“The European Union gets the leadership that it deserves… uuhm … wants”.

During one of the worst political crises in years – the Ukrainian-Russian war by proxy – the European Union has selected new leaders for the highest European positions. Whoever thought that – in these extremely trying times – the European Union would choose for the best and strongest leadership possible, would be in for a rude awakening today...  

With the nomination of Jean Claude Juncker as chairman of the European Commission, Donald Tusk as president of the European Council and Federica Mogherini as High Representative for Foreign Affairs, the scramble for the highest positions in Europe has finished.

What is now remaining for the coming weeks, are the nominations for the other European Commissions: very important for all the countries involved, but not a very big deal for the world as a whole.

With one look at the newly elected leaders, we can conclude that the desire of the European Council to nominate European leaders, who are not threatening towards the national leadership, has been fulfilled.

François Hollande, Angela Merkel and David Cameron can rest assured: the European Council as a whole managed to find leaders that are even more unknown, invisible and undistinctive than they are themselves, as a matter of fact:

Donald Tusk, the new Polish president of the European Council does have a Wikipedia page in the Dutch and English language and he seems to be a genuine European Unionist and a bridge-builder for East-West integration (as I read on this very page), but did you HEAR from him?! Was he more familiar to you than Herman van Rompuy, the last President of the European Council?

And did the name of the Italian representative Federica Mogherini ring a bell with you, before you had read that she would become the next High Representative for Foreign Affairs? After Lady Catherine Ashton, who has been so bleak during the last five years that even her husband hardly recognized her, when she was on television during one of those rare occasions?!

And ‘good ole’ Jean Claude Juncker is perhaps the most exuberant of the new European leaders, as most European might have heard his name once or twice and might have a vague impression of what he looks like. And they might even know that he likes alcohol and tobacco, thanks to current chairman of the Euro-group Jeroen Dijsselbloem.

As a matter of fact: I might even like the nomination of Juncker, as he is an experienced apparatchik who knows his way around in the European Union and therefore is able to fulfil this mainly executive and administrative background job.

Perhaps Donald Tusk is also able to fulfil the job of being the ‘mortar’ between the bricks formed by the 28 European countries.

When I’m honest, I really think that Van Rompuy has done the impossible at multiple occasions, during the last five years; only due to the fact that he could put his ego so far aside that he could cope with all resistance against his plans and (even) the humiliations from the European leaders, without being frustrated or angry in public.

And perhaps this Donald Tusk is also such a man with the ego of a flee, the perseverance of a woodworm and the patience of an angel. Someone who could do good deeds in silence and leave the honour for another man or woman.

Still, I can’t help but having this vision of Donald Tusk and Federica Mogherini, combinedly visiting the Kremlin to talk with Putin and Medvedev. How long would they wait in the reception room of the Kremlin? Half an hour?! Over one hour?! And would they accept it that Putin first has to finish his laps of swimming? Or his icehockey match?!

And would they accept being televised on Russian state television with their mouths shut, while President Putin is talking to them like they are naughty children in a classroom at school? Because that is what it takes when an ‘official nobody’ visits Russia.

Still, I have to swallow after learning that yet again the European Union and the European countries will continue their role as laughing stock of the western world. Taken for granted by the Americans, ridiculized by the Russians, pressurized by the Chinese and mainly ignored by Israel and the other countries in the Middle East. But taken seriously by none of the above.

During the most dangerous political crises with Russia and during the most violent disorder within the Middle East since the 1980’s – crises which put the sheer existence of the European Union and Europe on the line, like rarely before – the European Union chose yet again for virtually the weakest and most invisible leaders possible.

The 28 frogs in a wheelbarrow, which we lovingly call ‘The European Union‘, have decided that a strong and decisive European leadership is still too threatening for the national leaders. And that, as a consequence, weak and colourless European leaders are yet to be prefered above strong and visible people with charisma, attitude and the power to unite the continent and create history.

But the European population? The people who inhabit the European Union and who are dependent on the leadership of this very union for their jobs, their income, their life and wellbeing and their future and that of their children?  

These people have been hoaxed by their coward leaders. By François, Angela, David, Mariano, Mark and Matteo. And by the 22 other leaders of the European Union, who think that a weak union will make their countries and their leadership stronger.

As David Ogilvy, the worldfamous advertising man and founder of Ogilvy & Mather once stated: “If each of us hires people who are smaller than we are, we shall become a company of dwarfs. But if each of us hires people who are bigger than we are, we shall become a company of giants”. 

Europe  has definitely chosen to become ‘a company of dwarfs’. A sad conclusion…

Chairman of the Euro Group Jeroen Dijsselbloem to German chancellor Angela Merkel, after his own ‘Caesaric Moment’: “Et tu, Brute?”

