5 first insights to understand why populism is not on the way out in the Netherlands

Hello all foreign readers,

It seems as if our supertiny country has attracted quite some attention these days as all eyes were focused towards the main question: will a wave of populism change Europe? And although on the surface the answer seems a clear NO, there is more to the results than meets the eye.

In my humble opinion, the current results of the Dutch exit-poll show how populism and clientelism have become more prominent here, as in all other countries around the world. So mind you: in the Netherlands we're still moving to less democracy and more populism.

This will be clear after the reading the insights below. But do note that these are based on the exit-polls and not the final vote.

Insight # 1: Dutch voters have learnt their lesson, punished government and no longer voted strategic
What we can see is that both VVD (-10) and PvdA (-20) have been punished for their role in the preceding government. During the last elections, many citizens voted strategically and shifted their votes from their original parties to either VVD (right) or PvdA (left) to avoid the other party to become the biggest.

Yet through a strange turn of events and due to the anxious hunger for power, VVD and PvdA decided to work together. They compromised on fundamental party principles in order to be in power. As such they both disappointed the strategic voters and their party fanatics who assumed that it was unlikely that these two would work together with the enemy, even without additional parties.

PvdA and VVD formed an alliance that was based on very limited support and did not have a majority in the Senate. When started it was clear that they would focus on one thing only: surviving as a government out of fear that in-between elections would lead to a massive victory for PVV.

The first lesson in todays outcome in the Netherlands is that strategic voters have learnt that strategic voting does not pay. In addition, die hard party fans of both PvdA and VVD did not accept the fact that their party was sleeping with the enemy. So first and foremost, both parties are punished for quickly seeking power with the dark side. And the strategic voters have decided not to do this again but vote for their principles.

Insight #2: Dutch are more populist than before, but they come in different clothing
Whereas it looks as if the regular party VVD (31 seats) is the biggest with runners up CDA (19), D66 (19) and PVV (19), we should note that the only non-populist party in this row is D66. Both VVD and CDA made a sharp right turn by taking PVV-like positions on immigration and such.

With this in mind, I think it would be fair to say that effectively we had at least three rightish populist parties on the scene, who together assembled 69 out of 150 seats. This used to be 56 seats (for VVD and PVV) in the previous elections.

On top of that we can see that, even though parties all declared that right-wing PVV would not be invited for government roles (given their unreliable stance some years ago), the parties has won some 4 seats.

Right now, this election evening, most people and foreign media are misstaking the wood for the trees by concluding that the low amount of seats for PVV is a signal that the battle agains populism has been won in the Netherlands. It is with much regret that I need to conclude otherwise: the existing parties have adopted the populism and it is more widespread than before.

Insight #3: Fact free politics are also on the rise in the Netherlands
All over the world we are witnessing new 'leaders' or political activists who don't care about truth but focus on convincing the public by playing on their emotion. They don't provide solutions to real life problems, but are able to amass considerable support, either from within existing parties or as a new political party.

It's the same here. We have narcistic old and new players with a lot of noise, but no true consistent content coming into play from different angles. Among these are the party for elderly, forum for democracy, THINK and PVV. From a number of 15 seats in 2012, these are now expected to gain 28 seats.

Insight #4: Turkish incident helped both VVD and DENK with some extra seats
This weekend, just before the elections, the Dutch and Turkish government ended up in a diplomatic row over unwanted visitors to the Netherlands. This allowed prime minister Rutte (VVD) to pose as a leader, thus winning some seats, while DENK (representing Turkish interests in the Netherlands) avoided to enter the debate. Their existence did allow the irritated Turkish/Dutch citizens to voice their anger on the discrimination that they experience in the Netherlands.

One could compare this to the situation with Eurosongfestivals, where the immigrant population in the Netherlands and Germany have a big vote/say in influencing the Dutch end result.

