The Dutch Money Crisis

Irresponsible and rash risk taking brought the banking sector in the United States and Europe at the brink of bankruptcy. Governments had no choice but to bail out the banks at taxpayers’ costs in order to prevent a complete collapse of their economies. Besides the enormous amounts of money needed to stabilize the banks, economic growth slowed down or went negative adding to the strain on government budgets. The United States is trying to “ease” itself out of  the down-turn by printing money. However the problems of the Euro Zone are far more complicated as a unified fiscal and monetary policy is only available on paper. Forcing the paper rules into reality, i.c. the rule to limit the budget deficit to 3% of GDP,  is leading to incredible levels of unemployment especially in those countries that used to live on credit. In Greece governability became a question mark and in Spain social unrest is increasing by the day. In its own interest Germany keeps insisting on austerity while even the Financial Times, be it slowly, had to come to the conclusion that a country cannot be starved out of a recession. The consensus seems to be shifting to the enhancement of economic growth, however it is quite unclear what politicians have in mind when talking about this issue.

Besides the banking and unemployment crises in The Netherlands a third type of crisis is unfolding.  Despite the emerging consensus that a country cannot be starved out of a recession, the government insisted on maintaining the 3% budget deficit target for 2013. It came to a political crises and the government had to be rescued by some smaller political opposition parties in order to be able to present a budget proposal to the EU Commissioner Olli Rehn. New elections are planned for September 2012 and it remains to be seen whether the “budget coalition” obtains sufficient votes to uphold the plans. Employment and cost of living consequences of the proposals are still unknown; facts that may influence the outcome of the elections. In the meantime the Dutch economy is stagnating mainly as a consequence of the lack of consumer confidence. People refuse to spend their money.

For the causes of this lack of confidence one generally points to the political crises and the uncertainty about the future development of employment, costs of living and the costs of mortgages. Missing in these analyses is the underlying mistrust in the capability of institutions to prevent the economy from new disasters. This one may call the Fourth Crisis.

Put under financial pressure many flaws in the institutional organization of Dutch society surfaced. Despite a multitude  of governing councils and supervisory bodies of (semi) privatized organizations (often manned by well paid ex-politicians) failure surfaced frequently. Gambling on derivatives by the largest social housing fund did lead to huge losses, the privatized railways do not perform up to standard, the privatized postal service accumulates losses, the introduction of  competition in the health services did not reduce costs and did not improve the quality of the services. The supervisory body of the semi-privatized COA (the immigration organization) could not prevent misuse of funds and empty office blocks are spreading all over the country. But, most important, De Nederlandse Bank (DNB; Netherlands Central Bank) showed that it lacks the capacity to control the banking system. Despite their arrogance the central bankers did not have a clue about the risk positions taken by ABNAMRO, ING, SBS and the insurance company Aegon. They even advised that Dutch savings could be safely deposited at Icesave just before that bank blew up.

Who will tackle this fourth crises and dare to put the institutional arrangement of Dutch society on the agenda?

Click HERE to read more from Oye! Times.