Due to German chancellor Merkel, Dutch Finance Minister Jeroen Dijsselbloem now knows that he has come in the extra time of his first and only stint as chairman of the Euro-Group. Chairman of the European Commission Jean-Claude Juncker, who was disdainfully degraded as a heavy smoker and boozer by Dijsselbloem, has the last laugh.

To these eyes in particular, the Dutch Finance Minister and current chairman of the Eurogroup Jeroen Dijsselbloem (PvdA; i.e. labour party) is a slightly controversial person. Personally, I still don’t know whether he has been ‘a prince turning into a frog’ or exactly the other way around.

I have followed Dijsselbloem since the Dutch ‘Parliamentary Investigation Committee into Education’ of 2007, in which he was the chairman. He made an impression as a serious, razor-sharp and intelligent investigator and an excellent chairman, who was asking the right questions.

At the time of the last parliamentary elections in The Netherlands in 2012, I was pleased to learn that he had been put high on the ballot list for the Dutch labour party PvdA – where I gave my vote to him – and I was even more pleased to hear that he would fulfil the role of Finance Minister in the current cabinet Rutte II.

However, since then “our” relation turned a bit sour: mostly, because Dijsselbloem kept on following the lead of “austerity, before everything”, which has seemingly been the ‘raison d’être’ of all Dutch cabinets  since the crisis started in 2008 – and as a matter of fact of many cabinets before them.

Dutch politicians are often akin to medieval chirurgeons: these chirurgeons leeched their sick and feverish ‘patients’ until their fever dropped and they became healthy again.

However, when this did not happen in time, the chirurgeons saw it as sign that they had not leeched enough blood yet. When the patient died due to urgent blood loss, it was an ‘accident’ and not a fatal flaw in their treatment of the illness.

About a week ago, I have written about the European Stability and Growth Pact, or as I  called it: the Stagnation and Gloom Pact. I am sorry to state that one of the strongest advocates of this pact – since the crisis started - has been The Netherlands, represented by the Prime Ministers Jan Peter Balkenende and Mark Rutte and its Finance Ministers Jan Kees de Jager and Jeroen Dijsselbloem.

Dutch politicians seemed deaf and blind for the needs of the South European countries since the crisis started and kept on banging the drum that ‘it had been their own fault, due to irresponsible fiscal behaviour and they – the peripheral countries – should be punished for their misbehaving in the past”.

In my personal opinion, next to the rigid German leadership of Angela Merkel and the undeniably negative influence of the German Constitutional Court in Karlsruhe, it have especially been the Dutch who can be blamed for the fact that the Euro-crisis could smoulder on for years and years, like a unextinguished forest fire.

Therefore I was initially pleased that Jeroen Dijsselbloem had been appointed as chairman of the Euro-group. I hoped that the responsibility for the whole Euro-group and not solely the Dutch interests in it, would lead to a more cooperative behaviour on his behalf and to an end of the North-European resentment against the South-European, peripheral countries, as “spongers” and “financial mess-up’s”.  This did not happen so much as I hoped, unfortunately.

Looking back at the one-and-a-half years that Dutch Finance Minister Jeroen Dijsselbloem has been chairman of the Euro-group until now, I must praise him that he did not scare away from some very tough decisions.

Early after his nomination as Chairman of the Euro-group, Dijsselbloem had got two very tough cases on his desk:

• The imminent bankruptcy of SNS Reaal in The Netherlands, due to the inevitable implosion of SNS Property Finance.
• The looming liquidity shock within the Cypriot banking system, which could lead to a new, devastating leg of the Euro-Crisis. 

I must admit that Dijsselbloem handled both cases quite well.

Instead of choosing for the obvious u-turn through the wallets of the Dutch and European tax-payers to save the day for SNS Reaal and the Cypriot banks, he chose respectively for:

• a bail-in of the shareholders and subordinated bond-holders (in case of SNS Reaal);
• a bail-in of the large savers and deposit-holders above €100,000 (in case of the Cypriot banks)

One thing that I didn’t like at the time of the Cypriot bail-in, however, was the resentment against especially the Russian savers on Cyprus with their large deposits of black and gray money:

I can’t take away the notion in my head, that the savers needed to be punished, because some of them were RUSSIANS with probably lots of BLACK MONEY. While everybody knows that black money is a global problem, with global offenders, it seems that the word ‘Russian’ is enough to restore some of those Cold War feelings and rethorics. “Those darn Russians need to be punished”;

Or, like Dutch MP Mark Rutte said in an interview to Dutch newspaper Het Financieele Dagblad:

“We support this financial aid program with considerable reluctancy and annoyance. Especially the presence of Russian money gives me a very bad taste in my mouth. We would like very much to drop Cyprus, because of the Russian money and practices of money laundering. Still, we can’t, due to the intertwinedness of Cyprus with the other countries in the Euro-zone”.

And until this day, I can’t stop thinking that the case of the Cypriot banks would have been handled differently, when many of the large savers would not have been Russians, but rich Germans and Dutch people instead.

