Eurocrisis at its peak (december 2011)... some forward thinking here

Well, I think the world has all very much suffered its eurocrisis fatique in the last months. Yet it is time for some new forward thinking on the euro. And I'm going to ensure it's a plain vanilla explanation here. The situation is: this euro-thingy was and is a cunning French plan. And we shouldn't fall for the cunning French for a second time.

Let my try to explain this in three simple steps. That will help you understand the world without constantly following tweets and live blogs. It is - after all - not really that complicated, although the rethorics of the French President Sarkozy and the German Bundeskanzlerin Merkel do create a bit of fog.

Step 1: Monetary union means moving money between regions that constitute the union
Let's look at history. In particular the year 1977. A group of experts, headed by Mr MacDougall, wrote a report on the possibilities for a monetary union and the consequence on public finance. It's a beautifully written report in typewriter format, the standard of those days. And it describes the functioning of monetary unions in a numbere of countries, thus providing the European Commission (9 countries then) with a bit of inspiration for the future.

Conclusion four in this report clearly outlines that an economic and monetary union will always (and permanently) lead to a redistribution of money from richer regions to poor ones via a number of methods (taxes, subsidies and so on):
The redistribution through public finance between regions in the countries studied tends to be reflected to a large extent (though not, of course, precisely because other factors are involved) in corresponding deficits in the balances of payments on current account of the poorer regions, with corresponding surpluses in the richer regions. These deficits and surpluses are of a continuing nature. Net flows of public finance in the range of 3 - 10 % of regional product are common for both relatively rich and relatively poor regions, but a few of the latter enjoy considerably higher net inflows, up to around 30 % of regional product.

The report then continues to describe diplomatically that it's too early for a monetary union now. It also becomes clear that the redistribution of income between regions requires a central form of taxation/income for the centre of the Union (the EU itself) and a bigger budget. Because that creates the mechanisms through which redistribution can occur.

2. The euro: cunning French plan consisting of well packaged creeping committments
In an earlier Dutch blogpost I mentioned and honoured the foresight of Bernard Connolly. This former EU civil servant described in 1995 the French policy: use the euro to gain more influence in the relationshop with Germany. Because without some form of cooperation, the German economy would rapidly show its tail lights to the weaker French economy. By introducing the euro, the French got their influence as well as the desired endgoal; a political union in Europa.

The French understood that going into the discussion with their main goal revealed: political union, would not work. So they chose the Monnet-strategy of creeping committments. Just start with a joint currency and understand that economics will then in the end lead to some crisis-moments. Which are then used to further cement the union. They cleverly disguised their main goal (as no one was ready and willing to committ) and suckered the Germans into believing that this 'no-bail-out'-clause was really worth the paper it was written on.

Of course the French were clever enough to understand that in times of crisis, such clauses will be dropped. They also succeeded in making the sanctions of the Treaty subject to political assessment. And thus they put Germany and Europe on the road of small creeping committments were there is only one way: forward. Until in the end, after some crisis-moments, the full policial union would be arrived at.

Step 3: French magic and illusions: confuse the public with the actuality and hide the real rabbit
I think that it's useless to be excited about the events in the market and politics. What's happening now is exactly what was planned by the French. The diverging economies and bad public finances in the EU have become a strain on the functioning of the European Union. So now is the time to cement forward towards the political union. And we see Merkel and Sarkozy using this opportunity to convince their people and local politicians that this is the time to really step up to the plate and cement some solid new agreements in place. And once again, the German-French axis is the dealmaker with the rest of Europe standing by.

The real choice: political union or not?
By using short term rethorics Sarkozy still hides the real choice as the magician hides his rabbit for his audience. And that choice is wheter or not we want a political union in Europe (where rich countries yearly pay the poor ones and where a central EU-taxation exists and is used to redistribute wealth).

Let's be clear: we failed to properly assess the French gameplan in 1994. We got suckered into their game of creeping committments with only one endconclusion: political union. And our politicians didn't see it, were unaware or otherwise incapable of noticing this. But now that we have seen this happening, we can choose to engage in todays rethorics on new pacts and unions or to step back and repeat the main question: do we really want this political union? Is there sufficient solidarity among all countries in Europe to start sending money from rich to poor countries?

The answer and most likely outcome: Marseillaise rather than the ninth of Beethoven
Our true challenge now is not to be confused by the magic, the tricks, the thick air, the fog and the 34th rescue plan for the Euro. So when brushing all that aside, what remains is a lack of solidarity in Europe to go forward towards a political union. But we can also see that our current style politicans lack the courage, guts or vision to really deal with that question openly. Then again, that is also a valid choice. It's the choice to remain the puppet/marionet in the French theatre.

My guess is that Sarkozy is a very smart man who foresees that the European countries will continue to fall for his cheap magic and will remain puppets in the French masterplan. And could that perhaps also be the reason why, at the end of his pro-Europa-speech, one week ago, we didn't hear the European anthem (the Ninth of Beethoven) but the Marseillaise?


Click here to the read the Dutch version of this blogpost.

Wilders is changing his image..... suddenly has bright blue eyes !

Sometime ago, the website of Geert Wilders was hacked. And today I figured, let's see what his new site looks like. Of course it would have been fun to toy around with it and see if this site could be hacked, but I couldn't even start trying. Because something was staring me in the face. And it surprised me. But it also reminded me of something.

If you know Geert Wilders and his history, then you know that there is some Indonesian blood in his family. And you would also know that he's originally got black dark blond hair and brown eyes with big black pupils. While we are by now accustomed to his hair being dyed blond, we all recognize him when we see the picture here:

So you can imagine that I was quite a bit surprised to see his new website with the following, iconic picture:

At first I did'n believe it, so I magnified the picture to look again at his eyes:

Well, we all know what a little Photoshop can do to improve the looks. But this, I felt, was different.

So I tried to remember what is was that made this so familiar. I browsed around the web, my books at home, magazines, asked the neighbours, but still I couldn't figure it out. In the end I had to give up. I vaguely recall that there is something about a strong desire and ideal to have blond hair and blue eyes, but I just can't remember what it is.



PS Not having ever seen him in person (I am now checking a lot of google-images) it may be the case that his eyes may have a shade of grey/blue/green. Still this upgrade to hefty blue remains remarkable.

PS 2 (20.55): Indeed they appear to look a shade of blue. So he may (or may not) have used some digital highlighter that created the unnatural image.

PS 3 (23.24): I struck out the black hair, as I was wrong about his original hair colour as well. It used to be dark blond rather than black. So what remains is a bit of photoshopping and digital polishing that struck me. 

Eurocrisis: the frog may have been long boilt but we fail to notice...

Looking at todays market developments I am very much reminded by the complex discussions of 2007 and 2008. I think also these days, here in Europe we are failing to recognize that the political and decision process has gotten out of control. The bailout-frog is long boilt and dead, but we keep pretending it is alive and will be able to move. And heaven only knows wen reality will sink in.

Mind you, my personal opinion is that the Wednesday-package was not about bailing out Greece but about bailing out Europe. Given that clearly the EU governments don't have the support/cash to fund a bailout fund themselves, they had to provide the EFSF with sufficient flexibility to go shopping for funds in the market. Three cheers to Angela Merkel for finally understanding that...

And the European leaders of course also placed an emergency solution via the IMF in the background. In doing so the (emergency) plumbing is laid for a bailout of Europe. As a result, the financial markets could no longer determine whether the bazooka was sufficiently big. It's size is unknown, now that there is the possibility of some Chinese or Saudi Arabi or the IMF to step in. So, lot's of work to do, but the main problem was solved.

Thus, the essence of the EU-package was that it ensured that the EU itself would qualify for emergency packages, should push come to shove. And this appeared to work for a day or so. And while Draghi outlined to continue to take extra-ordinary measures, Italy got burnt in the market. So that did not bode too well.

And here we are now. Tuesday evening, first of november 2011. Berlusconi is meeting with his Cabinet to discuss measures. As is the Greek Prime Minister who presumably felt that the First November of 2011 was a good day to announce a referendum (1-11-11, it must mean something in Greek mythology). And of course, the Dutch Members of Parliament will also convene this evening. So there will be more discussions. And letters to parliament. And then our Prime Minister will say stuff. And then there will be the G20. And so on, and so on.

I understand that for those working in civil service, there is no giving up on Europe and procedure. They must continue to go the way that has been prescribed and try to make something out of this very desperate situation. But it is all quite similar to the myth/story of the boilt frog. If you put a frog in a glass of water it will jump out if it is heated quickly, but will not when the water is heated slowly. So in a situation of slow changes, the frog will boil to death.^* 

The whole EU-situation now reminds me very much of the complex discussions we had here in the Netherlands with the takeover of ABN AMRO by Barclays, followed by the bid of RBS/Fortis/Santander. This whole deal messed up incredibly and had all kinds of side effects (no attention paid to smaller banks with two of them failing subsequently: DSB Icesave). And the one major lesson that we could learn in the Netherlands was that it is essential to identify the moment in which a process has become too complex to handle.

