Charles Grant, the CER’s director, has made some notes on his recent visit to The Hague, where he met government officials. Written for friends of the CER, they are not for publication and should not be cited.
Dutch officials were notably pro-German on most issues, quite hostile to the European Commission and rather uninterested in France. Because any new EU treaty would have to be voted on in a Dutch referendum, they do not want another treaty – not just in the near future, but ever.
Brexit and German leadership in Europe
The government officials I met were very concerned about the risk of Brexit – notably for the boost it would give to Dutch eurosceptics, and for its potential to weaken economic liberalism within the EU. But apparently the leading politicians are unlikely to tell the British how to vote, out of fear that it would be counter-productive. That did not stop King Willem-Alexander telling the European Parliament on May 25th that that the “European bouquet would not be complete without the English rose”.
Many EU governments worry about Brexit because it would make German power in Europe even more preponderant than it is already (that is the view one often hears, for example, in Warsaw, Paris and Rome). But if Brexit boosted German power, it would not be a problem for the Dutch. “We’re not uncomfortable with German power; Merkel talks to us a lot,” said one official. “She is a responsible leader. We agree with Germany on most issues. Europe needs German leadership.”
Eurozone governance
The Dutch follow the Germans on most eurozone issues. This is not just because their economies and their roles in the eurozone, as creditor nations, are similar. The Netherlands’ political culture also emphasises the importance of following rules. Thus on Greece, the Dutch think the IMF has to be involved, but they refuse to write off Greek debt (though ‘extending and pretending’ is OK). As for any future demands for new money for Greece, it would be politically impossible for the Dutch government to provide new money – whatever the Germans do and say.
The Dutch don’t like the Commission’s increasingly political and ‘soft’ line on budget deficits, eg recently giving Spain more leeway. They lament the ‘reverse QMV’ rule, which makes it hard for governments to stop the Commission pushing through its proposals on budgets. The Dutch like the idea of replacing the Commission with an independent institution to analyse national budgets (eg the European Stability Mechanism). This could then send recommendations to the Council of Ministers – and if the Council wished to give a country more flexibility, for political reasons, it should be open about saying so. Some senior officials in the finance ministry in Berlin think along similar lines. Nevertheless there is not much chance of such a radical reform of eurozone governance, because a lot of countries, including France, would defend the Commission’s role.
The Dutch share Germany’s hostility to the ECB’s quantitative easing programme – on the grounds that it leads to low returns for savers, may cause asset bubbles, and is (they think) not working. But when I asked what their alternative proposal was to fight deflation and enable the ECB to fulfil its mandate on prices, they had no clue. The Dutch also like the German idea that sovereign bonds should be risk-weighted by banks; but they know this is not viable in the short term, given how many sovereign bonds are held by shaky Italian banks.
The Dutch have an even bigger current account surplus than the Germans (about 10 per cent of GDP, against 7.5 per cent) and are therefore unsympathetic to those – including the Commission, the French and many Anglo-Saxon commentators – who want Germany to lower its deficit. The Dutch emphasise that their deficit is more structural than the Germans’, being caused by things like the ‘Rotterdam effect’ (other countries’ exports pass through the Dutch port) and Dutch exports of gas.
The Dutch are a bit less hostile than the Germans to the Commission’s proposals for a deposit insurance scheme for the banking union – partly because their finance minister chairs the Euro Group, which has a policy of supporting deposit insurance. But on substance they share the Germans’ reluctance to agree to anything that could lead to the quasi-mutualisation of debt. The Dutch think that common deposit insurance won’t happen for a long time, ie until the various member-states have sorted out their banks’ problems.
The Dutch are not fans of the ‘economic reform contracts’ that Angela Merkel wants, because they would lead to a loss of sovereignty. In general, they don’t like the idea of a ‘grand bargain’ between France and Germany on the way forward for the eurozone, because they don’t trust the Commission to enforce tighter budget discipline, which would be part of that bargain. In short, they do not want major changes to eurozone governance, partly because of:
The Dutch problem with referendums
The Dutch referendum law allows any petition of 300,000 signatures to trigger a vote on a new law or treaty. Therefore under current rules there could not be a referendum on leaving the EU. However, TTIP, CETA and any other significant trade agreement would probably be put to a referendum and almost certainly defeated. So would any new EU treaty. The Dutch therefore oppose any treaty change, even after 2017. This has big implications for the future of the eurozone. “The only kind of EU referendum that we could possibly win would be one on membership,” said one official.
There is talk of changing this awful law, either by raising the threshold for the number of signatures required (to, say, 1 million) or by exempting international treaties. There would be a majority in Parliament to change the rules. But the second of those two options would be politically difficult. In any case even a new law to change the current system could be subject to a petition for a referendum.
What will the Dutch presidency of the EU do about the referendum in April which went against the Ukraine-EU association agreement? The Dutch government has not decided, but there is talk of ‘renegotiating’ the deal in a way that would not change a great deal of substance. I was left with the impression that this exercise could be similar to the EU’s constitutional treaty evolving into the Lisbon treaty.
The EU’s problems: Italy and Poland
The Dutch find that Matteo Renzi has become somewhat easier to deal with in recent months, eg on migration issues. “We are willing to be a bit softer on the fiscal rules, as he is trying to reform”. In contrast the Dutch want the Commission to be tough on Warsaw’s new government: the rule of law has to be enforced in Poland. “The other member-states offered a way forward to the Poles, through getting the Venice Commission to make recommendations, but these were rejected”. The Dutch seem to think that throwing the rule book at the Poles will solve the problem, and don’t believe that a more subtle approach is needed. However, they liked my idea that, post a successful referendum, Cameron could play a mediating role.
Migration
Mark Rutte played big role in brokering the EU-Turkey deal, which the government sees as a “triumph of our presidency”. But the opposition is opposed because of human rights problems in Turkey. On the difficult issue of visa liberalisation, for once the Dutch want a ‘political’ Commission, that can fudge the key condition that Turkey must satisfy, the reform of its counter-terrorism law; they would happily focus on the practice in Turkey rather than the law itself.
What about the recent Commission proposals to reform the Dublin asylum rules? The Dutch like these but think they won’t be agreed for years, since there is a blocking minority. “If we can fix the external border by strengthening it, then in the long run quotas become feasible. Even Orban indicates he could accept them.”
Charles Grant is director of the Centre for European Reform
