In the Netherlands, the public underestimates how much Southern Europe has already suffered. And how we benefited ourselves, says Joris Melman, analysing the Dutch stance in the negotiations on the EU’s economic responses to the corona crisis.
The Dutch stance in the EU negotiations about the economic response to the corona crisis has sparked criticism abroad, as well as at home. Combining a hard stance on EU solidarity with lecturing southern countries on their public finances was not particularly appreciated by other member states. This criticism has had some effect. The Dutch government acknowledged a ‘lack of empathy’, and more importantly, agreed last week to a European recovery package of €500 billion.
At the same time, the dominant perception of both the Dutch government and the public still seems to be that Southern Europe should consider itself lucky to be part of a union with such an affluent country that saves the day when the need is high. Just like in the eurozone crisis, the Dutch, as the best-behaved pupil, always come to the rescue of the countries which made a mess of their own finances. Few seem to realize how distinctly Dutch, or at least Northern European this view is. And how painfully wrong it is from a southern perspective.
Take the euro. Most economists would agree that the single currency and its rules have worked much more favourably for northern economies such as the Dutch than for the southern ones. For example, it deprived the southern countries of the possibility of currency devaluation, a policy instrument they frequently used before the introduction of the euro. Although the euro made it possible for southern countries to borrow money at a lower rate – before the eurozone crisis – this subsequently led to the bubble that burst so painfully into a financial crisis.
The repercussions of the euro crisis
More importantly, in the Netherlands we tend to underestimate how much economic pain the South has endured since this crisis. In the Netherlands, we think we have had a tough time, with unemployment reaching almost 8 percent. But Southern Europe could only dream of such numbers, even in the best years. Greece went from 7 percent unemployment in 2008 to 28 percent in 2012 and is still today at 16 percent. Unemployment also rose well above 25 percent in Spain. Or take the economic recovery. The gross domestic product of Greece, Italy and Spain is still below that of 2008, 12 (!) years ago.
And as the South plunged into dire poverty, their misery worked to the advantage of the North. Billions of euros in southern banks have been transferred to banks in northern member states. And with youth unemployment rising to almost 60 percent in Greece and Spain and over 40 percent in Italy and Portugal, talented, highly educated workers also moved en masse to Paris, Amsterdam and Berlin. In Italy alone, more than 2 million people have left since the outbreak of the crisis.
Greece’s lost autonomy
Okay, but the North did offer substantial financial support during the euro crisis, right? Well, that picture too is more nuanced than it may seem. The emergency packages of the eurozone crisis were substantial, but they were intended to support own banks just as much as being an act of charity. For example, research from the German ESMT business school reveals that 95 percent of the 216 billion euros in Greek emergency packages was spent to cover interest and debt payments. The funds thus went to German, French and Greek banks, and hardly to the Greek state.
In exchange for the emergency packages, the South was forced to massive austerity, resulting in a lot of human misery. Just as the Netherlands now demands conditionality for European aid, the aid providers then laid down in detail how to reduce budgets, virtually denying the Greek government any form of autonomy. An example: in July 2013, Eurogroup President Jeroen Dijsselbloem held back a tranche of a few billion euros because Athens had only met 21 of the 22 “milestones”. The one missed objective: 4,200 officials had to be fired, while the Greek layoff list had only 4,120 names.
Self-interest as the steering motive
These experiences have shaped the southern image of the North. Countries such as the Netherlands and Germany are prosperous, not least because they know how to successfully take advantage of European cooperation. As an illustration: the Bertelsmann Stiftung calculated that the European internal market generates an average of 1,500 euros per year for a Dutch citizen, compared to 600 euros for the Spaniard and 300 euros per Greek.
However, when push comes to shove and European cooperation calls for solidarity, these countries become stingy and adopt a pedantic attitude. Solidarity can be provided as long as it fits to their direct self-interest. If aid is to be provided, this can only happen under very strict conditions that practically override the autonomy of the recipient country. Aid that goes beyond their own self-interest is virtually unthinkable anyway. Isn’t the southern disbelief of the Dutch attitude only understandable against this background?
Now, Europe has been hit by an external shock not caused by any country’s own actions, and that is accompanied by an incredible amount of human suffering. This requires a common approach. And what is the Netherlands’ first reaction?
Some support is possible, yet only under strict conditions. However, just before committing to support, the Dutch raise the question: why are those public finances not in order in the first place? And this is coming from a country that actively facilitates tax avoidance for companies from the South.
The bare minimum
The Dutch finance minister Wopke Hoekstra and prime minister Mark Rutte’s turnabout following the criticism is a step in the right direction. The European recovery package they now agreed to would be a rather substantial package in normal times. However, these are not normal times, and all parties involved know that much more is still needed. If the Dutch stance in the negotiations to follow will continue to be based on the biased northern stereotype of the functioning of the eurozone, southern anger will be unavoidable. And who can blame them?
This is a translated and adapted version of an opinion piece that was originally published in the Dutch daily newspaper Trouw, 8 April 2020.