And what I'm saying here: we may have passed that moment quite some months ago already. We are already witnessing the Lehman 2 moment in the markets, but European politicians are too busy to notice (as they are holding summits and meeting to prevent Lehman 2 from happening).


By the way: later scientists proved that the story was untrue and an urban myth. Maybe someday people will say the same of the Euro...

Waiting for the trojka report and the finale... will the euro go out with a bang...?

The times they are changing amazing.

One year ago in Deauville, we saw Merkel and Sarkozy decide on how to save Europe: getting the banks involved was the answer. Then this week we saw them saving Europe once again: a huge fund and effort was necessary. Everyone was hopeful; it really appeared as if they were going to get it right this time. Stock exchanges felt happy but the stakes are up. Because if Merkozy fail to get it right, the finale will certainly become a blast.

What I find amazing is that we could see a sovereign crisis turn into a full blown bank crisis in Europe, due to the political desire to take revenge on banks. If banks need to pay up as well, this hurts their income, their revenue and future divivends. So down with share prices and trust. Then, add a couple of local bank tax plans on top and those are all the ingredients you need for a full blown contagion in the financial market. Yet only a number of people, among which former Director Hoogduin of the Dutch Central Bank, dare to outline to Merkozy that they themselves have been the major factor that contributed to the feared 'contagion' in the financial markets.

So now we need an ever bigger final bazooka solution. And what concerns me now, is the tone with which both leaders of state keep referring to the trojka report and the decision afterwards. It's a tone that defers the topic to a technicality with subsequent political decision. It's not the tone that you would expect of leaders. Two real political leaders might refer to the report, but not give the trojka this much attention.

Because imagine yourself to be a member of the trojka. If all the eyes of the world are upon you, what are you going to say? You need to keep an optimistic tone, but then again, you can see that the Greek are evidently failing the standards. What to report then? Outlining that Greece missed the norm will mean oil on the fire of populist hardliners in the EU. And stressing that Greece is well underway means that the flak might be directed at the trojka itself. There's no way of doing it right.

So what may happen is that there will be a highly diplomatic press conference and report, so ambigous that it will do the least public harm. Still, the politicans are responsible for putting the trojka in this awkward position. They deflected a primary political issue to a group of experts while they should effectively solve it themselves. Because as things stands now, the trojka has too much politicial expectations deflected upon itself, to do its work properly. And in my opinion, this doesn't bode well at all.

So we could be up for a grand finale. Either because of the trojka report or because of the fact that the French and German are not going to agree on the details that they need to agree upon to shoot the final bazooka.

More and more I feel that this political (and sovereign) crisis has some similarities with these animated Disney films. Cat is chasing mouse. Running hard. Running off the cliff and keeps running in a straight line. Until the cat discovers there's no more ground underneath. Which is when the fall begins. Cat falls down and should be dead of course, but in this miracle world of Disney just irons out the bumps and starts chasing the mouse again....


Updated 1540: If you wish the end result, the joint statement, read the text below: a nice example of diplomacy beyond diplomacy. Greece gets the money while it doesn't fullfill earlier criteria. Where did we hear this before..?


PRESS RELEASE
11 October 2011 - Statement by the European Commission, the ECB and IMF on the Fifth Review Mission to Greece

Staff teams from the European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF) have concluded their fifth review mission to Greece to discuss recent economic developments. The mission has reached staff-level agreement with the authorities on the economic and financial policies needed to bring the government’s economic program back on track.

Regarding the outlook, the recession will be deeper than was anticipated in June and a recovery is now expected only from 2013 onwards. There is no evidence yet of improvement in investor sentiment and the related increase in investments, in part because the reform momentum has not gained the critical mass necessary to begin transforming the investment climate. However, exports are rebounding—albeit from a low base—and a shift towards a more dynamic export sector, supported by a moderation of unit labor costs, should lead to more balanced and sustainable growth over the medium term. Inflation has come down over the last year and is expected to remain below the euro area average in the period ahead.

In the fiscal area, the government has achieved a major reduction in the deficit since the start of the program despite a deep recession. However, the achievement of the fiscal target for 2011 is no longer within reach, partly because of a further drop in GDP, but also because of slippages in the implementation of some of the agreed measures.

As for 2012, the mission believes that the additional measures announced by the government, in combination with a determined implementation of the adjusted Medium-Term Fiscal Strategy, should be sufficient to bring the fiscal program back on track and ensure that the deficit target of EUR 14.9 billion will be met.

Looking to 2013-14, additional measures are likely to be needed to meet program targets. Such measures should be adopted in the context of an update of the Medium-Term Fiscal Strategy by mid-2012. To ensure that the program is growth-friendly, and in view of the ambitious assumptions regarding improvement in revenue administration already embedded in the Medium-Term Fiscal Strategy, it is essential that such measures focus on the expenditure side.

In the area of privatisation, progress has been achieved with the creation of a professionally managed privatisation fund. However, delays in the preparation of the assets for privatisation, and to some extent worse market conditions, mean that revenues in 2011 will be significantly lower than expected. The government remains, however, committed to the revenue target of EUR 35 billion by the end of 2014. Ensuring that the privatisation fund remains independent from political pressures remains key for success in this area.
Banks have improved their capital base through market-based means. As evident from this weekend’s resolution of Proton Bank, the recent amendment of the banking law ensures that non-viable banks can be wound down while protecting depositors' interest and preserving the stability of the financial system.

As to structural reforms, areas of progress include the transport sector, licensing procedures, and regulated professions. As overall progress has been uneven, a reinvigoration of reforms remains the overarching challenge facing the authorities. In this regard, the decision to suspend the mandatory extension of sector-level collective agreements to the firm level is a major step forward, as it will help ensure the flexibility in the labour market needed to boost growth and prevent high unemployment from getting entrenched.

Overall, the authorities continue to make important progress, notably with regard to fiscal consolidation. To ensure a further reduction in the deficit in a socially acceptable manner and to set the stage for a recovery to take hold, it is essential that the authorities put more emphasis on structural reforms in the public sector and the economy more broadly.

The success of the program continues to depend on mobilizing adequate financing from private sector involvement (PSI) and the official sector. Ongoing discussions on PSI together with assurances provided by European leaders at their July 21 summit suggest that the program remains fully financed.

Once the Eurogroup and the IMF’s Executive Board have approved the conclusions of the fifth review, the next tranche of EUR 8 billion (EUR 5.8 billion by the euro area Member States, and EUR 2.2 billion by the IMF) will become available, most likely, in early November.

Exceptional, depressing and amazing interview by Peter van Ingen on Buitenhof (Dutch tv) this morning

This morning. Both the terms Peter van Ingen and Buitenhof became trending on Twitter Netherlands. And the reason is that we could all be amazed at the style of interview by Mr. van Ingen. I dedicated a Dutch blog on the implications of such an interview style, but the foreign readers may want a bit of background information.

So what happened here in the Netherlands in the media?
Our labour party, PvdA is strongly in decline. While they reached 30 seats in parliament during elections, they have considerable less seats in polls now (see here) which creates an uncomfortable position. The Socialist Party eats up a lot of votes and there is a lot of discussion in public on the style of Job Cohen, the chair of the 30 members of Parliament. He remains the gentlemen rather than choosing for the quote-style of politics that we can see a lot these days. In doing so he is the exception.

This week, the chair of the Labour Party, Ploumen, left the party. But she also gave an exit-interview in the Volkskrant (a bit left-oriented newspaper in the Netherlands). And as a result, the pressure on Job Cohen mounts. See also this article. Cohen has outlined that he will take the criticism to heart and therefore all eyes in the Netherlands were turning to Buitenhof, this Sunday morning. Buitenhof is the main political debate program, which often serves as a platform for political discussion.

The interview in Buitenhof
This mornings edition of Buitenhof had a particularly agressive interviewer, Peter van Ingen, who fist wanted to discuss in detail what exactly had happened this week, with the exit interview of Ploumen. Then Cohen explained this but also stated: I prefer not to further engage on this issue in public, but within the party. Van Ingen kept pushing, but Cohen outlined his stance.

In a lof of the rest of the interview van Ingen effectively sort of played the devils advocate and repeated some of the criticism of Ploumen on Cohen. Which was all about style and conduct. Cohen made it clear that he was choosing his own style, his own tone of voice and that insulting nicknames said more about the insultor than himself. Yet van Ingen pushed on, not willing to listen to the content of Cohen's message.