Still, Jeroen Dijsselbloem’s most fatal flaws – in my humble opinion - have been his open resentment against his predecessor Jean Claude Juncker and the general atmosphere of rancour and allergicness for criticism that he often spreaded in his communication and relations with people.

Things between Jeroen Dijsselbloem and former chairman of the Euro-group Jean Claude Juncker soured very quickly after Dijsselbloem’s nomination, when the latter publicly expressed his opinion that the ‘freshman’  Euro-group chairman had not handled the Cypriot situation decently, with his bail-in of the depositholders.

While this was not exactly a graceful thing to do of Jean Claude Juncker, the response of Dijsselbloem about a year later was not either:

And the very last political blunder of Dijsselbloem – not yet mentioned in these lines – has been that he identified his predecessor Jean-Claude Juncker as a ‘boozer’ and heavy smoker in a Dutch television program. The following snippets come from the Luxemburg (online) newspaper Wort:

(CS/vb) Eurogroup president Jeroen Dijssebloem appears to be holding something of a grudge against his predecessor Jean-Claude Juncker, calling the former Luxembourg PM a “heavy smoker and drinker” on a Dutch talkshow.

On the programme “Knevel & Van den Brink” – broadcast on Monday evening – Dijsselbloem initially avoided talking about Juncker. However, when asked if smoking and drinking are allowed at Eurogroup meetings, Dijsselbloem commented that while this has always been forbidden “the former chairman” did not stick to the rules. Dijsselbloem went on to say that Juncker is a “heavy smoker and drinker.”

During his brief, 18 months stint as chairman of the Euro-group-with-a-double-mandate, the growing irritation within the European Union about both Dijsselbloem as a person, as well as his repudiating at key moments [for instance, when he missed the annual IMF assembly, due to domestic political quarrels | see the last hyperlink - EL ], have caused that he probably will not finish the whole 2.5 years of his (first and definitely last) stint: 

• Less than a year after Dijsselbloem’s nomination, the French forced – with some help from other countries – that ‘chairman of the Euro-group’ will become a full-time, single job, as soon as the next chairman will be elected, and not a job for a national (finance / economic affairs) minister with a double mandate anymore.
  
• Very quickly too it became all too clear that Dijsselbloem is not in the running for this permanent position; undoubtedly due to his slips in the last 18 months. 

Everybody, who had serious illusions that Dijsselbloem could become the first permanent chairman of the Euro-group after all, will have been woken up rudely by the unconditional support of ‘Bundeskanzlerin’ Angela Merkel for Spanish candidate Luis de Guindos. The following snippets come from De Volkskrant:

The German Chancellor supports the candidacy of Spanish Finance Minister Luis de Guindos as chairman of the Euro-group. The Dutch finance minister Dijsselbloem now fulfils this role and his stint will finish in the summer of next year. De Guindos is Minister of Economic Affairs in the Spanish Government.

Merkel stated that De Guindos is an ‘excellent’ minister in these ‘trying times’. She supported him openly during a press conference in Santiago de Compostela.

This is what you could call a ‘caesaric moment’ for Dijsselbloem: his supposed strongest supporter Angela ‘Brutus’ Merkel decided to openly support his successor more than one year before his official period ended. In other words: Dijsselbloem has become yesterday’s newspaper.

Dijsselbloem himself reacted to this news like being stung by a bee, according to BNR:

Jeroen Dijsselbloem is certain: he will yet be chairman of the Euro-group for at least one year. His job will not be vacant, in spite of the fact that yesterday, German chancellor Merkel openly supported Luis de Guindos as next chairman.

According to Dijsselbloem ‘it is impossible to hand out a job, which is not vacant yet'. “The rumours were going around longer, so once again, I take the news for granted. I am nominated for 2.5 years by the other Finance Ministers. This period ends only in the Summer of 2015, so we will see that in a year. Not now”.

I am afraid that I have discomforting news for Dijsselbloem: his days as chairman of the Euro-group are counted and the wheels for his succession have already been set in motion. Besides that, due to his enduring feud with the new Chairman of the European Commission Jean Claude Juncker (yes, it’s him again…), Dijsselbloem will not even become “European Commissioner for Sanitary Affairs and Micro-Credits”. There is no way that Dijsselbloem will get a high position within the leadership of the European Union now, as far as I'm concerned.

To put it even stronger: when The Netherlands tries to push Dijsselbloem hard anyway, the whole country might lose the important European Commission portfolio that it so desperately wants. Dijsselbloem has become damaged goods in Europe.

This brings me back to the question whether ‘prince’ Dijsselbloem has turned into a frog during the last 18 months?! I am afraid that the answer is ‘yes’.

His good and strong deeds as Finance Minister in The Netherlands and chairman of the Euro-group abroad, have been overshadowed by some of his thoughtless and resentful actions during the past two years. 

