation in the Euro-zone was explosive, to tell the least, and the world might never know how close a financial meltdown in the Euro-zone had come then.

Now, I want to further dig out these points.

This threat may indeed have happened

For me personally, the first point is very serious and not just a simple question of poor judgment by PM Mark Rutte.

I do understand that Rutte was struck by ‘election fever’ in those days and that he felt that Wilders – with his anti-European stance –  was standing behind him to tackle him and his liberal-conservative VVD-party, if Rutte would have given in too much to Van Rompuy.

Nevertheless, Rutte’s threat to leave the Euro-zone was an unprecedented move in a time of great pan-European tensions. 

It was also a clear case of confusing one’s personal interests and frustations with the interests of the whole country: leaving the Euro-zone would have had enormous financial and economic implications for The Netherlands itself, irrespective of the fact whether people were in favour of it or against it.

As an event, it speaks volumes of PM Mark Rutte’s blatant incompetence and his destructive stance, in those days, caused by the fact that he neither had a firm vision and ideas upon the future of The Netherlands, nor the backbone to stand tall for it.

So, it could happen that PM Mark Rutte made a threat out of personal frustration and electoral fear for Geert Wilders, which would have cost The Netherlands dearly when it would indeed have been effectuated.

The implications could have been far stretching

One should not forget that this event took place in a time, when the Euro-zone stood seemingly at the brink of a financial meltdown.

In 2011 and the first half of 2012, the Greek crisis and the financial/economic events in the other PIIGS-countries turned from bad to worse, as the international financial markets had been continuously challenging the toughness and  ultimately  the viability of the Euro-zone as a whole.

Besides that, the Euro-zone seemed struck by blatant indecisiveness and by mounting tensions between the ‘fiscally sound’ net-exporters from the North and the ‘spending-happy’ net-importers in the South (the PIIGS, i.e. Portugal, Ireland, Italy, Greece and Spain) of the Euro-zone. 

The member-states of the EU behaved as the proverbial ‘28 frogs in a wheel-barrow’ and a total implosion of the Euro-zone and perhaps the whole EU seemed nigh.

So when President of the European Council Van Rompuy ran the gauntlet and took the unrewarding task in hands to deploy his blueprint for the transfer union (see both red and bold texts), this was not ‘just another attempt’ to attract more sovereign power to Brussels, away from the capitals of the member states. 

No, it was nothing less than an attempt to rescue the Euro-zone and consequently, the whole European Union itself.

And personally, I think that this ‘despised’ transfer union – in spite of the fact that it would take ‘power of decision’ and sovereignty away from the sovereign states, and would bring it towards the Brussels’ bureaucrats – was a good idea, of which it is a shame that it has not been realized yet. 

Currently, we are still in the situation that all political steps of the European Council and the Euro-zone member states have generally been ‘too little too late’. This left the Euro-zone to be still utterly dependent on the credibility of Mario Draghi, in his role as ECB chairman and financial conscience of the Euro-zone.

With that background in mind, the whole situation described in De Volkskrant speaks volumes of Rutte’s bluntness and inadequateness for his current job, in my humble opinion.

Fortunately, Mario Draghi did come to the rescue on 26 June 2012, and he held his famous, life-saving speech:  

"Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough," .

"To the extent that the size of the sovereign premia (borrowing costs) hamper the functioning of the monetary policy transmission channels, they come within our mandate."
Perhaps, Mario Draghi should be honoured as the man who ultimately rescued the whole European Union and perhaps Mark Rutte should be taunted as the man, who almost blew it to smithereens.

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