Essentially, the interviewer kept on moaning and complaining about how Cohen conducted himself in the political arena while Cohen tried to outline his partys vision for the future. And although the tv-interview was advertised on the web as: 'Cohen's reply', (suggesting that Cohen would get the floor for his vision on developments) the interviewer didn't allow for much space and often interrupted. So we ended up with very little content in the discussion and an awful lot of tit-for-tat talk on process.

The most striking element was that the last question was: 'Did you arrange already for your succession?'. Many comments on twitter described this as impertinent, given also the previous line of questioning by the interviewer. It's not nice to wrap up the interview and throw this prepared granate to the guest. But Cohen handled it competently. And this ended the interview.

Annoyed
The style of interview -and the last question as the cherry on the cake- got many people annoyed. This was more about the opinion of the interviewer than giving the floor to Cohen.It got me to immediately write an analysis and comment on my Dutch blog that:

1. the choice by a tv show to not focus on content but only short time actuality/gossip is in itself also a political choice; it's not a neutral choice but a choice that also shapes the political climate,

2. the choice by an interviewer to go for an offensive style can be made, but the talk should in the end be about the guest and the opinion of the guest, rather than the opinion of the interviewer. And this interview contained quite a lot of display of morality and opinion of the interviewer, blocking the message of the guest. And underneath, the interviewer did not appear to be interested at all in the opinion of the guest. Which showed.

3. the last question about succession planning, was an impertinent one; comparable to kicking a man when he is own on the ground. And I noted that this tough-style interviewing is becoming more and more popular in the Netherlands. And thus, the Dutch media themselves play a role in creating a more rude and inpolite political climate: a serious trend that they might want to reflect on.

Action
To vent out my amazement I wrote this Dutch blog. And in it I placed two links so that readers who would agree, could easily send out e-mails to the journalist team at Buitenhof. So that the team may reflect on what happened today in the interview with Cohen.

I hope they will succeed in getting their interview standards to a higher level, because a good functioning political system also requires solid journalists keeping up their standards.

Dutch budget talks and generic policy discussions in parliament taken hostage by 'freedom of speech' of Wilders

This is a blog for the foreign readers, interested in finding out what's happening in the Netherlands political debate since Wilders was acquitted from hate speech.

Well the short update is the following:
1- many politicians were awkwardly silent when the Norwegian shooting occured; although it was quite clear that this shooting better proved the existence and cross-border impact of Wilders hate speech than the local Dutch court dared to conclude.
2- Wilders keeps on banging the drum that Greece should be kicked out of the euro; as a result the PvdA (Labour) challenges Wilders to stop supporting this minority cabinet or otherwise be silent,
3- Wilders now helps out a cabinet with a set of cutbacks that are contrary to his election promises, and seeks to divert attention,
4- the strategy of Wilders to divert attention was a full-out indecent and improper behaviour during yesterdays and todays Parliamentary discussions on budget and future strategy of the Dutch government (read the dutch report here).

My personal impression was that, as is often the case with narcist people, the words of Wilders said more of himself than of the subject or person at hand. And the fact that Wilders had to resort to so many unsubtleties shows two things:
- psychologically he has concluded - in his head - that with the acquittal of the penal court, he has firmly gained and established the right to freedom of speech and the right to express himself any way he likes; there is no stopping Geert now as he thinks the judge has now not only acquitted him, but also issued him a license to insult,
- politically, he is playing his old record/song (personal attacks, indecent inferrals and wording) louder and louder in order to gain attention from media and electorate; yet, now that he supports the government, the opposition is smart enough to point out to the people that Wilders is all talk, no action.

Effectively Wilders is eager to exercise his rights but never present when it comes to honouring obligations that come with the rights. So below I have listed some of his words, translated, to illustrate how Wilders uses his right to freedom of speech in Dutch parliament and ignores his obligation to show conduct an MP becoming. And do note that many other subtle hints in body language, tone and frasing, are untranslatable.

To Cohen, leader of the PvdA
-Well you can bleat all you want but at the end of the day you are the company poodle of this cabinet.
-I'll say it once again and it hurts, but you are the company poodle
-You are the toy dog, the poodle of the Cabinet.

To the chair of Parliament:
-Wilders (when meaning to talk to Cohen): ..you are the co-muddler of this government.
-Chair of Parliament: Mr Wilders you were going to try to talk via the chair of Parliament. I am not a co-muddler.
-Wilders: Not yet, so much is true.

About MP Peters (when characterizing Green Left as a 'beach-party' this summer:
.. and Mrs Peters was somewhere mixing up her interests (inuendo to an affair that became part of a public and political discussion).

To Mr Pechtold
I am not sure if there was a question, but let me try to answer this dhiarrea of Mr Pechtold..

About Secretary of state Albayrak
While Albayrak still recieved criminal strangers open armed, giving a general pardon away - I don't know if she did it in cooperation with her niece - we now really deal with criminal strangers.

To Green Left:
Objection noted. The Beach Party apparently does not agree.

About A director of a hospital
We have a concern with care-directors at the top (using the word bobo's which is a denigrating term for rich, ignorant directors).

About himself, when adressed about courtesey in parliament
We at the PVV enjoy a strong debate. One time it is courteous, the other time sharp and sometimes both. It's all part of the game and we will never change our ways.

Latest update: Wilders provoking the Minister President and parliament ignoring him
Yesterdays improper behaviour of Wilders resulted in 120 letters being sent to parliament. And some MPs, notable Roemer (Socialist Party) yesterday desired a written declaration of the Minister President Rutte on how he qualified the wording of Wilders. Prime Minister Rutte chose to do that at the end of todays session. And that was a solid choice, because a good discussion followed during todays session in parliament.

Until somewhere this afternoon Rutte denounced the wording of Wilders the day before and Wilders started rebutting, throwing in the remark (in sort of cockney style): 'Hey man, act normal.' So Wilders had chosen to increase the stakes by now provoking the Prime Minister. What then happened was quite interesting.

The chair of Parliament asked both Wilders and Rutte to behave and a discussion occured between members of parliament and Rutte on whether this verbal behaviour of Wilders was suitable. Rutte distanced himself completely from the wording of Wilders (yesterdays wording in particular) and explained: 'Well, we always knew this was a package deal. With Wilders we will get some support and because of the support we carry on as a government. But we also know his style to be provocative and at some times its best to not react and clearly state that this is unsuitable.'

Although Cohen outlined that this was too distanced a response by Rutte, the members of Parliament chose to discuss norms and behaviour at another time and to go on with the discussion. Also, the Minister President Rutte acknowlegded that as politicians we are struggling with how to deal with these provocations by Wilders. He literally said: "we know that the style of Wilders is to throw in some red meat in the arena sometimes". And having discussed the topic, VVD-leader Blok (who previously had outlined that he was not joining the debate because he had no intention to be provoked) simply suggested to move on. Which happened and was a new thing for this parliament.

Essentially Wilders provocation was ignored. With Wilders then stating that what he said was almost the same wording as used in previous years by other politicians. But that was a feeble attempt to communicate to his followers that once again Wilders was being discriminated against by the regular politicians.

The 'magic' of Wilders is fading quickly now
All in all, this is some interesting development here in the Netherlands. The content-less provocations of Wilders are no longer discussed as true suggestions but viewed and treated for what they are. Simple provocations that aim to make himself look as the reasonable guy that dares to say what the public thinks. And that dares to challenge everyone.

But it does have the looks of it as if the magic fades. Everyone in public gradually starts to realize that for Wilders there are no promises that he keeps, just the promise to himself that only he is allowed to do and say as he pleases and anyone critisizing him will become his object of hatespeech and indecent wording.

Interesting development... default Greece confirmed/rumoured (sort of) by Dutch Ministry of Finance..

This morning, Bert Bruggink, CFO Rabobank, was quoted in Financieele Dagblad, saying that -looking at the markets- it was not the question if but when Greece would default. And RTL Nieuws informed the public that the Ministry of Finance was now preparing for all possible (and unthinkable) options in the crisis. Which lead to clippings in the press: 'Dutch Ministry of Finance thinks that default of Greece is imminent.'

Tomorrow, Dutch parliament will discuss the EFSF in parliament. But PvdA (Labour) does not wish to support the extension of the fund if Finland still has its demand for collateral on the table. The 'Green-Left'-party states that with the extension, the EU should also decide on the Euro-commissioner for budget (the MarkRutte proposal). And the Socialist Party doesn't want the EFSF to take over bond-buying from the ECB as, the ECB has 'unlimited funds'.

Meanwhile, national radio bulletins send out the message that sources near to the Ministry of Finance outline that it is preparing for default (19.57). While formally the Ministry may not be calling for orderly default and denies it (20.20). Which means that the 'open' and transparant communication of Minister de Jager, once again creates more confusion than necessary. It's a bit like BNP formally denying the informal rumour about its financial health.