However, there is hope. When Finance Minister Dijsselbloem sticks to his national portfolio and stimulates Cabinet Rutte to truly invest in financial, social and true economic reforms, as well as education and innovation, then this bright and intelligent minister could finally fulfil his promise and still become a great Finance Minister. 

And as he is still relatively young, there might be a beautiful European position in the future after all, just around the corner…

‘Why it could be a good time to strike a deal for a new house in The Netherlands’: Ernst in informal discussion with Wienke Bodewes, CEO of project developer and asset management company Amvest

During the last one-and-a-half year, I had the pleasure of being present a number of times at the BNR Newsroom semi-live talk radio shows, presented by the distinguished and excellent host Paul van Liempt.

One of the very interesting people, who I met in the aftermath of these shows, was Wienke Bodewes: CEO of project developer and asset management company Amvest and, besides that, chairman of the Dutch association of project developers NEPROM.

Wienke Bodewes, CEO of Amvest and chairman of NEPROM
Picture copyright of Ernst Labruyère
Click to enlarge

Last year, I was invited by Wienke for his presentation of CSMART, the hi-tech training and simulation centre for helmsmen and operators of cruise ships, established by Carnival Cruises. CSMART will be developed in my hometown Almere, as part of ‘Project Duin’ in which Amvest is the leading project development company and main contractor.

The CSMART simulation centre became a high-profile ‘flagship’ project, enabling a flying start for Project Duin; this project encorporates the development of residential real estate in a rural surrounding of artificial dunes, completed with venues for sport, recreation and hospitality.

As an ICT Testing Consultant – my normal day job – I had been between assignments from early May to mid July of this year. This ‘time off’ gave me the time to meet interesting people from my network, in an informal setting.

I was therefore very pleased that Wienke Bodewes could offer me some of his valuable time. For last Wednesday, August 20th, we made an appointment to drink a cup of coffee together and chat about the developments on the Dutch and international real estate markets and in the Dutch economy in general.

Amvest, of which Wienke is the CEO, is a project developer which develops new residential and commercial real estate in The Netherlands. Besides this, the company is the asset management company for two large Dutch insurance companies; it maintains the extensive residential real estate portfolio held by these companies and also offers them new real estate projects, developed by Amvest, on a ‘right to pick first’ basis, but without a purchase obligation.

Amvest is currently also busy with slightly expanding its customer base (through investments and participations in new real estate projects and portfolios), but this customer-base, however, will solely consist of very large, corporate and institutional investors and no private investors at all.

One of Wienke’s concerns is the current, very strict regulation with respect to investments and participations, which is enforced upon Amvest by the Dutch Authority Financial Markets (AFM) and the Dutch National Bank (DNB). 

“These are not inexperienced private investors, but corporate and institutional investors that are used to investing millions of euro’s in projects. The whole AFM and DNB ‘paperwork’ (development prospectuses and other mandatory documentation) for a new investment portfolio takes a lot of time, legal research and investment money. 

While I very well understand the necessity for this paperwork regarding non-professional and smaller investors, it would be great when the regulation would be simplified in our particular case. As I stated: these are all matured investment professionals with whom we are dealing and no rookies”.

Coincidentally, Wienke and I had both been in London and Paris recently and we agreed that the dynamics and vibrant energy of London made this one of the hottest places to be, due to its attractive mixture of historical buildings, new skyscrapers, top notch residential real estate and interesting shopping, entertainment and hospitality zones. 

Wienke spoke about the one of the latest London projects, concerning Battersea Power Station – a genuine landmark of a 20th Century industrial building, becoming world-famous through the Pink Floyd album ‘Animals’ – which will now be turned into a residential real estate project for utterly luxurious appartments and condos.

London is a place where development of residential and commercial real estate has reached ‘the next level’ recently and where – off centre – houses and condo’s are sold at truly unbelievable prices of (sometimes) more than €15,000 - €20,000 per square meter.

These price developments must be partially ‘bubblicious’ of course, but, according to Wienke, they also reflect the fact that London attracts the rich and famous from all over the world: not only Russian and Chinese millionaires, but also people from many other countries, who have historical strings attached with this vibrant city and now want to have a ‘pied-a-tèrre’ in London.

In comparison with not only London, but also booming German cities like Munich, Frankfurt and Berlin, the Dutch capital Amsterdam is still relatively cheap. Where prices for houses, appartments and condos in the aforementioned German cities – and of course London – often easily exceed €4000 per square meter, it is quite hard to find a house or appartment in Amsterdam that will cost you more than €3000 per square meter.

This brought us to the Dutch residential real estate (RRE) market, which is definitely on its way back, according to Bodewes. The soaring sales numbers and slowly, but steadily rising prices, for a number of months in a row, undoubtedly point in this direction.

