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Goose. Gander.

by r------ Wed Mar 14th, 2012 at 07:31:07 AM EST

We've been on and on lately about the economic orthodoxy emanating from Germany, and supported by its allies the Netherlands, Austria, Luxembourg and Finland, the jist of which is that there is no macro-economic problem in the Eurozone which cannot be solved by austerity. Eurozone-wide budget rules pushed forward by the German Bundesbank as the price of Germany's entry into the single currency, and first enshrined in what Romano Prodi rightfully described as the Growth and Stupidity Act, were meant to be respected! And never mind that the two largest Eurozone economies, Germany and France, have already breached those rules in pre-crisis times, now that we have a proper economic crisis, with huge balance of payments imbalances provoking severe fiscal strain on the Eurozone's periphery, it is time for the "garlic belt" in the south + Ireland to "tighten their belt" in ever-deeper waves of cuts to salaries, public services, pensions and other government participation in the economy so that bank shareholders in the Eurozone core can be protected from the logical losses they would otherwise suffer due to systemic risk inherent in their investments in Europe's periphery budgets can be balanced and European citizens can get the government they deserve.  

Mark Rutte's "pro-business" government in the Netherlands has been out front, if this were possible, of Germany in efforts to force the laggards in the south and in Ireland to heel, being behind a sovereinty-stripping proposal (without, this being Europe, any institutionalised democratic underpinning for it) to create a Eurozone czar to control member-state fiscal policy. After previously contributing the Bolkestein Directive ostensibly meant to liberalise service provision in the EU, ,the Netherlands is again leading the way to providing anti-democratic neo-liberal regression solutions to the rest of our lot. After all, the 3% of GDP public deficit rule enshrined in the Growth and Stupidity Act must be obeyed, and a friendly and newly-empowered bureaucrat from Brussels is here to "help" you do it.

So it is with no small amount of schadenfreude that we see the Netherlands struggling with its own budget issues:


Promoted by Colman

A hush has descended on a handsome 17th century villa in The Hague where the leaders of the Netherlands' rightwing minority government are huddled over spending ledgers, debt projections, budget balances, housing market analyses and deteriorating pension fund figures.

Mark Rutte, prime minister and leader of the liberal-conservative VVD party, has imposed a vow of omerta on his colleagues locked away in his official residence until they chart a path out of a worsening public finances debacle.

Europe's two-year debt and deficit crisis has pitted preachy northern creditors against "feckless" Mediterranean spendthrifts - countries the Dutch are wont to dub the "garlic belt".

But suddenly the air in Brussels and elsewhere is thick with tales of pots and kettles, glass houses and stonethrowing as the triple-A rated Netherlands comes unstuck...

The CPB, accustomed to delivering inarguable verdicts on fiscal and budgetary policy, said the Netherlands was in flagrant breach of the new eurozone rulebook and fiscal pact it has been highly instrumental in drafting.

"The government has the intention of living up to the rules, but it's embarrassed that it can't meet the targets now," says Coen Teulings, director of the CPB.

On current policy, a mild recession would leave the country nursing a budget deficit of 4.5% of gross domestic product next year, 2 points higher than previously projected and 50% above the eurozone ceiling of 3%, - risking the wrath of Brussels and the imposition of automatic penalties the Dutch had been keen to devise for others.

What is good for the goose is, apparently, good for the gander as well, never mind that the Netherlands are in relatively good shape econmically, crisis excepted, and that austerity is as counterproductive for the Dutch as it is for everyone else in Europe, periphery or no...

What's more, without a new round of austerity, the Dutch would still be above the eurozone deficit limit by 2015. National debt levels are also running in the wrong direction, from 65.4% of GDP last year to 75.8% in 2015, well above the 60% eurozone threshold.

Most analysts agree the Dutch economy is fundamentally sound and a dogmatic application of the new eurozone rules next year will do much more damage than good.

As elsewhere in Europe, of course, though surely the moralising Dutch government with be loath to abmit that.

But as one of the most vocal cheerleaders for the rigid new rules the Rutte government has put its own credibility on the line. The Dutch are the authors of a radical proposal for establishing a new eurozone budget tsar to enforce fiscal rectitude across the 17 countries.

"The government's in a fix," says Paul Nieuwenburg, a political scientist at Leiden University. "It's a problem of image. Having such a big mouth on Greece and seizing the moral high ground, they are now morally obliged to stick by the rules. Things have become very complicated. That's why Rutte has withdrawn into splendid isolation and they won't talk to the media."

Seizing the moral highground? wtf? Austerity is moral high ground? Ah, the joys of european economic conventional wisdom...

The good news for us is that this budget crisis in the Netherlands has the potential to unravel the current conservative Dutch government. The minority Rutte administration governs on sufference of the far-right and xenophobic PVV, led by Geert Wilders, who has already put the Rutte government on notice that it will not support further fiscal measures by Rutte's cabinet. And one party stands to gain in any snap elections, Netherland's Socialist Party:


The Socialist Party of Emile Roemer is once again the country's biggest party, overtaking the pro-business VVD party of Prime Minister Mark Rutte, according to a weekly opinion poll.
In the weekly survey conducted by Maurice de Hond, the SP now would have 32 seats in parliament, whereas the VVD would to drop to 30. In January the SP also emerged as the biggest party in the survey. Socialist Party leader Emile Roemer was rated 6.8, a record figure his predecessor Jan Marijnissen had obtained ten years ago.