So, looking at this confusion, it does indeed look as if the default of Greece is imminent...

Eurocrisis: a clash of old (long term) and new (opportunistic) political thinking

These days I'm trying to get my head around the current developments in international and European markets and politics. There's a real flood of former politicians emphasizing that Europe is the solution, rather than the problem (see for example the statement by the Council for the Future of Europe). And here in the Netherlands we had former Prime Minister Wim Kok as well as former Minster of Finance Gerrit Zalm explaining to us on television that we need to remember the benefits of Europe and use it as a road to the solution. And I fully agree. As a whole, the eurozone is not doing so bad, but we do have a serious internal management and discipline problem.

Leadership today may be far more difficult than when the euro was formed..
Many commentators outline that now is the time to show leadership, based on a long term vision. And that is most certainly an important element of any solution. But I sense there may be more to it. There are some tectonic plates moving beneath todays politics. And the theory that I'm forming right now, is that most commentators are overlooking the movements of those plates as they are standing on those plates themselves (and incorrectly assume that they're not moving).

My theory is that, due to these slowly moving tectonic plates in the political environment, it might be much harder for todays leaders to exhibit the same leadership as their predecessors. So the solution to the eurocrisis is not just about leadership, but requires an appreciation of those fundamental trends as well.

What are the fundamental trends that now constrain our leaders?
The slowly moving 'tectonic plates' that constrain our leaders are:
1- a long period without war and a fading memory of bad economic circumstances,
2- a growing mastering of technology, leading to a shift in risk-sensitivity and a new control-perspective on the ability to control developments,
3- less religious attitudes, loss of self-discipline and focus on individual welfare,
4- electoral behaviour that is no longer focused on full political vision or ideology but can be seen as short-term shopping behaviour; the contract term of citizen and politicians decreased considerably,
5- the rise of the internet and social media, leading to increased scrutiny by the public, less margin for politicians to implement long term solutions and to oversimplification of complex problems in the public debate.

So what am I saying is: 
1- In Europe, we have forgotten how rich we really are and where we came from. So the financial and geopolitical benefits of Europe (income, peace and peace of mind) are taken for granted. And as we grow older, this individual and collective memory fades more and more.

2- The advancing technology incites a sense of control into the modern human being and people are less inclined to accept the limitations of life; we are used to demand more, get more, expect more, demand more and so on. The succes of technology also provides us with a sense that we can control more than we really can. And it shifts our risk-sensitivity. Risks that in former times were acceptable or considered an act of God, are now subject to preventive and containment measures, with the people seeking a culprit if insufficient measures were taken. Essentially technology makes us become spoilt brats that don't want to bite the sour apple for our health if there is a sweeter alternative around the corner.

3- The increased welfare and growing economy allow for the realization of many wishes. And the traditional religions slowly lose ground to an economic religion in which there is little place for self restraint or group thinking and solidarity.

4- In the political domain, the economization also occurs and voting becomes more an act like shopping than an act like determining which church/religion you wish to belong to. The lifelong committment to ideologies fades away and needs to make place for opportunistic electoral behaviour. In turn, the political parties need to focus more on short term issues and popularity to survive and represent the interest of their electorate.

5- Whereas in former times some leeway in government and politics could be created by controlling and restraining the flow of information, the rise of Internet and social media make it almost impossible to create time/intellectual room for debate/solutions. These media also allow for collective intelligence and feedback which is very much quicker than before. So politicians can no longer design political solutions which do not work in practice or contain design-errors. Similarly they cannot decide or choose open-ended solutions, hoping that some underlying fundamental problem will be solved by time rather than politics.

Thus, in order to solve the Eurocrisis, we don't just need leadership, but also:
- increased awareness about the benefits peace, peace of mind and economic growth that Europe has brought us and brings us,
- the ability to bite through a sour apple rather than postpone solutions,
- the awareness that we're in it together, even if it doesn't feel like that,
- politicians with the leadership to appeal to the publics desire for stability and growth and the fact that only with their prolonged loyalty can the public expect a better long term outcome,
- consistent solutions to the technical, financial and political issues at stake; any backdoor or design error will get back at us within a years time-frame.

See also the Dutch version of this post here.

How political opportunity helps dampen the economy

Today the Dutch Central Bank released its economic monitor. And that monitor warned that the good times are over. We are getting depressed again and growth will slow. See below the first signs of the downturn in dark blue:

It is quite clear to me that this time, it will be hard for politicians to blame the banks or anyone other than themselves. We know from research that bad news on financial markets and stock exchanges is affecting all the people in the public (although in the Netherlands only 1/16th is actually actively holding its own securities). And it is of course not more than fair to say that it is the clumsy and opportunistic behaviour of politicians with respect to budgets and eurocrisis that have significantly contributed to the turmoil in the market, this last half year. Add to this the fact that the politicians chose to also curtail all future economic growth by imposing taxes, buffers, liquidity traps and all that stuff onto banks.

So we are now back in the dried up markets, with depressed consumer outlooks with mainly the politicians to blame. Central banks are heavily overstepping their mandates to try and save the day but still we see no signs of true leadership in the Netherlands, Europe or the US. And somehow I have the impression that it may a take quite some time before our Dutch politicians will truly acknowledge that it was their own opportunistic behaviour that helped spark this crisis and slowdown/downturn.

Fed is moving the wrong way with announcement of longer period for low rates...

The full FOMC statement for August 9 says that “low rates of resource utilization and a subdued outlook for inflation over the medium run” warrant maintaining current rates until “at least” 2013. Although perhaps not surprising, it is not a smart thing to do. So many things can happen, among which feed-forward into an economic system that we do not really grasp. So why outline the policy goal now for such a long time?

My opinion is quite a bit based on the thoughts of Stephen Axelrod, a very senior policy expert of the FED. He explained (in this excellent book of his: Inside the Fed) that he thinks such a pre-announcement policy is not a wise thing to do (p 157).

In general I think it is best all around for officials to avoid commentary about the future of rates they cannot directly control or are unwilling to control - that is, rates other than the funds rate. I also think it is best to avoid commenting on the probable future of rates they do control. In either event, they taint the information being conveyed back to themselves and other market participants by the behavior of rates. Also, and more dangerously, because of misinterpretations and unintended consequences, they risk causing reactions in businesses' and individual's spending and borrowing decisions that make the underlying economic and also financial situation worse rather than better for the economy and its future.

In short, the future is unknowable both to the Fed and to the market. Little seems to be gained, and much can be lost in the terms of the chairman's and the Fed's credibility and policy effectiveness, by getting into the mug's game of exposing policy intentions and wishes that may be both misinterpreted and in the end, as market conditions change, misleading.

So in my opinion Bernanke is heading into very dangerous territory now.

Still amazed at the 'tough' stance of Netherlands Jan Cees de Jager in Greek Crisis

As the readers of this blog know already, here in the Netherlands we have a minority government that has to lean on support of the PVV to survive. With the end result that we have a divided caretaker government that steers on a day-to-day basis, and is unable to steer on long-term policy goals or to achieve fundamental changes.

As a result we see the current government and in particular our Minister of Finance, Jan Cees de Jager, surfing the waves of public sentiment rather than those of solid government. De Jager time and again has to account for the public sentiment and does so in particular with respect to todays political and macro-economic European crisis. He continues to stress that private entities will have to pay along to save Greece. And he says: there will be no more money going to Greece, unless this condition is fulfilled.

Well, this tough policy stance, copied from the Germans, is not bringing us in Europe or the Netherlands anywhere. All it does is prolong the crisis, as we have seen last week in all the market turbulence about Italy and the stress tresting of banks. So perhaps de Jager will slowly retreat. But still we can imagine some more populist talk to enter the European policy arena. Because the populist PVV is still banging the drum that no more money should go to Greece.

It is interesting to analyze the position of de Jager, using some of the insights of former President of the central bank: Nout Wellink. Just two weeks ago, on the day of his departure from the central bank, a book was published with the title 'Wellink talking'. And in it Wellink outlines that at some point in time, bad collateral of banks may result in losses for the ECB and thus also hit the Dutch tax payer. It is telling and striking that only very few people in the Netherlands realize that our 'tough talk' with respect to the Greek situation is just for show. The real costs of this crisis may well end up at the Dutch tax payer via the back door of the ECB.

Although by now I should have gotten used to the 'pragmatic', visionless way in which our government operates, I still remain amazed at the Ostrich policy that our Ministry of Finance uses in dealing with the EU-crisis. If indeed at some point in time the central banks or bankers were to blame for a crisis, now is the time that we can fully blame politicians for not deciding, for bowing towards populists and for a complete lack of leadership.

Greece: let's help the Greek people in solving the democratic errors that caused the financial trouble!

