This, it seems, is the latest rallying cry of the Dutch government to placate national opposition to further support of heavily indebted euro countries and to prevent future crises in the euro zone.
After months of wavering statements about the Dutch willingness to come to the financial rescue of embattled euro countries, and doubts if there was a euro policy at all, the government announced its proposal that in the future a special commissioner for budgetary discipline is installed in Brussels. This new commissioner should have the authority to impose escalating penalties on euro zone countries that do not comply with budgetary discipline. Countries that refuse to abide the commissioner’s ruling, should be asked to leave the euro zone and, ultimately, be expelled from it (a step, it was recognized, that requires an amendment of the European treaty).
This proposal, launched by prime minister Mark Rutte and Finance minister Jan Kees de Jager – among other places, in the Financial Times – comes after French-German calls for a European ‘economic government’ or ‘gouvernement économique’, a suggestion strongly opposed by the Netherlands. The Dutch have discussed their proposal with Germany and Finland, two other surplus countries in the euro zone. According to Mr. De Jager, Germany supports the proposal and it is hoped that German weight will help to convince France to give its blessing to the scheme.
In the Dutch parliament opposition and government parties alike hailed the independent eurocop as a ‘return’ of the Netherlands to the core of the current euro debate. The support of the opposition parties is vital, as the government of Mr. Rutte has a minority in parliament and relies on the support of the anti immigration and anti European ‘Freedom Party’ of Geert Wilders. Lately, Mr. Wilders has discovered that his anti-euro stance is even more popular among voters than his usual anti-Islam statements. Depending on his support, the government’s room for maneuvering on European issues is limited. The Freedom Party has consistently opposed Dutch tax payer’s money for the rescue operations of embattled euro countries and Dutch contributions to the European Financial Stability Facility. Greece, according to the party of Mr. Wilders, has to be thrown out of the euro area immediately.
So the statement that the Netherlands is in favor of a stable euro and wants to strengthen the disciplinary anchors in the euro area, has been greeted with relief by pro-European Dutch politicians. The punitive measures that Mr. Rutte and Mr. De Jager propose may not be welcomed in all euro countries, but the move plays well for the national audience: the government takes a tough stance against any country that – in the future – tries to fudge the budgetary rules.
Economists were quick to note that nothing was proposed to solve the current mess in the euro area. Nor was anything offered to alleviate the pressure of the bond markets on the highly indebted euro countries. In the end, leading economists warned that the very threat of expulsion of a sinner country may well cause a domino-effect. If one country can be forced to leave the euro area, other countries will come under pressure from markets as well.
‘The unraveling of the eurozone would be a disastrous scenario, both economically and financially’, according to a senior economist of a major Dutch bank. Another banking economist warned that the existence of an exit-penalty will accelerate capital flight, thus provoking the financial collapse of a country, which it aims to prevent.
For now, however, the government has reached its political goal. It has secured sufficient parliamentary support in order to pass the controversial second rescue package for Greece and the enhanced EFSF. Eventually, that may not do to save the euro, but the taboo on expulsion has been broken.
For more information www.omfif.org
Roel Janssen
