And do you feel scared, I do
But I won't stop and falter
And if we threw it all away
Things can only get better
Two days ago, the
Dutch Finance Minister and current chairman of the Euro-Group, Jeroen
Dijsselbloem, had his weekly interview with RTLZ, the business magazine of Dutch RTL television.
In this interview, Dijsselbloem sided clearly with the growing
number of pundits who declared the current economic crisis in The Netherlands
over… albeit not for everyone. The following short
transcription comes from RTLZ’s
May 6. interview with the Finance Minister:
Q:
When will the economic crisis be over?
Dijsselbloem:
By itself the crisis is over now. We are experiencing economic growth in The
Netherlands at the moment. This year’s economic growth will be approximately 1.2% and
last year’s growth was 1.4%. So growth is gaining momentum at the time.
Unfortunately, unemployment takes longer to be solved.
We hope that the turnaround will come this year, as for many people the
economic crisis still lingers on.
The investments of companies are increasing. With a
certain delay this will inevitably lead to more jobs, as more establishments of
companies and more production lines will
mean that more hands are needed eventually.
At this moment, companies still have too many people under
contract in comparison with their sales revenues. Consequently, we do hope that
unemployment diminishes this year, but it is more plausible that this will be
next year. The situation should yet be balanced out for companies and people.
Employment is traditionally lagging against economic growth.
At this moment growth is increasing considerably, but
unemployment is high and the national budget deficit has still not been replenished.
Government, companies and households are all busy bringing their balance sheets
in order.
Dijsselbloem’s statement
about the crisis being over was ‘breaking’ news for many written and broadcasted media. However, we
should not ignore his complementary remarks with respect to the context of this
statement.
In reality, the
crisis is only over for the genuine front runners in the Dutch economy:
- The national
government (from a macro-economic point of view);
- The banks and
insurance companies, which fixed their balance sheets during the last few years and returned to
profitability in most cases;
- The large, multinational corporations;
- The larger companies and the small and medium enterprises, with strong ties to exports and business-to-business delivery.
For these groups there are two circumstances, which make their life much easier
and raise the profits to pre-crisis levels or even higher:
- The ample availability of extremely cheap money;
- The improving economies in the US and especially Europe, which enable the expansion of Dutch exports;
However, as Finance Minister Dijsselbloem already mentioned: unemployment
in The Netherlands is still exceptionally high at this moment, in comparison with 'normal' Dutch
circumstances. Especially when you take the awkward situation of the many ‘freelancers
without an assignment and income’ into consideration.
The latter don’t appear
in any official unemployment rating and their exact numbers are therefore very
hard to estimate. Still, we can safely assume that these freelancers are a
massive source of hidden unemployment and sometimes even poverty.
And even the middle class people, who kept their jobs and assignments, generally suffer from stalling or
even dropping wages and remuneration fees.
This stalling income causes that the purchase
power of normal middle class households is eroded by the inflation and the ubiquitously increased taxes and
levies. Most people spend less, as they simply have less available money to
spend.
Consequently, the
majority of the middle and lower class households is still on strike, when it
comes to consumption out of the ordinary, except for unavoidable investments in
household appliances and indispensable consumer electronics.
The plummeting consumption
struck a massive blow to the retail industry in The Netherlands, which could not
be mitigated by the people from the highest income groups, who did not stop consuming during the last six years.
Take for instance a
look at the following chart, which shows the indexated sales development in The
Netherlands since 2005:
 |
| Moving average of indexated sales development for the Dutch retail industry (2005 = 100%) Data courtesy of: statline.cbs.nl Click to enlarge |
What this chart shows very clearly, is that the value of consumption remained at an acceptable level, due to the 15% in general price increases, which took place since 2005. However, when we look at the average sales volume, we are currently well below 2005 levels of consumption.
As an inevitable consequence, many retailers are in
dire straits currently and even former national champions, like HEMA
and Ahold,
show ‘less than optimal’ results, to say the least.
And let us not forget that
there are two other important nails in the coffin for the retail industry:
- The Dutch housing
market, which still seems in a tailspin of slowly dropping prices and continuous low
demand, in spite of the cautious green shoots that emerged in the most
promising areas;
- The excess availability of shopping space for brick-and-mortar stores which leads to murderous competition and cannibalization, pauperizing shopping malls with lots of vacant stores and plummeting margins for the shops that do survive this brutal battle for survival (read also this article).
And now the situation
in the whole retail industry and the consumer-oriented small and medium enterprises, is awkward. So awkward, in fact, that it turns Jeroen Dijsselbloem’s statements
about the crisis being over into ‘meaningless babble’ and - as a matter of fact - economic propaganda.
Unless something dramatic happens with the Dutch unemployment and the stalling wages, the outlook for 2014 and 2015 is still very grim for the Dutch retail industry and the consumer-oriented small and medium enterprises.
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