Netherlands acting tough in euro crisis

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One economist gives the Dutch finance minister a 10 for machismo, while another gives Jan Kees de Jager a failing grade for his tough attitude. Three financial experts holding widely divergent opinions on the euro crisis that has hit Europe, but they all agree on one thing: the Netherlands is acting unusually tough.

How concerned are you about Ireland and Italy?

► Lans Bovenberg, professor at the University of Tilburg:

“I am much more concerned about Ireland than about Italy. In Ireland the banks are still facing problems which means the government may yet have to bail them out. I am much less worried about Italy because the unrest in the financial markets has really scared the Italians, which has led to bigger budget cuts than originally intended."

► Mathijs Bouman, economist and journalist:

“Ireland is a minor problem, which Europe can handle. Italy is a much stranger story. Nothing really went wrong there from a financial or economic perspective in the past few months. And yet, hedge funds and other cowboys suddenly came after Italy. Partly because of the panic currently affecting the financial markets, but also because Prime Minister Silvio Berlusconi failed to back up his finance minister, which made people doubt whether Italy would be able to see its budget cuts through. Creating doubt in people’s minds has serious repercussions these days."

► Arjo Klamer, professor at the Erasmus University in Rotterdam:

“The problems in Ireland, Greece and Portugal can still be contained because these are small economies. However, when Italy goes down the same road, and similar problems are threatening to engulf Spain, I am afraid that Europe will no longer be able to keep the situation under control.”

Is the euro under threat?

► Lans Bovenberg:

“I believe the euro will continue to exist, but I also think that measures will have to be taken to make this possible. And I also believe that the EU government leader will reach agreement on this issue in the coming months.”

► Arjo Klamer:

“The euro has been under threat for about two years. The question is: how long will we be able to keep this up? I have always been strongly opposed to the introduction of the euro. Even regions in the Netherlands should have their own separate currencies. I always call them Amsterdammers and Rotterdammers. What is important is that coins circulate in a community which can guarantee its value.”

► Mathijs Bouman:

“In an ideal world Europe would have two currencies. The southern European euro would be able to devaluate when those countries faced problems. But we’re stuck with the euro, it’s not going to go away. It would not help anybody to give these countries a weaker currency. They would not be able to repay their debts, because they would still be in hard euros. And so much political capital has been invested in the euro that it won’t fall apart easily." 

What would be a typically Dutch solution to the crisis?

► Arjo Klamer:

“The Netherlands is always after finding a compromise, holding consultations and searching for intermediate solutions, but these days we insist on compulsory contributions from banks. It is very un-Dutch, but it is sparked by parties like the right-wing populist Freedom Party.”

► Lans Bovenberg:

 “The Netherlands should fight to make money available to countries in need, but on condition they get their house in order and introduce sensible policies. So strict conditions must be attached to support.”

► Mathijs Bouman:

“The role of the Netherlands is to draw a line in the sand. We have a cabinet which likes to play tough and would not easily give in to what may be best for the whole of Europe: using our creditworthiness to back up countries which may not deserve it. It will only serve to create bigger problems. A trading nation like the Netherlands needs healthy economies in its neighbouring countries. Serious problems in the euro zone mean even bigger problems for us.”

What grade would you give the Dutch finance minister?

► Mathijs Bouman:

“I would give him a 10 for machismo. He is acting really tough. Maybe he is not even doing such a bad job serving Dutch short-term interests. However, so far, he has not been a factor which has brought a solution any closer.”

► Lans Bovenberg:

“A 7.5 for generally doing an acceptable job. De Jager goofed up when he spoke out in public about the compulsory participation of the banks. However, we all make mistakes. I am confident he will defend our interests well from here on in.”

► Arjo Klamer:

“I don’t feel he has been doing a good job by making such a tough stance. It is un-Dutch. You immediately paint yourself into a corner with the risk of suffering serious loss of face when you have to change your position.”

What is really in it for the Netherlands?

► Arjo Klamer:

“We decided to introduce the euro and now we are going to pay the price. In that sense we are pretty much stuck. We are all in it together now. One of us is in trouble, so we will have to bail that country out. If Groningen were in trouble, we would support it. We wouldn’t be shouting the kinds of things about it we are now shouting about Greece.”