Insight #5: Better economy allows for a more positive stance
With the economy starting to gear up slowly, there is more room for a positive outlook and progressive choices. Both GL (Greenleft) and D66 (liberals) spreaded a positive message and succeeded in regaining their strategic voters from the PvdA while adding some new ones. Therefore their results improved from 4 to 16 (GreenLeft) and from 12 to 19 (D66).

So did we stop populism and clientelism here in the Netherlands?
While many here in the Netherlands are strongly hoping that our election message to Europe and the world is that populism has been put on hold here, I am afraid that conclusion is not justified. Some of the mainstream parties have adopted the populist positions of PVV, including some measures that are in conflict with treaties and basic human rights. Meanwhile the PVV has still grown and some smaller parties popped up that are more in the personal interest of the party leaders themselves than for the public.

My conclusion is therefore that populism and clientelism is still with us, even stronger than before. Due to its absorption in main stream politics and the specific Dutch electoral landscape outsiders, may be less able to identify this. But I would not be surprised if in other jurisdictions, with other electoral constellations, the trend of populisms and clientelism (Fillon) remains the main trend, just as it is here.

So, the Netherlands may have appeared to have stopped populism, but mind you, we didn't!

Dutch government deeply involved in illusionary budgets and politics (just like the bankers)

In my previous post, one year ago, I outlined that it would be possible that with the PvdA at the helm, the Dutch politics would enter a time of less populist talk and more stability. Boy, was I wrong about that. What happened here in the Netherlands is that the elections turned into a shoot-out between right wing VVD and left wing PvdA. All votes sucked into a battle where right wing voters chose VVD to prevent the PvdA from becoming too big and vice versa.

The end result was that PvdA and VVD both became very big and have a majority in the House of Representatives (Tweede Kamer) but not in the Senate (Eerste Kamer). Rather than seeking a bigger coalition, the two leaders: Rutte (VVD) and Samsom (PvdA) chose to develop a government policy plan within a brief period of time, with very few consultations. This didn't work well for a number of reasons.

It turned out that VVD and PvdA had compromised on important positions by using some simple cards. The result was that the VVD agreed to a very strong income adjustment whereby high income earners would significantly pay more tax than before. This was a PvdA desire that was one bridge too far. After a lot of hassle, the plan was revoked. But it showed the core of the problem: the agreed package of compromises between PvdA and VVD hadn't been thought through sufficiently. This was enough for me to coin their policies: Illusion policies.

Where are we now?
Right now, we are almost one year underway and it seems that the prime Minister has taken aboard some of the criticism that all the government plans were made without sufficient backing in society. As a result he is now setting up deals on healthcare, prison-policy and so on. The number of deals ('akkoorden') is immense and each changes a bit in the start policy of the government. One of the involved social partners at some point in time said: 'I'm getting a bit of tired from al these deals'.

But there is a bigger problem here in the Netherlands. In an effort to fullfil the EU criteria, our government is trying hard to cut expenses. It does so however, without making fundamental choices. It tries to avoid some of the hot issues, such as deductibility of mortgage interest. The reason for this is that ever since the death of Fortuyn, our politicians are scared to lose their votes to the populistic players that promise a lot but cannot deliver a consistent policy (see my previous post).

Meanwhile the public is smart enough to recognize that things aren't going well and they revert to an old Dutch quality and habit: save money, stop spending. Because in this political climate it is quite likely that even if you don't expect it, some sort of measure may affect your personal budget. Until revoked or replaced by an adapted plan or deal.

Much of the macro economic debate focuses on the housing and mortgage market as politicians believe that in this area the solution of the crisis can be found. The paradox here is that polls show that the Dutch public assumes the interest deductibility to disappear and understands that that is necessary. But this government doesn't want to do that and reverts to additional measures to fix the market (a government guaranteed mortgage fund being the latest plan). While in itself useful it keeps consumers in uncertainty as to when the deductibility will be abolished.

