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Monday, 26 January 2015

“If the British want to get out of the EU, then so be it”. My reaction to the Op-Ed of MEP Peter van Dalen, representing the Dutch confessional parties SGP and CU

Yesterday, the Dutch Member of European Parliament Peter van Dalen, who represents both protestant parties SGP and ChristenUnie (i.e. Christian Union), wrote an Op-Ed to the daily newspaper De Volkskrant. 

In this Op-Ed, he held a heartfelt plea to keep the United Kingdom in the European Union, by giving in to their worries and agonies against the EU.

The key question of his plea was: 

“Why do we worry so much about Greece, when it possibly leaves the Euro-zone and so little about the United Kingdom, when it threatens to leave the EU? For The Netherlands, the UK is so much more important than Greece”.

As this is a valid and very topical question, I will try to answer it. 

Here I print the pertinent snippets of Van Dalen’s Op-Ed, accompanied by my comments:

 These days we are talking again about a ‘Grexit’: a possible departure of Greece from the Eurozone. What surprises me, is that this possible departure gets so much more attention than another possible departure: that of the UK from the EU – a Brexit. Both for The Netherlands and the EU as a whole, a Brexit is so much worse; a nightmare. The EU, as well as the Dutch government should go all the way to prevent the United Kingdom from making their Brexit.

My comments:

First, together with Greece we are all involved in arguably the largest monetary experiment of all time. When one of the participants is threatening to leave the Euro, this is a worrisome development for the stability of this whole Euro ‘experiment’, as it could lead to a future implosion of the currency. The United Kingdom leaving the EU simply isn't such a worrisome development.

Second, the British have never entered the EU at full force and with much enthusiasm. From the beginning it seemed like a shotgun wedding with mutual benefits, but no real love between the partners. 

The British have always been looking for their own special rebates, their own special privileges and their own emergency exits from union regulations, when the going would get tough. This behaviour has dramatically increased since David Cameron has become the inhabitant of 10 Downing Street.  

Besides that, I really miss the nightmare point of the Brexit. In my humble opinion, the UK and the other European, export-driven countries could continue their commercial, financial, industrial and agricultural trade, without many additional boundaries. 

Especially, as the British economy remains to be a mainly finance-based economy, with the City of London lightyears ahead of the rest of the country in economic sense. The UK exports financial services and imports goods and agricultural produce and it will probably continue to do so after a Brexit.

It is my conviction that many Europeans already moved on, with the concept of a Brexit in mind and that in their heart not too many people really care about it. To these eyes, the country was never really part of the team after all. Can I be wrong? I can be wrong!

What is going on? This year, there are elections in England. The British PM David Cameron promised that if he would be re-elected, he will organize an in/out referendum with respect to the European Union. Until that moment he will try to reform the EU. 

Will he succeed in his reform plans, he will advise to vote for an Opt-In (i.e. the UK should stay within the European Union); when he does not, he will advise to vote for an Opt-Out (the UK leaving the European Union). The public opinion in the UK is divided 50-50 at this moment.

My comments: No matter how you call this, it is political blackmail: “Do as I tell you, or my country will run away”. This would be a license for the British to change the EU towards their own image. Did somebody ask how the other 270 million European citizens think about that?! 

Many Europeans are already sick and tired of the German yoke upon the EU and will go definitely short on the EU 2.0, that David Cameron has in mind: a free trading zone with all the benefits for the British and no burdens, aka an egoistical EU.

For the EU and The Netherlands, a departure of the British would be desastrous, from a political and economic point of view. First, the EU loses a net-payer. The loss of the British net-payment to the EU would have to be compensated by all member states and would cost The Netherlands already €275 million per year. 

The trade between The Netherlands and the United Kingdom would get hurt. Trade between The Netherlands and The United Kingdom amounted to €62 billion in 2012, with for us a surplus of €7.3 billion. Even a small dip in this trade would cause millions in losses.

My comments: Let’s take a look at that... 

First, the UK is indeed a net payer of the EU, according to this article based on 2011 data, albeit not so much as Germany and France. Nevertheless, the United Kingdom pays a very substantial amount to the EU.

However, it seems somewhat strange to think that the EU administration would burn up the same amount of money without the UK, as with the UK. The UK leaving the EU would definitely mean that the EU could operate at less expenses. Summarized: although the revenues for the EU administration would decrease, so would its expenses.