In an earlier post, I outlined that both the EU-countries and Greece were sort of stuck with politicians that may have not done their job well. Populist politicians in the EU have widened the gap with Greece by portraying all the Greek as bandits. Meanwhile, within Greece there is a huge difference between have's and have-nots and between politicians and the people. So while the world may treat Greece as one people, we overlook the distinctions within the Greek people.

ZeroHedge featured an article that made this distinction more specific. The article outlines that Greece may essentially be a kleptocracy. In such a system, a financial and political Elite skims and concentrates the wealth of the nation via corruption and embezzlement while being protected by the winking complicity of their fellow plunderers who hold civil and financial authority.

At present all eyes are focused on Greece and the votes in parliament. While most eyes will focus on the financial part of the vote, I am thinking now about the ramifications for Greece as a democracy and its citizenry. Imagine yourself to be a Greek voter that has over time learnt to live with corruption and the fact that an elite holds the jobs and priviliges. In this role you are essentially illegally taxed by the elite, in order to get services from the state that it should provide you for free or at much lower costs. And now this elite has also frauded the European system so much, that it is obliged to introduce a formal tax upon you as well. This double-taxing appears to be quite unfair and incorrect. And what can you do about it?

The current workings of the Greek democracy will thus inevitably lead to further social unrest than we see already. The people will want to rise up against their political elite in a similar way that in the Middle-East countries we see the people rise against its dictators and their family-clans. And that's what we see in the streets now. It's the same process, but the Greek elite is less pronounced, leass easy to catch and less easy to portray as a single entity.

I am afraid that the EU people and politicians will be so much clouded by their economic mindset and reasoning, that they will misstake and portray the Greek people's resistance as inappropriate given the amount of fraud that has occurred so far in Greek government (the elite). This may lead EU leaders and politicians to explicitly or implicitly favour a violent suppression of completely justified Greek protests.

In my opinion, our attention in the EU should not just be focused on the financial issue. We should take a broader perspective and try to determine how we can help the Greek public get a government with less corruption and less implicit taxes, allowing them to pay the formal taxes that Greece needs to come out of the crisis.

The stakes are high. And not just financially. If we overlook this issue, then essentially we are supporting the dictatorship of the Greek political elite.

And is that something we want the European Union to be based on?


Click here for a Dutch translation of this blogposting.

Wilders acquitted in Court but gets the biggest verbal reprimand ever

There is much to say about the trial and the full acquittal of Wilders. Yet, realistically speaking we need another day or so to read the full verdict and come to final conclusions.

It is possible though, to sketch what happend at the Court House today. Essentially two things happened:
- for quite a bit of Wilders behaviour, the Court found it denigrating, rude, schocking and so on; they gave him a thorough verbal reprimand in terms of regular human behaviour,
- by referring to the context of the discussions in earlier years, as well as Wilders repeated additions in public "I have no personal grudges against any individual muslim", the judges observed his behaviour to be directed to the ideology islam and not to humans. Thus they concluded that a full acquittal was in place.

I'm still pondering the consequences and implications. Here's my first thoughts.

1. If this approach is the recipe, it means you can come a long way in society by constantly throwing in this easy disclaimer: 'I don't have any personal issues or grudges against the individual people; it's merely their collective way of thinking that bugs me'. Thus, practically speaking, the court just provided a recipe for our society. Hatespeech allowed, if accompanied by a disclaimer that you don't mean harm to individuals.

2. The judges morally and verbally convicted Wilders in the loudest terms possible. They didn't use the word 'obknoxious' but their sentences and qualifications came essentially down to the biggest reprimand ever. So while Wilders may now claim that free speech is essential and he has won a victory, it may be a Pyrrhic victory. Every time that Wilders refers to the verdict of the court in his favour, anyone interviewing him can also quote the other parts of the verdict in which his behaviour is qualified as rude, schocking, seeking and on the border of the acceptable.

3. With the acquittal, Wilders no longer gets a stage for standing up as a symbolic freedom fighter or a martyr of democracy. He is none of the above, merely qualified as a rude politician that has sought the edge of the allowable. And that puts the ball back where it belongs: in the court of the civil society. Here in the Netherlands we may all take some time to reflect on the developments in our society that made it happen that such a rude, obknoxious man has gained so many followers.

4. I suspect that the claimants that have brought the case forward, may eventually seek to address their dissatisfaction with this verdict with the European Court of Justice. And my guess is that they do have a chance there. In the meantime, the trial has allowed us to ponder fundamental questions with respect to the limits of free speech in practice and has lead to a very clear qualification of Wilders behaviour. Both are a good thing and it is good to observe that as we speak, the national news bulletins outline both elements of the verdict of Wilders.

Greece: we Europeans need to bypass politicians and support the Greek people

The Greek parliament is facing a tough call with respect to future measures to reaarange their financial household book. And at present we are seeing the economists do the calculating, the politicians do the talking/negotiating and the banks may mildly be supportive. Yet all the talk and public debate seems to be in terms of black and white, of division, rather than in terms of connection. That surprises me.

At pressing times like these, it may be time for the citizens themselves to speak out and connect to Greece and its people. The euro has a very positive cost-benefit ratio as it shielded Europe from uncanny complicated situation when the financial crisis hit in 2007. Without it we would have had highly fragmented local financial disasters all over Europe. Politicians are forgetting this too quickly and choosing for populistic lines of reasoning to satisfy what, in their view, is the peoples wish/opinion.

On both a political and human level, there is no other way than supporting the Greek. But we shouldn't let only the politicians and bankers do the work. It is now time for European labour unions, companies, families, sports clubs, stamp collectors and what have you, to reach out to the Greek counterparts that they have been in touch with over the last years.

The message to them could be one of human and moral support, outlining that both the Greek people and the European people are stuck with politicians that sometimes don't do their job right. In Greece they frauded a bit too much and in Europe they are just too populist and lack the leadership to stand up for the euro now. But if we look underneath it all, there is only one thing to do: support the Greek, sympathize with their situation and encourage/support them to make the best of it.

May 30, 2011: some background on the Wilders trial and the developments here in the Netherlands

In this blog post I will try to summarize what happens here in the Netherlands with the criminal case against Geert Wilders. Some very good descriptions in English of the days in the trial can be found at the Klein Verzet Blog. And I contributed a number of reviews and observations myself (in Dutch here) on the more recent trial days.

Wilders in footsteps of Fortuijn: populist and anti-Islam
Starting with Wilders, as a successor to Fortuyn. Wilders is active in politics since the 1990s, then for the liberal party, VVD. He witnessed how Pim Fortuyn succeeded in rallying and mobilizing the disgruntled parts of our people that found that there was too much political attention and care for newcomers/immigrants and that the original Dutch people were being forgotten. As a result, Pim Fortuijn got a significant number of votes but he was not going to live his success as he was killed by a left wing activist. And truth be told, before that happened, some of our politicians were quite keen (and too quick on their feet) to compare Fortuijn and his movement to the developments in the depression times (1930s, running up to the war). This is when the word 'demonizing' came into existence and the impression occurred that the death of Fortuijn was due to the consequent demonizing of Fortuijn by left wing politicians.

Wilders observed Fortuijn and decided to step in his footsteps. And the Al-Qaida attacks since 2001 (as well as the killing of Theo van Gogh, a Dutch filmmaker by a radical Muslim) helped him to play a fear card about Muslims and the Islam. Wilders philosophy is that the Islam is an inherent violent and suppressive ideology and that not only the Muslims are bound to conform to the inhuman/uncivilized rules of the Islam, but all people. Thus, the Islam is the vehicle with which a political war is being fought and we should all recognize this invasion and stop it. He wants the end to the 'cuddling of minority groups' that in his view has gone over the top here in the Netherlands. He wishes that all incoming foreigners should adapt and integrate with the Netherlands and he wants the politics to return to the public again and thus plays the anti-elitist card.

Setting up his own party: he is his own king
Wilders soon found out that his own party, VVD, did not agree with his populist views, so he founded a Group Wilders, and went for political success alone. He founded a party, but chose to circumvent the official rules in a 'smart' way. He founded a party movement where he himself is the only member (chairman, treasurer, secretary, member) of the PVV-association as our election law prescribes that all participating parties in elections should be an association. Thus, Wilders avoided all kinds of trouble with members of his party association wishing to steer his politics. He is himself the king and the party at the same time. And he uses a foundation to gather funds for his political movement. And indeed, this has all the looks of a narcissist

One of the key trademarks of Wilders is that he never wishes to engage in a real discussion. He is very verbal, very able to make cunning and smart remarks in parliament and thus win the hearts of people who think that politics is about saying openly how much you dislike others (other than trying to engage in constructive choices for the country). And he is keen to jump from the one environment (parliament, press, science, court of law) to the other while ignoring the implicit game rules of those environments. So he mistakes the court (where the question is not what is the truth, but does one abide by the rules) for science. He mistakes and uses science (where there is never certainty and always doubt) as the tool to declare that his Islam-vision is the one and only correct one. He uses the media to send out and reinforce his political messages to the public (and to throw in denigrating statements about the Islam and those who follow it). And in parliament he chooses at times to walk out (rather than try and debate about differences of opinion) so that his followers will applaud him, while MPs are annoyed.

