The European negotiations on the revision of the Stability and Growth Pact have started. In terms of content, this is a crucial issue for the European Union, because it concerns economic requirements that Member States must meet and the reduction of Southern European debt mountains. His reputation is also at stake for the Netherlands. The Netherlands is regarded as a stingy country that blocks European progress from a minority position. What is a smart attitude that stabilizes the eurozone and does not cause any further reputational damage to the Netherlands?
Adrian Schout is professor of European public administration (Radboud University) and affiliated with the Clingendael Institute.
The budgetary agreements laid down in the Stability and Growth Pact force member states to keep debts sustainable. The national debt may be 60 percent of the national income and the budget deficit is capped at 3 percent. For example, countries have their own economic buffers. Southern Europe wants to get rid of the rigid rules. With the low interest rates that are now available, debts are perfectly sustainable, is the idea, even if they are higher than 60 percent. And in addition, it is in any case impossible for Italy to reduce the government debt from 150 percent to 60 percent in the foreseeable future. There are also member states that hope for larger public finances at the EU level, such as a budget for the eurozone, eurobonds, and European financing for the energy transition, among other things. Undoubtedly, they will be on the table in a deal to revise the rules of the fiscal compact.
All of this goes against the northern tradition of rules being rules, independent oversight, and no transfer union in which money goes from one country to another. When the Netherlands, Prime Minister Rutte first, defends those positions, everyone seems to be annoyed. Together with Denmark, Finland and Austria, the Netherlands forms the group of ‘the reluctant dwarfs’. Also in the Netherlands itself, the criticism of European action is strong: the Netherlands has to move with the times, finally become pro-European, and stop with ‘loser strategies’. Experts and analysts who are also advisers to the Ministry of Foreign Affairs even state that the Netherlands ‘always’ says no to ‘everything’. Others see Rutte as a slacker who signs at every European cross.
So much for the frame. In reality, the Netherlands outperforms its weight and is it always out for compromises.
Despite its obvious diplomatic strength, the Netherlands can still do better. It is good to look back at the way in which the Netherlands negotiated the controversial corona emergency fund of 800 billion euros last year. The firm negotiating style paid off, and gave the Netherlands a great deal of influence on the outcome. Eastern Europe had to accept the rule of law conditions. Southern Europe had to accept that aid was linked to conditions and supervision. The Netherlands also added water to the wine and agreed to transfers and forms of Eurobonds. But what about a loser strategy?
Nevertheless, the Netherlands missed two important battles last year. Firstly, the Netherlands should have negotiated even longer – and therefore harder – to also get the economic supervision properly arranged. The corona recovery fund should have been linked to the condition that not the European Commission but the Member States themselves must set up independent supervisory structures. An example of this is the Central Planning Bureau in the Netherlands. It independently monitors reforms and investments, and reports on them in the media and to the cabinet and the House of Representatives.
European supervision from Brussels does not work, because many socio-economic decisions are taken in national parliaments. Supervision ‘from outside’ has little control over this if supervision in the member states themselves is weak. Areas in which EU policy does work are precisely those areas where the EU has enforced independent national regulatorssuch as food safety, aviation safety, independent central banks and competition policy.
Because the supervisory culture of economic policy in many Member States leaves much to be desired and the European Commission does not want to hand over supervision of the Member States here, the Netherlands will now have to take this seriously.
Emergency funds not for strong countries
Secondly, the Netherlands should have stipulated with the corona fund that Member States economic competitiveness is in order not getting money from emergency funds. Temporary European support funds will remain necessary, as banks could fail or an unforeseen crisis could break out. It should be clear that support is then only for needy countries. Germany, for example, has to set priorities within its own budget to pay for digitization and the energy transition.
The argument that every country has a right to ‘juste retour’ (what it puts in, it should get back) undermines the meaningful use of EU funds, pushes up budgets, and erodes solidarity where it is needed. Northern member states say they do not want European pocket money, but when push comes to shove, they demand ‘their’ share – that they pay double and straight themselves.
Also read this opinion piece: It doesn’t help if the Netherlands always says ‘no’ in the EU
The Dutch commitment to the corona negotiations was firm, effective but incomplete. The lessons from this help to come up with a complete vision of the fiscal compact. There must be a system of independent, national and European economic supervisors remote from the Commission, emergency support must be possible under conditions and under independent supervision, and strong Member States do not receive any money from support funds. For example, there is room for sufficient flexibility in the interpretation of the Stability Pact and for temporary solidarity funds. In the case of the Dutch deployment, it does not matter whether it is weak, miserly or unwilling. It is about diplomatic professionalism and that requires a well-considered vision of effective economic supervision in the EU.
A version of this article also appeared in NRC on the morning of December 6, 2021