I objected that the reduction of the ceiling amount for the Dutch National Mortgage Guarantee in July 2014 – to €265,000 from €290,000 -  could have pushed the decision to buy a house forward in some cases, for interested people. This could lead to a diminished demand for residential housing in August and beyond, in my humble opinion.

Nevertheless, Wienke was convinced that the Dutch RRE market had gone through the trough and was now climbing up again. This effect would be noticed earlier within the portfolio of existing houses than at the newly-built houses, as the latter are always trailing, due to the time that it takes to develop new projects. Nevertheless,the worst is definitely behind us.

Bodewes: “It figures: in average the Dutch housing prices have dropped by no less than 20% - 30% during the crisis years and the interest is almost at an all-time low. 

Although the maximum obtainable mortgage amount has definitely decreased under pressure of the Dutch banks and the new regulation of the AFM, the current reduced sales prices and historically low interest rates offer you so much ‘bang for your buck’ that it is worth your while to not wait any longer, with buying your dream house. 

Besides that, it almost costs you money to save it at the bank, with the current minimal interest rates on savings' accounts. Especially when you have saved money during the crisis years, which you now use for partially buying your new house, you can get a very good deal at this moment.

Of course, when you compare the Dutch housing prices with the prices of houses in f.i. the German rural areas near the Dutch border, then Dutch houses still seem relatively expensive. This changes, however, when you compare Dutch housing prices with the prices in the larger German cities and industrial areas. The ‘Randstad’ [the large peripheral "city", consisting of Amsterdam, Rotterdam, The Hague and Utrecht and the urban areas in between - EL] can very well be compared with such large German cities. If you do so, then you will see that the Dutch houses are not overpriced at all”.

However, Wienke Bodewes was convinced that the resurrection of the Dutch housing market would not be evenly spread over the country.

“For instance Amsterdam, Utrecht and the provinces of North Holland and Utrecht are doing great currently. Still, in the peripheral areas, like the provinces Drenthe, Groningen and Limburg, things don’t look so bright yet. Sales and price development of residential houses will increase most in the frontrunning areas, and the other areas will trail for some time or will remain at a structurally lower level”.

Bodewes was also not unconditionally optimistic about the commercial real estate market in The Netherlands. “Amsterdam – especially the Zuidas (i.e. South Axis) is doing fine and also the rest of Amsterdam is improving. Other A-locations are also doing better. However, there is still a lot of problematic commercial real estate and shopping space”.

We agreed that this vast amount of problematic and often uninteresting commercial real estate was caused by commercial building activities that continued too long after the start of the crisis in 2007/2008 and that took place without a clear, specific demand from future buyers and/or asset managers. 

Companies and especially communities built for 'stock', speculating on an 'ever stable demand' for new real estate. It will take quite some time to get rid of this excess CRE. There is simply too much shopping space and too much office space and it will take years and years to reduce this portfolio.

Of course, Wienke is not pleased by the developments in Russia and the Ukraine and also the Middle-East. A few months ago, there seemed to emerge a new dynamics and increasing consumer confidence in The Netherlands, but this confidence received a fierce blow from the MH-17 plane incident, caused by the simmering conflict in East-Ukraine.

Still, his company Amvest did relatively well during the crisis: “Amvest always did business in a fair and square, down-to-earth manner, without taking too much risk. Besides that, we had nothing to hide in our way of doing business. 

Therefore it was not hard for us to stay afloat and that is why we did not experience most of the problems that some other project developers and large building companies did experience.

A few large building and construction companies have done risky projects in very challenging and opaque markets. These are now going through a rough time. You must reckon that the international tolerance for uncontrolable project plans, moonlighting and payment of f.i. slush money to principals of projects has evaporated. 

Countries – especially the USA, but also The Netherlands – are much tougher on bribery and moonlighting now than they have been in the past. What have been ‘best practices’ for years, has now become untolerable for many national governments”. 

I thank Wienke Bodewes for the opportunity to openly talk with him.

Reality bites in the most brutal way: outrageous violence, trial by media, societal acrimony and mounting tensions between East and West poison the world’s atmosphere

Stop everything, I think I hear the President

The Pied Piper of the TV screen is gonna make it simple

And he's got it all mapped out… And illustrated with cartoons

Joe Jackson - Right & Wrong

This haunting song by the wonderful British artist Joe Jackson has been written in the eighties – in 1986 to be precise, at what later proved to be the final years of the ‘first’ Cold War  – but its lyrics yet sound more topical than ever.

It was the first week after my summer holiday in Venice and Croatia and what a helluva week it has been. From the relative cocoon of the holiday resorts – which offered very few attachments to the real world, but so much more sun, sea, excursions and relaxation – and after having loads of fun with my beloved family, I returned to my work and to the real world last Monday.

It has been the week of the surreal and sickening ‘video execution’ of the poor abducted journalist James Foley and the seeming death sentence for the other journalist Steven Sotloff, abducted by IS. It has also been in a week in which numerous other people with other backgrounds and religions have been murdered in Iraq and Syria, because their faith differed from the one prescribed by IS.