Wilders is very verbal and very able to maneuver about. Dutch politicians find it very hard to position themselves against him. So where his idea is that Muslim people should leave the Netherlands, he chose to use the word/abstraction: islamisation to discuss the desired emigration. All people in the Netherlands instinctively understand what he means, but he seldom says it straightforward. The consequence is that it is very hard to pin him down on where his statements are discriminating, racist or hate speech. While he does undoubtedly bring such a message across, as you can see by watching his film Fitna.

As far as his personal life and personality is concerned. Wilders lives under permanent security rules, given possible attacks by radical political adversaries. And we have seen an analysis in a Dutch opinion paper that his trauma is essentially of a postcolonial revanchist nature. Wilders is part of minority himself: the minority of Indonesian immigrants who came to the Netherlands after the second world war. And as this group was forced to assimilate (and assimilated itself due to their cultural background) it may have been the case that this has struck Wilders deeply in his youth. And witnessing that later immigrants were being cuddled more than he/his family was, it is argued that Wilders wishes to impose on them what was 'done to himself'. So the young man that used to be bullied now becomes the bully.

The criminal case against Wilders
Whereas Wilders is a hard act to catch, his public speech at times is discriminating and implying that Muslims are non-humans ('they reproduce like rabbits'). And he creates an atmosphere in which discrimination and rudeness (even in our parliament) becomes the norm rather than the exception. Quite a number of people in the public, as well as organizations that represent Muslims or other minorities have thus complained about some of his public remarks, stating that is was inciting to discrimination and hate speech.

Yet, the prosecutors here in the Netherlands at first did not want to take up these complaints. So the complainants appealed, which lead the legal court in Amsterdam to order the Public Prosecutor to start a criminal case against Wilders. Wilders at first wanted the best criminal lawyers, Anker&Anker. In response to Wilders request to make a public carnival out of the trial, they informed Wilders that hiring them would mean: 'no publicity during the trial', Wilders left them and chose to hire Mosckowicz, a lawyer that is often in the media (perhaps even more than in court). This is of course in line with his strategy to always play his political game simultaneously in public, parliament, media and court.

The trial started last year, with Wilders often remarking that it was a political trial. Exploiting the publicity. And there were some legal and procedural mishaps, with made it possible for his lawyer to send the first Judges back home (it turned out that one judge of the Amsterdam court had been present and possibly influenced a witness of the Wilders-trial during a dinner, a couple of days before the trial-date). So all the proceedings had to wait and a new court with new judges was assembled and assigned. But at that point, we already witnessed something very particular. The Prosecutor effectively did not want to prosecute and demanded acquittal on all counts of the criminal case. In doing so, the Prosecutor messes up the due process that we need in the court.

An interesting thing that also occurred during the trial is that civilians and complainants may join in the criminal proceedings so that they can be granted a compensation for damage. And most of them ask a sum of 1 euro. But the group of complainants is quite diverse. There are some solid legal arguments put forward by some lawyers, while the rest of the complainants acts in a personal manner. Which may feel good for them, but is not legally relevant. Yet, this varied bunch does create an image in which the trial doesn't seem to be important/true/real. So it helps Wilders to frame the trial as a 'fake trial' in which judges protect each other.

What I find interesting during all the proceedings is that Wilders is using very much the freedom of speech argument to be able to say what he wants. And he says that 'the lights will go out in Europe' if he is convicted. Thus stating that freedom of speech is more important than any other human right. The argument is used in an opportunistic way however, because since then, we have witnessed Wilders and his party limiting the freedom of speech of all those that were against them. So the image of Wilders as the proclaimer of freedom of speech has bleached considerably.

What is remarkable as well, is that the trial is essentially a clash of the two fundamental human rights that nation states should seek to protect/enact. One is the freedom of speech but the other is a prohibition of discrimination/hate speech. Both of course have an effect on the quality of democracy. And the essence of the trial is that these two human rights need to be protected/enacted in a balanced way. And the trial demonstrates, in my view, that Wilders is only executing his fundamental rights and does not wish to abide with the obligation (not to discriminate). And with the people in the Netherlands in flux about the statements of Wilders, I think the court of Amsterdam has chosen wisely to order the Prosecution of Wilders. Only such a prosecution and court case will make it clear if Wilders has crossed a line, or not. And the facts and material at hand, is sufficiently substantial to do so. Again I would encourage the readers to have a look at the film Fitna.

Current state of things in the trial (May 30, 2011): rushing it too much
As promised, the lawyer of Wilders has made it a carnival. Rebutting/challenging also the second set of judges. Declaring that the case should not start ('niet-ontvankelijk) and so on. But all that was brushed aside and the court was considered independent to continue. Also, the court listened to some extra witnesses to discover that whatever happened at the dinner (before the first trial) was not legally relevant to the case (although the court considered it very unwise of the judge to be present at the dinner). So last week, we finally started.

On Monday, the court summarized the case, presented the facts, and also outlined some international relevant law, including  considerations on the European legal framework. At last, we were now dealing with the facts.  And to me it became clear that the choice to prosecute is very fundamental and important. This is an important court case that will determine the extent to which freedom of speech can be exercised, until it turns into discrimination or inciting hate.

On Wednesday we could witness the Prosecutor, not prosecuting but effectively defending Wilders. The Prosecutor used an intermediary test to determine if what Wilders said or published wash criminal or not. The test was whether the statement was intrinsically divisive and conflictual in nature. Yet, all statements and context discussed lead the Prosecutor to conclude that acquittal was the only conclusion. In doing so, the Prosecutor rebelled against the court that had ordered the law suit. And they now made it more difficult for the court itself as well as for the civilians that wish to file compensation claims in this criminal case. Any soccer game requires two teams. And by siding with Wilders, the flow of justice (and exchange of arguments and counter arguments) is not guaranteed.

On Friday the civilians that complained could substantiate their compensation claims. But, they weren't allowed to comment on the case itself. This led to a strange situation where one lawyer, Prakken, outlined that the basis for the claim constituted a different reasoning than that of the Prosecutor. The judges were, after being incited by Mosckowicz, keen to alert her to stay within bounds, but she held her ground properly. And stated that the prohibition against incitement does not build on discrimination but is a separate human value that deserves protection by and through its essential nature. In my view a very convincing argument, and better at times than the flawed vision of the Prosecutor.

The overall impression that I was left with, on Friday, was one of a rush. Having watched the proceedings via Internet, it became clear to me that the judges want the case to be done with. And that is a bit unsatisfactory, as it is an essential case and theme. And with a prosecutor that does not prosecute, the court judges are burdened with the obligation to determine themselves if or not they agree with the prosecution arguments.

And today we're back on Monday (30th of May). Wilders lawyer, Moszkowicz, of course compliments the Prosecutor for a solid piece of work. Thus creating a setting in which Prosecutor and defendant agree, and making it hard for the Court to disagree and condemn Wilders. The first bits of the argument by Moszkowicz were a recollection of the strange proceedings until so far. And as we speak, he is still throwing all kinds of arguments. And what struck me in his arguments, is that he is effectively responding to all kinds of arguments, but never developing his own line of thought. And least of all is his recognition of the fact that two fundamental democratic values are at stake here. Which is perhaps what one can expect from a defending lawyer, but it still creates an uncanny setting.

Last words by Wilders
As is the custom, Wilders has had the last word in his first instance of the trial. He immediately used it to make political statements. And in doing so, he provided evidence to the court that he will use any instance to voice his vision (which is exactly one of the elements of hate speech: the repetitive and consequent manner in which a suspect incites to hatred and unjustified discrimination). And I am confident that we will see some of this in a few moments, when again he will be offered the opportunity to make a statement.

Whereto from here?
In my view, the prosecutor has not done sufficient effort to make the criminal case against Wilders. There is a lot of material in which there are clear signs of Wilders' hate speech and demonizing of the Islam (and implicitly all followers/believers). Yet we haven't come round to properly discussing it in this case. And in this very important case for our democracy we are now faced with a court that wishes to speed things up. I am not confident that this is the best way forward.