Illusionary cuts and budget
We should also note that significant part of the budget cuts of this government only exist on paper. The idea that it is possible to delegate central government task to municipalities while reducing the expenditure with many billions is unreal. It allows the government to book a reduction while municipalities will be blamed afterwards for not achieving their targets.

A similar illusionist trick is done with the government financial assistance (for childcare, raising kids, housing). By reorganising the existing range of reglementations and procedures into 1, it is expected to save us some other billions.  Quite unlikely given the bad track record of the government and tax department in automation and procedural change.

Essentially we have thus sent a paper tiger to Brussels stating that we achieve our budget goals, but we will undoubtedly be in for some surprises. Our government is living on borrowed time, hoping that the other countries pull us out of the mud (which might work as we are an open community, earning in the slipstream of Germany). And it would be a wrong idea to see a role for the ECB here. The ECB can't of course solve the deficiencies and absence of our political statesmanship with monetary instruments.

What do the Dutch think of all this?
In my view, those of us who suffer from the budget cuts do tend to align with the populist parties at the left and right side of the spectrum. Other than that we maybe more mature than the politicians assume. Mortgages are being repaid and there is an understanding that we all need to pay our fair share. But the problem is that the political debate is not about fair shares but about finding easy and quick wins in order not to lose votes. There is a longing for stability and trustworthiness which our politicians are unable to provide.

In analogy with the banking sector: the incentive structure for politicians is skewed towards the short term just as heavily as it was in the banking domain. While in the bank domain this is now being corrected, the politicians lack the self-reflection to apply similar lessons to themselves. The result is that the general trust in politicians is getting steadily lower.

Meanwhile the Dutch draw their own conclusions: stop spending, start saving until the outlook improves and becomes more predictable. Unlocking this spending stop will not just require certainty on the mortgage market. It requires more stability and fairness from politicians, but they are too busy going for votes, to notice that.

In sum: we had our opportunity for a Dutch spring here in the Netherlands, but as in other countries, we let the momentum slip away.

Dutch elections 2012: finally we have our Dutch spring

This fall, the Dutch elections will provide us with something we have all been waiting for: a true Dutch spring. While in the past years our country became a mock of a democracy with too much populist talk and too little true cooperation, we can see that there is change in the air. And I'll try to explain the sequence of events for you: the non-Dutch public.

From Fortuyn to Wilders: enter the populists...
As you know, ten years ago, we had a politician, Fortuyn, who sensed an enormous amount of dissatisfaction of the public with standard-politics and politicians. And he used this intelligently to mobilize the electorate to support his party. For many politicians, his strong emergence came out of nowhere and it was in fact the dawn of a different style of politics. More direct, more populistic and seeking the populist consensus rather than an optimal solution for all the public.

In a twist of history, Fortuyn was murdered. But PM Wilders had been looking closely and chose to emulate Fortuyn with clear and simple statements about Islam, mass-immigration. Essentially he played the classroom-bully for regular politicians, who found it hard to counteract his verbal agility. And in doing so he gained a lot of support. He also found it a good tactic to do some hate-speeching with respect to Islam/moslims but wasn't found guilty. Events in Norway later proved the effect of his hate-speech, but Wilder of course didn't want to take responsibility for infecting a young man's brain with nonsense.

As the 'Freedom Party' of Wilders grew quite big, he could enter into a construction where he helped a minority government rule the country for the past two years. But his party started to crumble from the inside, with some members leaving and explaining the inner workings of the party (Wilders rule is the one and only law). Given that there was no mass immigration of moslims he chose Europe as the new enemy to be used in campaigning. And he set up a notification-site to complain about Eastern European workers. But essentially the paint of his party started to fade and lose its effect.

At the same time, on the far left side, the Socialist Party adopted many of the stylistic elements of Wilders. In true populist style they banged similar drums on issues as Europe (no good), health care (don't touch it) and so on. Given that our Labour party was having too much internal debate due to a too decent leader (Cohen), this far left wing gained a lot of support in polls. The grand power party of the past, the Christian Democrats found themselves being punished once again and discovered that they alienated their constituency considerably by cooperating with Wilders in government.

