To understand the euro project we need to go back to 1989 and the frustrations over exchange rate adaptations under the European Exchange Rate Mechanism (ERM). France was frustrated by the hard Deutsch Mark and, occasionally, lost billions on aligning the FF to the DM. Mitterrand used the German unification as a lever to get Kohl to accept the euro. This was regarded by the Dutch with grave worries for various reasons. In essence, the euro is a French project.
For one, the Dutch, together with the Germans, wanted at least to ensure that the euro would be a hard currency and demanded the Maastricht criteria, the SGP and an independent ECB. The demand for rules to reinforce economic institutions continues and resulted of late in an ‘independent Commissioner’ and semi-automatic sanctions. The euro may have a French pedigree but was supposed to become German/Dutch and, with that, ‘southern’ Europeans would/should become like the Germans/Dutch. One of the most recent steps in this effort was the line in the six pack that all countries should have an independent budgetary authority. The Dutch have such a prestigious economic analysis bureau but in France this function has been part of the Ministry of Finance. Strong economic governance goes together with strong, independent, rule-bound and transparent institutions.
The Netherlands is now in a recession and economic prospects seem to be gloomy for some time to come. To be able to reform, the Dutch need to rely on their proven social ‘polder-model’ and recently a social pact between employers and employees was agreed on and supported by the government. However, the government did not want the independent budgetary control office to examine the consequences of this social pact nor its implications for the 3% rule. Moreover, this control office recently had a shift in leadership and a top civil from the ministry of finance was appointed. The new director may be extremely competent but the image of independence is endangered. Moreover, Prime Minister Rutte spoke out to be optimistic about economic prospects. Yet, over-optimism has been one of the most annoying characteristic of politicians when it comes to reliable statements about the SGP criteria. Recently Hollande also presented a brighter economic future for France than Olli Rehn. In the debate for EP on 7 May, Dijsselbloem ̶ albeit it as chair of the Eurogroup ̶ emphasised that we should not examine the weakness of banks until the eurozone has the resolution mechanisms in place. Hence, the message seems to be, let us postpone the facts until we think we are ready. Is it wise to circumvent facts, to thwart the image of independence and not to analyse major reform proposals?
Rumsfeld once stated that there are known unknowns and unknown unknowns, but the eurozone has invented the ‘unknowns we’d rather not know’. The French had a political perspective on the fiscal policy whereas the Germans and Dutch stood for rationality. As it now seems, the euro is not changing Hollande into Kohl, but it might make the Netherlands more French.
