Pride Comes before Fall: the Melting Wings of the Netherlands

Photo: Europese Centrale Bank (ECB). wikicommons mediaOn the 2nd of March, a fiscal agreement was signed by the members of the euro zone. The agreement enshrines stricter budgetary rules in a new treaty, called the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union. The treaty will be subject to referenda in the euro zone states in the coming months. Germany and the Netherlands have been asking for strict compliance of budget rules and harsh austerity measures since the beginning of the euro crisis in 2008; some might even argue that these have been main points of argument since the convergence criteria of the Economic Monetary Union were anchored in the Maastricht Treaty in 1992. However, it seems that the new fiscal agreement may backfire on the Netherlands, which looks unlikely to meet the criteria it has been working so hard to impose.

Despite its small size, the Netherlands plays a bigger role on the European scene than would be expected. This could be explained by the fact that the Netherlands is one of the few countries in the euro zone that has been able to maintain its AAA rating from Standard and Poor’s, a leading credit-rating agency. Only Germany, Luxembourg and Finland have managed the same feat, while other important euro zone members have been downgraded, such as happened to France last January. The Netherlands also had the lowest unemployment rate of the euro zone countries in January 2012, beat only by Austria, with 5% unemployment compared to an average rate of 10.7% across the euro zone as a whole. Teaming up with Germany, the Netherlands has been pushing the most for more spending cuts by the Greek government, as well as stricter rules for members of the euro zone. The Dutch Minister of Finance, Jan Kees de Jager, has repeatedly stressed the urgency to meet the criteria set as a foundation for the Economic Monetary Union, consisting of a maximum annual deficit of no more than 3% of GDP, and a maximum public debt of 60% of GDP. All these factors led to the often expressed idea in the Netherlands that it is, at least trying to be, ‘one of the best boys in the European class’.

Dutch Prime Minister Mark Rutte. Photo: Nick van Ormondt. wikimedia commonsHowever, it turns out that the Dutch government may have ‘cut itself in the fingers’, as the Dutch would say, in its harsh stance towards Greece and other struggling euro countries which are sometimes ironically named the ‘garlic-countries’. The provisional budget deficit of the Netherlands in 2013 is calculated at a shocking 4,5% of GDP, which is significantly above the maximum of 3%. Van Rompuy, president of the European Council, has stated that all members of the euro zone should respect the budget rules, including the Netherlands. The public debt is also expected to reach a level of 75.8% in 2013. Adding to the concern, the Netherlands slipped into a recession towards the end of 2011, for the second time in less than 3 years, with a growth rate of -0.7%. Compared to German and French growth rates, -0.2% and 0.2% respectively, the Netherlands’ reputation as steady and reliable is fading.

To reach the 3% the conservative-liberal coalition government headed by Prime Minister Mark Rutte has a hard task to face. The government, which is already cutting public spending by 18 billion euro, has to cut an additional 9 million euro to reach the target. Geert Wilders, the party leader of the right-wing Party for Freedom, which currently supports the government, is strongly opposed to more cuts. However, Wilders is in favour of cutting almost the entire budget on development aid, and, being Eurosceptic, has already called for a return to the Dutch guilder, demanding a referendum.

The image of the Dutch government has been further damaged by Wilders’ recent launch of a website where citizens can post complaints about migrants from Central and Eastern Europe. This has resulted in strong criticism of the European Parliament, which proposed a motion calling on Prime Minister Rutte to condemn this website, but hitherto he refused to do so. Rutte may now be in a position of having to accept stricter rules on immigration and Dutch citizenship, as desired by Wilders, in return for support for additional austerity measures. If unsuccessful, the coalition government is likely to fall, leading to new elections; a scenario, which risks aggravating the situation, as the budgetary targets will be missed without swift and stern action. It could also be argued that the current government is the most likely to reach these targets, as the opposing Labour Party has already stated that it would be a bad decision to cut government spending even more, because it would seriously harm the Dutch economy.

It is no exaggeration to say that Dutch politics has reached a decisive point, both on a national and European level. Time will tell whether the deteriorating image of the Netherlands on the European scene can be salvaged, and if the government will dare to increase budgetary cuts instead of falling under the pressure of parties and citizens who oppose further cuts. One thing is clear, however: something needs to change drastically if the Netherlands wants to keep its moral high ground on financial and economic matters and aims to stay one of the best boys in the European class.


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