Central and Eastern Europe, Euro, the Netherlands

looking at the future Europe behind a veil of ignorance

Proposals to split the euro into northern and southern currency or push Greece out of the eurozone, as for example supported by Frits Bolkestein in recent interviews seem to assume implicitly that the Netherlands would always be among the richer and stronger economies of the EU. With respect to any of the EU’s member states, the assumption that it can predict what its place would be in a future divided Europe, is misguided. Polish Foreign Minister Radek Sikorski reminds us of this in a speech delivered in Berlin last Monday and reprinted in the Financial Times and in Tuesday’s NRC. His examples of economic growth amidst crisis in the EU are Poland (15,4 per cent over the last four years and no recession) and Slovakia. His reminder to Germany that it also has not always kept the rules of the Growth and Stability Pact may have been unwelcome, but it illustrates the same fact from recent history: no EU member state is immune against recession or structural problems. On the other side of this coin, not only Poland and Slovakia but other new(er) member states such as Lithuania are quietly progressing with reform and keeping their budgets healthy. In his opinion piece in the EU observer, Andreas Aslund praises Lithuania for carrying budgetary reform during the crisis without the help of the IMF, implementing a vigorous fiscal adjustment and achieving 6.6 per cent growth annualized growth rate in 2011 after a dramatic slump in GDP in 2009. Most remarkably, the Kubilius government has managed to continue Lithuania’s much praised programme of public administration reforms, initiating this year a functional review system for the administration. Such measures attest not only to prudent fiscal policy but also to a realisation that a capable and modern administration is not a luxury but necessary investment for a country that takes a long term view how to emerge from the crisis. Even Bulgaria, a member state for which no Dutch politician has a good word to say, has been praised by EU Budget Commissioner Lewandowski  in October this year for being on track observing financial discipline. “Bulgaria is improving in budget terms. It is within the debt limit and is decreasing the budget deficit. The economic forecast for Bulgaria is quite decent.” Lewandowski said further.

The point of these examples is not that Slovakia, Bulgaria, Lithuania or even Poland have become as rich as the Netherlands or will be any time soon. Their citizens still suffer from the crisis and from poverty and unemployment. These member states, however, have made serious and credible efforts to keep their budgets balanced despite the crisis, a fact which is completely overlooked in the Netherlands. These newer member states should receive at least some credit for not only not causing the current crisis in Europe, but for persevering in taking fiscal discipline seriously despite the harsh effects on their citizens, on the socially weak and pensioners. Slovak doctors went on strike today because of their low salaries, Bulgarian railway workers have been told by the minister of finance that there is no money to answer their demands.

The inability to keep a balanced budget is not a mysterious cultural trait then,  as claimed by Frist Bolkestein in his recent interview in AD newspaper,  something typical of the Southern EU member states, while only Northern EU member states are careful and prudent in their public spending.

No, the budgetary discipline of Poland, Slovakia, Lithuania and Bulgaria today it is a question of political will, lessons learned from previous crises, commitment to the eurozone and oversight by the European Commission and the IMF. All of this perfectly applicable to Greece or other EU member states faced with similar problems.

The even more important lesson seems to me to be that all of the EU’s member states should decide the future of the eurozone as if behind a veil of ignorance about their own future place in Europe. As Sikorski aptly commented, “To those who would like to divide Europe, I say: how about a natural division into growth-Europe and non-growth Europe? But be forewarned. Their shapes would not conform to stereotypes”.

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