These are people, who think that their truth, religion and battle are universally valid and leave no room for any doubts or self-reflection whatsoever. They are willing to murder everyone and sacrifice everything that stands in the way to their eternal, ‘holy’ goal.

What discriminates these religiously driven murderers from ‘normal’ psychopaths is that the latter at least know that what they do is a crime, for which they will be punished eventually. The former have appointed themselves as protagonists in a Holy War in search of the truth, for which the whole world must suffer.

The only difference between the disgusting decapitations of 2004 in Iraq and 2014 in Syria and Iraq is, that the videos of the latter executions are offered to you through the social media, in HD quality and directed by professionals, instead of the shaky handheld home video cameras that ‘we’ were used to ten years ago. Even evil has gone through the tech revolution: medieval thoughts and killing methods, but wrapped in a 21st Century usage of modern technology.

There was one more disturbing thing about the hideous crime against James Foley: yesterday, August 23, the international press presented the names of three suspects of this murder, driven by the assumption that the perpetrators had been from the greater London area, based on the impeccable English and apparent West-London accent of the masked executioner.

These three suspects – among whom there was one formerly quite successful rapper – were reputedly acquaintances of each other, who had all traveled to Syria earlier to take part in the Jihad.  One suspect – the rapper – has been pictured full frontal in the newspapers, without any disclosure or black beams upon his eyes.

In this ‘trial by media’, there is seemingly no ‘innocence until being proven guilty’ anymore. Even if this rapper had nothing to do with this particular dreadful execution, his picture will be etched in the minds of people, as the epitomy of evil. A life sentence without a fair trial!

It must have been darn strong evidence, which drove the editors-in-chief of the international newspapers to print this particular picture, mustn’t it?!

And for the rest all the ‘usual suspects’ continued to do what they had been doing over the last few weeks and months:

• Hamas fired rockets and Israel subsequently bombed the Gaza strip, causing numerous casualties again;
  
• The Ukrainian army and the East-Ukrainian, ethnical Russian insurgents continued their ever-bloodier and increasingly desperate and destructive civil war;
  
• All the officials in this civil war spread their usual mixture of facts and sheer propaganda, making it virtually impossible to discrimate truth from lies, rumours and hear-say;
  
• (Alleged) agitator Russia illegally sent a ‘humanitarian’ convoy over the Ukrainian border in order to help people in distress, but this convoy was surrounded with an strong smell of arms smuggling and opaque business;
  
• The Ukrainian government, the NATO, the United States and some EU talking heads screamed blue murder about the actions of the Russians and the East-Ukrainian rebels, of course without looking to their own role in this continuing extravaganza;
  
• The EU – represented by ‘smurfette’ Lady Catherine Ashton – displayed its usual dividedness, indecisiveness and powerlessness, that the inhabitants of the EU unfortunately take for granted, due to the EU’s current political structure. The same indecisiveness which drives other countries to outrage: ‘now the rest of the world may know who to call in Brussels, but they don’t even bother…’. 

Due to the fact that my family by marriage lives in Russia, I might be still a little biased in favour of this country. I learned through my visits there that there are always two sides to the recent stories, in which Russia has been involved.

Nevertheless, my sympathy for and trust in Russian president Vladimir Putin – which have never been on a very high level to start with – have rock-bottomed during the last few years and months. Especially after the terrible attack on Malaysian Airlines MH17, which claimed 298 casualties, of which 197 Dutch victims about one month ago.

Where I at least appreciated Putin’s intelligence, diplomatic experience and communicative skills in earlier years, I think that he has totally lost it lately. 

I am convinced that Vladimir Putin had stepped in virtually all the traps that absolute power, unlimited financial wealth, clientelism and uncritical adoration from his henchmen, business partners and the Russian population, can pose in a country like Russia. And thus, during the last decade, he has turned into a 'dictatorish' leader, who will seemingly do anything to maintain his current position.  

Still, I have heard so many unfounded claims and straightforward propaganda during the last weeks, that it is impossible for me to believe everything about the Ukrainian civil war, and the Russian involvement in it, that is brought to me ‘in bitesize chunks’ by the Dutch and international media.

The notion that the Ukrainians are the totally innocent and the East-Ukrainian rebels and the Russians are the 100% guilty parties in this civil war is preposterous for me and should be for anybody with a mind of its own.This is the reason that I feel torn and bothered at this moment, not knowing who to trust and believe at this very moment.

The only thing that I know is that the mounting global tensions between the East and the West dearly need de-escalation, as things could go seriously out of hand soon, with devastating results. Yet, none of the involved parties (EU, US and Russia) really seem on the road towards de-escalation of both the civil war and the global economic war, which is going on. The world should get to its senses…

The various economic and military conflicts in Ukraine and the Middle-East have an unmistakenable impact on life in The Netherlands.