Freedom Party leader Geert Wilders is the only politician to see his popularity drop since December, the last time the survey gauged politicians' popularity ratings. Mr Wilders' rating now stands at 4.4, down from 4.7.

The Socialist Party in the Netherlands are implacable opponents of today's anti-democratic EU, and are just as implacable in their opposition to economically counter-intuitive and counter-evidentiary austerity programmes. Their success in Nederland general elections would be just the sort of news those of us looking for a Europe we can support rather than simply suffer could use. Alas, look for the Rutte government to find support, as conservative governments elsewhere on the continent have, from the Netherland's social democrats in the Labor party.

nothing much to add.

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Wed Mar 14th, 2012 at 07:40:31 AM EST
Most analysts agree the Dutch economy is fundamentally sound and a dogmatic application of the new eurozone rules next year will do much more damage than good.

Oh, now I see why Greece has to swallow another poison pill:

Exclusive: More austerity needed in Greece: EU/IMF | Reuters

(Reuters) - Greece will have to slash a further 5.5 percent of GDP in government spending in 2013 and 2014 to meet agreed fiscal targets underpinning the second international bailout for Athens, a European Commission report said.

The Compliance Report by the European Union's executive describes the progress of Greek reforms necessary for the release of new euro zone money to Athens and recommends the first disbursement be made as soon as possible.

The report, obtained by Reuters, said a package of savings adopted by Greece in early 2012 worth 1.5 percent of gross domestic product should allow Athens to meet the target of bringing the primary deficit down to 1 percent this year.

It's because the Greek economy is fundamentally unsound, y'see. So kicking it in the head while it's down is the sensible thing to do.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Mar 14th, 2012 at 08:34:24 AM EST
You don't understand the scapegoat theory of economics. Holland is in trouble because those pesky Greeks queered the pitch and denied the rich North a reasonable return on its investments.  The solution is to kick the Greeks so the Dutch don't have to blame themselves.

Given that national Governments are no longer allowed to manage/reflate their own economies, there is only one logical solution: an EU wide growth, employment, industrial and infrastructural development policy and programme. And of course that cannot be allowed.  The Germans/Dutch have become the new Eurosceptics.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Mar 14th, 2012 at 08:49:28 AM EST
[ Parent ]
The Dutch paper the Volkskrant, a paper of the centre-left, ... portrays the decision of whether to cut, or not, as a matter of character.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Mar 15th, 2012 at 04:26:29 AM EST
[ Parent ]
It is so sad when a country's government tries to hard to be the best 'little brother' possible to the dominant government in its Union only to see things blow up so badly in its face.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Mar 14th, 2012 at 01:10:18 PM EST
So, what government will be next in this parade of fools?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Mar 14th, 2012 at 01:11:52 PM EST
Eurointelligence daily briefing: The fiscal pact is in trouble in the Netherlands (15.03.2012)
The FT  today picks up on the story that the Dutch labour party has threatened to vote against the fiscal pact if the government insists on meeting the 3% deficit target for this year. This is a very interesting development because it occurs in one of the righteous creditor countries. The importance here is the Dutch coalition is a minority government, consisting of Christian Democrats (CDA) and Liberals (VVD), who rely on support from Geert Wilders' nationalist and Europhobic Freedom Party (PVV). Wilders wants the Dutch to leave the eurozone altogether. The Labour Party (PvdA) is the main opposition party, and its support is necessary for the budget to pass (and for the fiscal pact to pass). The FT reports that Diederik Samsom and Ronald Plasterk, the two frontrunners for the leadership of the Dutch Labour party, made the link between the budget and the pact, and that means the pact would risk defeat. In particular, the PvdA is now referring to the deal Spain got this week, allowing them to phase in the budget adjustment more slowly.

The Dutch paper the Volkskrant, a paper of the centre-left, has a front page article this morning, pointing out the dilemma for the Dutch government, and appears to disagree with the proposal to smooth the deficit adjustment in favour of structural reforms, as demanded by some Dutch economists, on the grounds that the economic results may be uncertain. It portrays the decision of whether to cut, or not, as a matter of character.

(What's is going to happen now is one of these dirty Brussels deals, whereby the Dutch will be allowed to break their deficit target - which would, of could, defeat the entire purpose of the fiscal pact. The same will happen in France if Hollande gets elected. We stand by our prognosis that the pact will either be broken before it is ratified, or not ratified, probably the former.)

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Mar 15th, 2012 at 04:23:18 AM EST
So Fitch has weighed in on the UK's AAA rating:

Eurozone crisis live: Greece task force reports as UK warned by Fitch | Business | guardian.co.uk

Fitch identified the eurozone debt crisis as a key threat to the government's tax and spending forecasts, along with the danger that the 'supply capacity' of the economy has suffered permanent damage [which would mean Britain would struggle to post solid growth.

It's important to note that Fitch isn't urging Osborne to change his fiscal plans. Indeed, Treasury officials were quick to point out that Fitch warned that any "discretionary fiscal easing" (ie, ditching the current deficit-reduction plans) would also probably lead to the AAA being cut.

I've bolded the two parts that are most significant, in my view.

So basically, Fitch is saying:

  1. Austerity causes long term damage.

  2. Don't deviate from austerity or we'll downgrade you... because... well... it's sinful to deviate...
by Metatone (metatone [a|t] gmail (dot) com) on Thu Mar 15th, 2012 at 05:10:09 AM EST

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