If I look at the replies/reactions on Twitter during the case, I can see a lot of harsh and rude comments, some of those outright violent. While it would not be fair to argue that Wilders is the cause of all these arguments, he has indeed been creating (and thus legitimizing) a climate for such comments and visions. Also he is providing a bad example by continuing his denigrating talk with respect to Muslim people (calling them 'cattle that votes' in Parliament). And while it is up to the MP's to correct him in Parliament, it is also up to the Dutch courts to determine if he's gone too far in inciting hate.

So, it is only too bad that we may be rushing this trial forward where it might be better - both for us and for our democracy here - to take our time to properly consider pros and cons.


[Update... June 2, 2011: I returned home yesterday to discover that Geert Wilders mentioned Johan de Witt in court on June 1, during his trial. He mentioned de Witt in his plea for freedom and tried to model himself after my example. That inspired me to write him a letter in which I lecture him on fundamental rights, democracy and so on. That letter is too Dutch to translate, but my response essentially was that Wilders poses as a member of parliament but he does not act responsibly like one. Leading to the conclusion that: an ape 's an ape, a varlet 's a varlet, tho' they be clad in silk or scarlet.]

Appointing the new President and two directors of our central bank: butterfingered fiddling with an aftertaste of sprouts...

Well, the dust has now settled in the Netherlands on the announcements with respect to the new President and directors of our central bank: De Nederlandsche Bank (DNB). It is clear that our Minister of Finance, de Jager, has appointed one of his own top-managers, Klaas Knot, as the next President of DNB, to succeed Nout Wellink. And Jan Sijbrand (former NIBC and ABN AMRO), is to become the Executive Director in charge of Supervision. And as a result of the clumsy process, one of the internal DNB-candidates, Lex Hoogduin, who was proposed/favoured by the Supervisory Board, drew his conclusions and decided to leave. So what we can also read in the press release of DNB is that a third new appointment is announced: that of Frank Eldersohn, who will be Executive Director in charge of the 'internal operations'; the day to day functioning in organisational/HR terms.

Let's review this appointment process from a distance, drawing on the numerous reports and bits of work that are available with respect to the functioning of DNB, AFM and financial supervision.

First some colours in the background
Traditionally, both DNB and the Authority Financial Markets (AFM) were given quite some leeway in how they organised their business and executed their constitutional supervisory roles. The consequence was that the AFM developed a policeman-style under Chairman Arthur Dokters van Leeuwen. His successor, Hans Hoogervorst, combined this approach with a political savyness and unnecessary PR-agressiveness. Hoogervorst used publicity incidents to hurt banks in their image and bashed the banks into his prescription: an academic frame-of-mind in which consumers are rational, yet deserve paternalistic protection from overcrediting and in which any form of kick-back is to be eliminated in the marketplace. I am afraid that the AFM is going to need quite some years to discover that they were wrong in assuming the consumer rationality and that they will in the end discover that the elimination of kick-backs means that financial advice for consumers has become far too expensive (and thus: out of reach) for the consumers. So through enforcement of their academic yoke, they will eventually make financial advice more costly, cumbersome and less available to the public at large. Similarly, we will find out in about 5 years -when the market has come to a complete standstill- that they have been beating to loud on the mortgages drum.

Now for DNB. While the AFM is noisily supervising the banks, DNB kept up their appearences in their old-fashioned supervisory stile in which banks are invited over for a cup of tea to discuss business. Whereas AFM was showing too much teeth, DNB showed too little. And that had an effect on the cooperation between the policing AFM and the ever-so-polite DNB. And then DNB got traumatized in 2006, by the failure of Bank van der Hoop. From that moment on, all things in DNB-life became legal. External advisors advised on each step of supervision, thus paralyzing DNB. DNB became afraid to move at all and also got stuck under the spell of Wellink. Wellink was in the Board since 1983 and had arrived at his second 7-year term. Which is impractical, as it is impossible to organise the required internal criticism and openness for such a long period. It just doesn't work as we can see from the examples of Kohl, Thatcher and Lubbers. As a consequence, the oil-tanker DNB was not able to respond promptly and properly in discussions on the ABN AMRO take-over, the failing of Icesave and the demise of DSB. Our readers should note however that it is not so helpful for the central bank to be surrounded by inconsistent and populist claptrap on complex banking issues. But that's all part of the game, so as a President you have to be able to handle that as well.

Our Ministry of Finance meanwhile lacked all vision on how to organise financial supervision. And I know this sounds harsh and crude, but it is a simple fact. Our independent Court of Auditors reported their amazement about the fact and the response of our Ministry was: our supervisory policy is embedded in the Law on Financial Supervision (WFT in Dutch). Well, the connoisseurs of that law will shrug their shoulders, smiling politely. Because the WFT is a beautiful, idealistic legal project that had the potentially to become a great legal structure for the financial sector, also through the nuanced use of open standards. In practice, however, every chapter of the WFT-law was introduced in a hurry so at present there is literally no understanding it any more. If we would consider the WFT to be a computer-application, it would be immediately classified as a spaghetti-bomb and a threat to business-continuity, requiring a comprehensive revamp and structural re-engineering.

Equally important is the fact that in the late nineties the internal organization of Finance was overturned. While the former Ministry would have a department dealing with the financial sector as such, the new departments were split up on the basis of regulatory aspects such as: stability, market conduct, generally and so on. This led to less visibility and understanding of the impact of legislative changes for the sector as such. Thus, the sector was facing a Ministry that looked like a conveyor belt pushing out partial amendments.

Change, but how?
It is clear that the above institutional and supervisory framework is not sufficiently apt to deal with large market shocks and changes. And it is not surprising that the various players in the field reflected on the best way forward. So there were reports of what had happened on DNB's supervision (report Scheltema). Politicians came up with an examination (de Wit), largely a rehashing of international reports. The banks founded a Maas Committee that emphasized in the final report the importance of good governance, stronger risk management and a more integrated assessment of societal interests. And the Ministry of Finance started thinking about a supervisory policy version 0.1 or 1.0.

What surprised me was how the discussion on the desired culture-change at DNB took place. This followed from the report Scheltema, but everyone could know that for such a change to have effect, it is necessary to embed it in a good institutional structure and to be supported and spearheaded by a good leader: the President himself. I looked with increasing astonishment at the senseless rush that was displayed by all actors in the play. Within one month an implementation plan for cultural change should be made. And while DNB met this request of parliament without complaint, it goes without saying that this will have absolutely no effect whatsoever. Because the President, spearheading the change, was going to be replaced in a years time.

While in the Netherlands we were discussing and pondering the above, our Government fell apart in February 2010, which meant that no ravishing or fundamental changes could be expected. Still, it appeared that our Ministry of Finance had decided that their links to supervisors AFM and DNB should be strengthened. So they colluded with Members of Parliament to obtain the discretion to guide and demand action from supervisors (without the realization that the WFT does not really allow them such an action). Furthermore, the Minister of Finance quickly said he was changing the appointment rules for Presidents to a maximum of one re-election. In doing so he inelegantly and unnecessarily bruised Wellink. And our Minister became more responsible for the succession planning at DNB, which requires a forward-looking approach.

The appointment process of the President and directors of the Dutch central bank (DNB)
What I noticed last year is that the tone of voice and the noise-level of publicity by the AFM appeared to decrease, already while Hoogervorst was still running the AFM. The penalties for banks were lower and the public reactions of banks with respect to the behavior of the AFM were milder. Hoogervorst was sent on (or perhaps: off) to his beloved international work. And at the same time the Ministry of Finance appointed his Treasurer, Ronald Gerritsen as the new Chairman at the AFM. Which brings the Ministry of Finance closer to the fire. 

As for DNB, there is of course the weekly lunch-meeting de Jager and Wellink. I imagine that early-on they discussed how to organise the succession. And it must have been obvious that Hoogduin was the intended successor, as such a preference (of the Supervisory Board) doesn’t suddenly fall from a blue sky down. Yet, both Wellink and De Jager will have noted that Hoogduin had little track record in Bank Supervision. And my idea is that the Ministry of Finance proposed a division of responsibilities between supervisory and monetary policy, so that Hoogduin could be appointed as new president of DNB. And that part of the succession planning proceeded nicely: Parliament agreed with the idea and we moved on.

But then, in May things suddenly went wrong. The discussion on succession hit the streets, the public and parliament. This surprised me, but also allowed me a moment to share my views on my preference. But the Members of Parliament did not want Hoogduin to be the next DNB-President as he was no outsider and could thus not be the one to spearhead the culture change at DNB. And then, one of the three candidates, Kremers, also stepped out of the race. To him, the Supervisory Board of DNB was unable to outline clearly what his position would be (no doubt this was a discussion on the relationship between the President and the almost independent director of Bank Supervision at the DNB).