Yesterday, I spoke with two people about the current conundrum: a grower of roses, who saw his exports to Russia dry out, and a salesman of TV-systems. Both were bothered by the current events, as these cost them money and gave them many concerns about their particular and our common future.

Especially the latter salesman had radicalized in his opinions about Dutch people from different descent and religion, who should ‘shut up and pledge allegiance to the Dutch society, rules and legislation or “get the funk out” to their own country’: assimilation or disappearance were his options.

The fact that normal, down-to-earth people and their opinions can radicalize so easily in the current situation – even in a relatively safe, peaceful and undivided country like The Netherlands – shows the enormous impact that the enduring economic crisis and the ubiquitously mounting tensions can have on people.

Please imagine what it can do with people who are already in much distress at this moment. A haunting and worrisome thought, isn’t it?!

Is the Stability and Growth Pact (SGP) of the European Union in reality a “Stagnation and Gloom Pact”?

Does the current, strict Stability and Growth Pact of the EU, with its dogmatic rules for government deficits and government debt and its obvious non-flexibility, lead to a disillusioned and lethargic European population and to years and years of far below average growth, political tensions and consumption staying away? I think it does and so do other economists!

During the last two weeks, I enjoyed a well-deserved holiday in Italy (Veneto region) and Croatia (Dalmacija).

Especially in the latter country, I was confronted once more with the powerful influence of the European Union on this war-struck, formerly Yugoslavian state.

The pristine, brand new highways led to numerous centuries old, but nevertheless dynamic cities and villages. On top of that, the whole country – at least the parts that I saw from it – displayed an impetus of new hope and mounting self-confidence, which I did not expect yet after the devastating ‘civil’ war in the nineties – less than twenty years ago: "we might not be there yet, but we try darn hard to be". 

Of course, one could argue that the direct influence of the EU on this ‘new Croatian self-esteem’ is questionable. Nevertheless, I have little doubt that the imminent membership of the EU worked for this country as a juicy carrot for a hungry and tired horse. And, in my humble opinion, it will continue to do so, when Croatia will take part in the Schengen treaty and – perhaps – the Euro-zone in the near future. 

More than an economic free-trade zone, the European Union is 'a beacon of hope' for countries in need: hope for a better future and more prosperity for people and their children. 

The obvious Croatian success story – from a battlestruck country in dispair in the nineties to a relatively successful and confident nation in the tens – makes it even more pitiful that the EU itself seems under a strong and enduring spell of bookkeepers and hagglers. 

Especially fired up by the eternal German fear for hyperinflation, emerging from the interbellum during the last century, and their worshipping of a balanced budget, these bookkeepers and hagglers feel pressured to fiercely cut the governmental expenditure of the EU member states, in order to reach the utopian situation described in their Holy Grail, aka the SGP: a balanced budget and a state debt of less than 60% of national GDP. 

After the national budgets within the EU will be balanced and government debts will be minimized ‘a new dawn of growth and prosperity will come over the EU. Lean and mean national governments can tap new investments and consequently spur economic growth’, they say. 

This strategy is widely advertized as “Trimming to enable growing” (i.e. ‘Snoeien om te Groeien’) as the Dutch so colourfully call this. Consequently, the whole European economy is economized into oblivion.

Of course – to further dig out this particular anology with agriculture – a gentle and well-executed trim session can strongly increase the yields of fruit trees. 

Spillage, bad investments in unnecessary infrastructure, useless subsidies and other forms of counterproductive government aid, excess bureaucracy and an oversized government apparatus are like overgrown, lifeless branches in a poorly yielding fruit tree: rather disablers than enablers for growth as they suck up the energy, that should be used for growing the desired fruit. It is good when these branches are trimmed from the tree. 

Yet, I can’t help but wondering, if I ever saw a Bonsai tree bearing fruit?! 

In other words: sometimes a tree must be helped to grow higher and stronger: with fertilizer, water and sunshine, instead of the trimming shears alone.

In this time, in which people, companies and (even) many small and large financial institutions all have their own difficulties in trying to make ends meet today and in the future, extremely frugal governments can be the final blow to the national (and even pan-European) economies.

The European governments had to spend so much money upon saving their financial system in recent years, that the ‘excess’ austerity – forced upon them by the SGP – now leads to government measures that really hurt the countries of the European Union.

In The Netherlands for instance, important subjects like the national defence apparatus (“apparently not something from a bleak past anymore”), development aid or the income development of civil servants and educational workers all have been widely neglected by the ‘spending-unhappy’, frugal Dutch government. And so have social housing, education in general, child care, elderly care and health care for the aging population.

