Jeroen Dijsselbloem is going to be the euro group head honcho. Will he be able to defend Dutch interests? Of course, and no one better, says Wouter Bos. As leader of the euro group he is uniquely placed to question whether or not the European budget rules are justified.
The appointment of Jeroen Dijsselbloem as chairman of the euro group is a wonderful reward and a token of appreciation for one of the most intelligent and loyal colleagues it has been my pleasure to work with in all my years in politics. That he should end up in Europe will make many of his (former) colleagues smile: is this the same Jeroen Dijsselbloem who headed the parliamentary party’s euro-realist or even euro-sceptical wing?
The discussion about the wisdom of accepting the job was dominated by the question of whether or not Dutch interests would suffer. That wasn’t my main worry. My concern is whether Dijsselbloem will be able to find the time to lead the difficult decision-making process about the budget come spring and late summer.
There are many far-reaching cutbacks still to be decided upon and conflicts of interest are bound to pop up. His colleagues won’t like being fobbed off with a senior civil servant.
I’m sure it has all been very well thought out. That is why, contrary to popular argument, I think the new situation offers unprecedented opportunities for the improvement of the way in which Europe is dealing with the crisis and the European budget regulations.
Jeroen Dijsselbloem, finance minister of a country that is not very good at keeping its budget in order and kick-starting economic growth, would not be in a position to ask for a temporary loosening of the European budgetary reins to help his country.
But Jeroen Dijsselbloem, leader of a group of seventeen euro countries, could be instrumental in a re-evaluation of the efficacy of the present policy. Not just for the sake of his own country but for the sake of the whole of Europe. What would sound suspicious coming from a minister under pressure to cut back more, would sound perfectly legitimate coming from the leader of the euro group.
It’s high time the policy was reviewed. The call for a change to the budgetary rules is getting ever louder. In the NRC, economist Rick van der Ploeg compared Rutte, Dijsselbloem and Asscher with Voltaire’s Pangloss: optimists against their own better judgment.
Having said this, I don’t agree with Van der Ploeg’s ( and that of many of his fellow economists) central premise that our government believes that a policy of quick and far-reaching cutbacks is a good thing. The speed with which cutbacks have been implemented is a result of a political agreement to abide by the European rules in order to prevent political isolation. That is completely different from judging these rules to be good for the economy of the country. The Panglossians in the Hague may have more sense than Van der Ploeg gives them credit for.
There is no mention of 3% in the government accord. There is mention of the importance of honouring our agreement with Europe. That is the key phrase: honouring our agreement. But that doesn’t mean we can’t have a discussion of what constitutes a good agreement.
Won’t the financial markets have a fit if we limit the amount of cutbacks, as former finance minister Jan Kees de Jager never tired of saying?
I don’t think so for one minute. There are countries outside of the eurozone who have larger deficits and debts (the United States, Britain, Japan) than many a euro country and they still pay a lower interest rate. How can this be? Some countries have better regulated banking and banking supervision systems and this reduces the risk to the treasury. And they are all in control of the currencies their debt is made up of so they will be a convincing lender of last resort.
The comparison with the United States, Britain and Japan shows that our greatest problem does not lie with deficits or debt in Europe but with our institutional incapability to control international risk. As long as this is allowed to continue, financial markets will always zoom in on Europe’s weakest link. Fast-tracking cutbacks does not remedy the ill but merely deals with the symptoms.
Minister Dijsselbloem can’t say this. Euro group chairman Dijsselbloem must say it. And his former euro-realist self will tell him that it can’t be done without a significant transfer of sovereignty.
Wouter Bos is a partner at professional services firm KPMG where he is responsible for healthcare. He was political leader of the PvdA and finance minister and deputy prime minister under Jan Peter Balkenende from 2007 to 2010.