What struck me was that we were very much running out of time. It was May, while we needed a President as of July. And you don’t want to be choosing your next central bank President in such a time-squeeze (it seems that shows such as Idols and X-factor even use more time to pick their winner). Anyway, we went through somewhat indistinct and misty weeks, to find out that one of the other top officials of Finance, Knot (who has a DNB-ring to him as he worked their for many years) will become our next President at DNB. With former Crown-prince Hoogduin choosing to leave, because he undoubtedly envisaged his future to be different than it now had become.

The net effect of all this fiddling: there are suddenly two new directors and a new President at DNB as of July 1, 2011. And do note that Klaas Knot is not really an outsider. He originally worked for the Insurance Supervisor and had a quick career at DNB for some 10 years. He became the right-hand advisor of Wellink in his international meetings/work. And a number of years ago he was appointed as a top-civil servant at the Ministry of Finance, possibly as part of a master plan in which Wellink arranged his long-term succession (or simply just took good care of the career of his closest advisor). Now, with the butterfingered public discussion on the succession and role of Hoogduin underway, the choice for Klaas Knot was advanced in time (he might have been on the schedule to succeed Hoogduin). And my guess is that the lack of enthousiasm of Knot for internal and organisational matters may have led him to outline that he didn’t wish to take up the ‘internal affairs’ portfolio of Hoogduin as a part of his role of President.

What struck me is that perhaps Kees van Dijkhuizen and Nout Wellink may have still played important roles behind the curtains. The new director supervision of DNB is currently working for NIBC, (the same bank where van Dijkhuizen is CFO). So both Wellink and van Dijkhuizen, may have each supported their trusted candidates/protegees in view of their qualities. And those qualities certainly do not need to be questioned as the competences of both Knot and Sijbrand speak for themselves.

What I do have a concern about, is that the new management at DNB may get a structure that was focused on the old idea of Hoogduin as the new President. And there now is a separation of the domain of internal affairs and organisation (Eldersohn), Bank Supervision (Sijbrand) and general management and monetary affairs (the President). If the DNB-improvement for the future lies in a cultural change, it is clear that this requires leadership from the future President. But that President is not directly responsible; his two Directors are. And that is a rather unfortunate organizational setting. Furthermore, Knot may not be willing to tighten the knots for his old colleagues when doing the cultural/organisation change. Nevertheless, with sufficient quality, coordination and perhaps a good fresh breeze in the organisation as a result of the new Director Supervision, we should just hope for the best.

Incidentally, I should also mention that the Supervisory Board has not made any statement at all. It appears to me that the unhealthy intervention of the Ministry of Finance with respect to the succession of the President (not a minor job) does not bode well for the future. And this is the same Ministry that formally provides the Supervisory Board with very strong powers in the future. In my view, it is strange to have a Ministry doing your job as the Supervisory Board, so I am amazed that none of them respond or resign. It’s a stunning silence that we can witness, which seems to imply that the Supervisory Board Members rather stick to the status and prestige of being the DNB-Supervisory Board Member than to the content of their job: ensure proper governance at DNB.

Conclusion: butterfingered fiddling with an aftertaste of sprouts...
If we look at the importance of proper supervision and a good central bank in a country, we must realize that DNB is a central element of the most vital (financial) infrastructure in the Netherlands. And that means we must do our utmost best to maintain this infrastructure and to ensure that is and will be functioning properly. I am therefore quite surprised about:
- the lack of debate on financial supervision and resulting institutional structure (the right for a Minister to mandate specific action to the Supervisor is absolutely undesirable),
- the faulty structure imposed on DNB (the split of responsibilities between supervisory director and president, the unworkable role for the Supervisory Board)
- the stunning silence that from the Supervisory Board, now that their preferred candidate has not been chosen and decided to leave,
- the outright poor planning, timing and limited secrecy surrounding the reappointment process. The fact that the process became public domain didn’t do anyone good and was quite awkward to observe, leaving some of the people involved with a bit of a stain on their image.

We can conclude that we have now effectively already built in the core structural weaknesses that will give rise to future incidents with respect to DNB and Bank Supervision. It's all quite embarassing given that the essence of government is planning and designing ahead in order to prevent incidents and structural weaknesses, rather than to ensure them.

For now I am left with a sense of shame about how we have executed this succession planning process in the Netherlands. If my English vocabulary and Google Translate are correct I could qualify this as a major bit of butterfingered fiddling that leaves an aftertaste of our beloved Dutch sprouts. It makes me realize that the Netherlands is too small in size and population to be able to achieve the proper professional levels necessary that suit a mature democracy and financial market. That is a bit depressing, but that’s the way it is.

Of course the biggest role of the Netherlands in the financial world stems from the Golden Age. And since then we were in decline until former President Vissering lifted us up by his international stature and authority. Similarly, Duisenberg was special and President Wellink has done an incredible good job (although in the end hindered by a monoculture within his own organization). But alas, if we continue conducting ourselves the way we have been doing recently, we can be certain to slide away into a pragmatist way of doing that certainly does not justify a place at the international financial conference tables.

With only ourselves to blame for that.

Dutch coalition has to lean on PVV and SGP for support of government...

Today was the day that the Dutch Members of the Provinces voted for the Members of the First (Upper) Chamber of Parliament. Traditionally this is called the 'reflection' Chamber, because it is not so much a political arena as the Second Chamber. It's role is, traditionally, to ensure quality of rules, rule-making and check the fundamentals of law. Only on occasion do the discussions in the First Chamber lead to parliamentary crises.

Well, as you can read here, it turned out that the current minority-coalition of VVD and CDA has failed to win an outright majority of seats in the upper house of parliament, or senate, according to the latest prognosis from Nos television. Even when combined with the PVV, the result is a mere 37 seats, which means that the coalition alliance (VVD, CDA and PVV) is still one seat short as the Chamber has 75-seat Members.The SGP has publicly stated however, that it will tend to support the coalition. And their support was of course much helped by the withdrawal of support (by VVD) for legislation which lifts the ban on blasphemy.

As a result, Prime Minister Mark Rutte is now facing the most serious balancing act since a long time. Rutte needs the support of PVV in the Second Chamber (Lower House) and needs the PVV for that.  Meaning he has to side with a party with strong anti-islam sentiments, that wishes Greece to step out of the euro and so on. And in the First Chamber (Upper House) he sides with the SGP, that has the political position that women should not be active in politics (and should focus on their maternal tasks primarily). And this is quite a combination... leading us in the Netherlands into ad-hocracy territory, due to the minority character of our governing coalition. And we haven't had situations before in which each government issue/thema had to be battled for independently in the Chambers. So we're up for some Realpolitik here in the Netherlands.

We should note however that this outcome is essentially doing proper justice to the outcome of the elections for the Upper and Lower House here. The Dutch were strongly divided, which resulted in a situation where it was no longer clear how to form a majority-coalition. So the voters have condemned the politicians to cooperation, despite their strong differences of opinion (and sometimes unagreeable manners or political views on other subjects). And it remains to be seen if this will be accompanied with proper conduct in the Houses of Parliament or whether we will see more name-calling and pub-talk. So the end result is that the voters have gotten what they represented: a divided caretaker government that will steer on a day-to-day basis, and will be unable to steer on long-term policy goals or to achieve fundamental changes.

I am curious to see if our Prime Minister, Mark Rutte, will succeed in his balancing act. Time will tell.

Will history repeat itself....?

One of these days I was wondering if we weren't heading towards a similar situation as in the run-up to the crisis. A prolongued period of low interest rates. Asset bubbles. Tech-stock and IPO's all over the place. And so on. And I recalled that one of the earlier FSF-reports had some good lines on that matter. The Report on Market and Institutional Resilience in April 2008 noted:

The turmoil in the most advanced financial markets that started in the summer of 2007 was the culmination of an exceptional boom in credit growth and leverage in the financial system. This boom was fed by a long period of benign economic and financial conditions, including historically low real interest rates and abundant liquidity, which increased the amount of risk and leverage that borrowers, investors and intermediaries were willing to take on, and by a wave of financial innovation, which expanded the system’s capacity to generate credit assets and leverage but outpaced its capacity to manage the associated risks.

What I found interesting in the aftermath of the report and its follow up, is that most attention focused on what banks, supervisors could do, but that central banks were kept out of the discussion and follow up. While the man in the street started taking up all the technical discussions in the report (on perverse renumeration inventives, capital buffers, securitisation that got out of hand, US housing market deficiencies), the role of central banks never made it to the spotlight of political discussion. Yet, it is clear that the central banks, providing easy money, played a very important part (as recognized by the words: including historically low interest rates).

And now, three years down the line, we have all fastened seatbelts with all kinds of regulations for banks, against short selling, increased buffers for Basel, risk tax for systemic institutions, new liquidity frameworks, harsher credit rating agencies and so on. But central banks maintain low policy rates that got us here in the first place.... so that makes me wonder: will history repeat itself?

We will soon find out.