The money, saved with these austerity measures, has been used instead to:

• uphold most of the current Mortgage Interest Deductability for many more years to come, even though this is a market-disturbing, “bubblicious” and overly expensive way of subsidizing owner-occupied houses;
  
• to save banks and other financial institutions;
  
• to further stimulate already successful industries and companies through the Dutch “Top Sector Policy”;
  
• to pay export subsidies to companies and institutions, making Dutch exports of agricultural produce and products even cheaper and (perhaps) more market disturbing than they already are at the moment;
  
• to maintain a partially doomed and oversized industry, like the Building and Construction industry, through the deployment of (often unnecessary) infrastructural and commercial projects. 

Too often necessary long term investments have been lagging to short term gains and political clientelism to powerful industries and institutions. As it are not the most necessary, useful or promising sectors and industries in the long run that get the most government money, but the sectors and industries with the best lobby efforts and the best network. I dare to state that this is not a typical Dutch phenomena, but a widespread practice in Europe and (far) beyond. For that matter, this particular phenomena is (of course) not caused by additional austerity as a consequence of the strict demands in the SGP. 

Nevertheless, the negative side-effects from it get reinforced, as too often the money for less "sexy", but yet very necessary long-term, societal investments is simply “gone” or “not available”, due to the impossibility to invest extra money at the expense of the national deficit and debt. And so the SGP is not anymore a Stabilitity and Growth Pact for the European Union, but rather turning into a Stagnation and Gloom Pact.

One look at the current statistics overview of Eurostat proves my point: some statistics are better and others are worse, but virtually no statistics give the impression that the crisis in the European Union is really over and the continent has definitely entered the path to sustainable growth again, in spite of the fact that the crisis enters its seventh year in Europe.

Overview of current Eurostat statistics with a mixture of
slightly positive and quite negative statistics
Picture courtesy of Eurostat
Click to enlarge

The Dutch and European consumers, who should lead the way to this sustainable growth, are still too much shell-shocked from the very high unemployment ratings (11.5% in the Euro-zone), their diminished purchasing power – as a consequence of austerity measures, tax-increases and wage restraint – and general feelings of lethargy and pessimism, in combination with their increasing need to save for a rainy day in the future.

This would be the very moment that a broad package of European government stimulus, aimed at useful, longterm goals could help the European citizens to pass the thresshold from pessimism and lethargy into moderate optimism and confidence about the future.

Such useful goals would be:

• Improved child education for both above and below average children;
• Applied vocational education for less studious, but manually gifted youngsters;
• Fundamental scientific research;
• True corporate innovation and R&D;
• Necessary(!) infrastructure for both road traffic, water and rail transport as well as digital purposes: no bridges to nowhere, but real improvement;
• EU government aid to challenged European (or Euro-zone) countries (i.e. a Marshall plan);
• Improved child care and elderly care; 
• Decreases of (in)direct taxes and costs of labour 

But it doesn’t happen… as the SGP rejects the possibility of sustained higher government debt for a extended period of time.

And so this balance recession, with its ubiquitous austerity among all parties involved – private citizens, companies, financial institutions AND the governments – lingers on, as no party is able to break the devastating spell.

One of the best articles upon this subject and a very original and elucidating view on the current dynamics in the European and world economy came – once again – from Robin Fransman: former chairman of the Holland Financial Center (an intermediary institution for the Dutch banking industry) and one of my favorite Twitter economists (@RF_HFC), with a vision that I often share.

The article called “The slow suicide of Europe” (the article is unfortunately in Dutch, but can be translated by Google Translate)  is an absolute must-read. I will print the main conclusions here, but strongly urge you to read the whole article:

The private sector must and also wants to be in a surplus situation and we cannot avert this very surplus abroad. Who is the only party left? Right, only the government is able to meet the demand for savings of the private citizens. 

The SGP, however, forces the private sector to a zero sum savings’  balance, or forces ‘abroad’ to a negative savings’ balance.

This is an unsustainable situation, which leads to political tensions, currency wars and protectionism, or to depreciations of those same foreign investments. This is also no sustainable solution. 

State debt is not just the result of squandering politicians without backbone; state debt is rather the result of the totally justifiable desire of the private sector to prepare ‘for a rainy day’.  

The SGP should be revised, consequently. First, the structural deficit should be equal to the structural nominal growth, say 1% of productivity growth and 1% inflation. Hence, the debt quote remains equal through the years. The maximum debt quote, now at 60%, should and could go up, when it is used for genuine investments. And we should look at state debt and budget deficit in the broader constellation of private wealth, private debt and the trade balance.

Robin’s articles are not exactly ‘for dummies’ and can be quite hard to understand for non-educated ‘economy fans’.

Nevertheless, I think he nailed the subject here, as he lays a theoretical foundation with respect to the current dynamics on the financial markets and the European economies, which makes the current economic conundrum easier to understand. 

I can only conclude with the hope that the European Union sees that the current SGP is a ‘dead end road’, which should be altered soon in order to preserve our and our children’s wealth for the future. And that a slightly increasing state debt is not bad, when the money is invested wisely and cautiously.