The real reason for The Netherlands to cry about the possible British departure, is the Dutch trade portfolio. The Dutch bird can seemingly only sing one tune and that tune is called: “Exports”. 

The UK is also one of the “victims” of the Dutch exports imperialism, as can be seen on the following picture, which shows the unequal trade balance between ‘exports champion’ The Netherlands and the UK. 

While the €7.3 billion trade surplus is ‘nice’ for The Netherlands, it adds to the huge imbalances within Europe, between the net-exporters Germany, The Netherlands and Ireland and the many other net-importers.

British exports and imports of goods and services per country
Chart created by: Ernst's Economy for You
Data courtesy of: British statistical bureau ONS
Click to enlarge
Great is the effect of a British departure on the whole European economy. The European market would shrink in size by 15% at once and it would lose its most dynamic, large economy. This would diminish the attractiveness of Europe as a target for investments.

My comments: It is good to look at this statement, as it calls the UK the most dynamic economy of the EU.

Although the trade balance of (commercial and financial) services shows indeed a mindboggling surplus of £81 billion, the trade balance of goods for the UK shows a impressive deficit of roughly £65 billion. 

Ergo, the UK earns this €16 billion, due to its extreme focus on financial and commercial services (see the next picture), but would be a large net importer without the London City. The fact that the country is member of the EU will probably reinforce the success of the City and could be a strong reason for the UK not to leave the EU. 

British exports and imports of goods and services
Chart created by: Ernst's Economy for You
Data courtesy of: British statistical bureau ONS
Click to enlarge

Besides that, I don’t particularly like the nature of this ‘dynamic’ economy, as it is too dependent upon financial and commercial services and so much less upon real production of goods and agricultural produce. 

The London City is virtually the financial capital of the world, but it is by far the most important region in the country. When the London City sneezes, the UK has caught a dangerous cold. This makes the British economy very vulnerable for financial and economic setbacks, where a more balanced economy would be less vulnerable to it. 

It also adds to the substantial imbalances within the United Kingdom: at one side there is the blatant exuberance of the London City, where the sky is the limit, and at the other side there is the disgraceful poverty of former industrial regions and mining areas. Read for instance this article in Dutch about this very topic of poverty.

Even more important than the economic effect is the political effect of a British departure. The European decision-making process has a fragile balance between the Northern and Southen European countries. 

The Northern block, with heavyweights Germany and the UK, stands for a smaller government in the economy and society and scores better with respect to competitiveness, corruption, transparency and quality of the public services. 

The Southern block, with the heavyweights France and Italy, but also Spain, is renowned for its urge for protectionism and a bigger government, and unfortunately also more corruption in politics and society.

My comments: Those darn Roman Catholics with their protectionism and their corruption”. 

This protestant MEP Peter van Dalen certainly knows his flock and their weaknesses. For MY taste, however, he could have shorted the stereotyping in his Op-Ed, even though there can be some sense of truth in it.

Besides that, with his claim that all North-European countries and citizens seemingly want a smaller government, he clearly neglects the left-wing people in Germany, The Netherlands and many people in the Scandinavian countries. That is both naive and foolish.

Where the South-European politics is still going through a rough time after six years of crisis, even more turbulent times lay ahead. Protest movements in Greece, Spain, France and Italy increase uncertainty. All these people want less austerity, less reforms and a flexible application of the European rules.

In this political landscape, the UK is necessary as a counterweight and strong partner. When the British leave, Europe could move in a direction from which neither The Netherlands nor the whole EU wil prosper.

My comments: Summarized, Peter van Dalen thinks: “There are two ways to solve the economic crisis: our Northern European way and the wrong one”. That is very arrogant and, as a matter of fact, it seems to be wrong.

Although I can’t prove that the monomanic focus of the EU on austerity, structural reforms, reduction of state debt and diminishing the budget deficits has done much harm within the whole European Union, the evidence of this seems to be mounting.

Export champion The Netherlands is still in a comatose economic state and while the Germans seem to do much better, they still have an enormous group of seriously underpaid workers (i.e. the mini-jobs). Consumption is still at anemic levels everywhere and the retail industry in The Netherlands – and probably many other countries – seems dead before dying.  

As a matter of fact, the whole EU have entered times of deflation and the situation in countries like Greece, Spain, Portugal and Italy is even worse, with real, shocking poverty in Greece and the emergence of a lost generation in Spain, due to 60% youth unemployment.

The German “solutions” for the economic crisis in the South of Europe, which were a reflection of their eternal fear for hyperinflation, have done more damage than good in these countries.

Cameron wants to have the possibility to retrieve competences from Brussels. He also wants to enable that a number of national parliaments could create a blocking minority, in order to stop new European legislation. 

He wants tax reduction for trade and industry and more trade with Asia and North-America. He wants a reform of the free traffic of people, so that Europeans can work everywhere, but only get access to social benefits after a longer period of work. The obligation to create an ever closer union should be abolished.

My comments: The desire to retrieve competences from Brussels, as well as the installation of blocking minorities with respect to European legislation – through national parliaments – could lead to an even bigger administrative monstrosity than the current EU already is. In the end, nobody would know which and whose legislation is applicable at any moment.

Although I’m sympathetic towards lower taxes for trade and industry (however, only for Small and Medium Enterprises (!)), I do fear that the citizens of the European union would have to foot the bill for this void in the tax receipts.

Besides that, as a consequence of the erratic and antisocial tax rulings in countries like Ireland, Luxembourg and The Netherlands, there are already many multinationals that hardly pay any taxes at all. Everybody heard the examples of Starbucks, Amazon, Apple, Google, Microsoft, Shell and probably many, many other companies. 

So why would you want to hand out even higher tax reductions to such companies? To the contrary, a pan-European harmonization of tax legislation and tax rulings would stop 'these herds of corporate locusts' from looting the pan-European funds, by not paying for the social services and infrastructure that they use on a daily basis. 

Alas, such a harmonization would mean more Europe instead of less...

Shutting out foreign workers from social security for a few years, like David Cameron wants, is akin to him wanting to have the benefits of foreign workers, but not the burdens. Where I really hate fraud with and embezzlement of social security money, I don’t think that creating a generation of foreign-workers-without-social-security-rights is the right solution for this problem.

And with respect to the ever closer union: we all took a democratic decision to deploy the Euro in 1999/2002 and we all tasted the benefits of this decision – unless you again would like to travel with four different currencies in your wallet and an envelope full of holiday cash and traveler's cheques.

Yet, we deployed the Euro with a foundation, that is akin to the wooden house of the three piglets fairytale. A strong burst of economic headwinds was enough to tear the whole structure down.

In other words: we need this so-called ‘ever closer union’ to reinforce the structure of the Euro, with a solid foundation that can stand the test of time. So, please don’t whine about the ever-closer union, please!

Conclusion: As far as I’m concerned, the British can stay in the European Union as long as they want. But please, let them stop with trying to turn the EU into a free trade zone ‘on steroids’, by totally ignoring the political and historical component of the European Union. And please let them stop with advocating a British policy that only wants the benefits and not the burdens from the European Union. But if they want to leave after all, so be it! 

And with respect to Peter van Dalen, I would like to state: 

You are a religious conservative and there are many liberals and conservatives who think exactly the way you do. Still, as a social-democrat, don’t want to be part of your stereotypes about Northern Europeans, who all would like to have a smaller government in economy and society. And with me probably many other people too.


  1. Interesting analysis just a factual correction. You suggest UK financial services sector more than offsets their abysmal trade deficit, but I cannot find any evidence of thet when I study the ONS pink book. It seems to me both primary and secundary income accounts show a deficit. The trade in Services may show a healthy profit for the UK but it hasn't balanced the books for decades. It seems only with countries like USA and Sauidi Arabia the UK manages to trade positively. The oill for arms trade is probably the cause of that ;-)

    Source : ONS

  2. Thank you for your insightful update. As the article is already about a year old, I cannot remember exactly the retrieval of this data and from which datasets of the ONS these data have been retrieved.

    Yet I can assure you that it was indeed ONS data, which I processed in the aforementioned charts. These data displayed a surplus in the financial trade of the UK with Europe, as far as I'm concerned.

    I will read the data behind the link that you sent to me and I thank you for the insight that you gave.

    Kind regards,