Wilders breaks up the coalition
This spring, Wilders had to negotiate with the minority government on reforms to ensure that the Netherlands would remain within the 3% deficit criterium. After seven weeks, in which he dropped many of his previous populistic important demands, he suddenly stepped out. And thus, we were heading for new elections. And it is only through the responsible behaviour of five other parties (VVD, CDA, D66, GroenLinks and ChristenUnie) that we managed -in one week - to design and agree on a reform package that would keep us within the 3%

Since then it appeared we would see all the parties banging a populistic drum. Because that is what happened here in the Netherlands. In the last ten years our political debate became quite uncivilized, with name-calling and all kinds of unpoliteness. As such it may have been a reflection of a more general trend in society. Then again, when looking at the deepest desire of the Dutch (we have a government agency doing hefty research into this..: SCP), there was a loud and clear appeal for: less individualism, more respect, more collectivity, more honesty.

Meanwhile, our minority government had grown the habit of not listening to the representative organisations of the citizens. They didn't listen to their formally appointed Counsels of Advice. And they even ignored the negative advice of our Council of State (Raad van State) on legal proposals that were just unfit, undoable or unconstitutional. And thus, over on my Dutch blog, in february this year I wrote a longer blog-posting: Time for a Dutch spring.

The blog post outlines that the Dutch both need and desire a revolt in politics, just as badly as those in other countries of the world (even if we don't think we need it). I pleaded for more balance and more nuance in the political debate. And I hoped for a society where media don't go for the hype and the incident. In sum, the blog outlined that the true Dutch spring is within reach if we all, individually, act resposibly towards each other without letting the economic mantra's getting too much in the way.

Developments in the Dutch election campaign: we respond to decency and honesty !
The essence of what happened here in the Dutch election campaign is that the old populist talk didn't work any more. Citizend could see Wilders doing his usual kinds of populistic stuff, but in the back of our minds they all thought that his previous tough talk turned out to be nothing but a charade. And the same line of thinking was applied to the Socialist Party, at the other end of the politicial spectrum. So far right and far left were losing in the polls.

And while everyone had believed all the debat would be between Socialist Party leader Roemer and Liberal Party leader (and prime Minister) Rutte, a change was happening. Labour Party Leader Samsom chose to not sweet-talk the citizens. He outlined clearly the tough choices to be made (including possible help for a 3rd rescue package for Greece) rather than pretend that no more support would be given. And it is this, more true, nuanced approach that started to resonate. Within a time frame of weeks Samsom suddenly started making up to become just as big as the Labour Party (in the polls).

Rutte, the prime-Minister, made some errors in his campaign, resorting to verbalities rather than seriously answering legitimate questions. In an effort to steer his success he even tried to avoid sitting at the same table in a talk show, with a famous Dutch comedian: Freek de Jonge. The net result was negative however, because the one comedian filling in for Freek, was quite outspoken and well able to counter the verbalities of Rutte with spirited arguments.

Will we have a Dutch spring?
What I think (or perhaps hope) is that the Labour Party has rightly assessed that the public is fed up with the populist talk and scamming that all politicans were resorting to. They chose to position themselves differently than others and chose for honesty and nuance. And it looks as if that approach will get them the majority of votes and the chance to be in the lead for the formation of a new cabinet.

If indeed the PvdA turns out to become the biggest party, then we can rightly state that our election day: September 12, will have marked the beginning of a Dutch spring.

Eurozone troubles.... all originate in a wish to get back to normal?

In the recent days I've read a book by J. Beyen called: 'het spel en de knikkers'. It's a Dutch autobiography describing the life and career of a banker, central banker, former President of the BIS, Executive Director at the IMF, Minister of Foreign Affairs and so on. Beyen was for example one of the important Dutch delegates at the Bretton Woods conference. And his book - in particular the episode on the golden standard - is fascinating.

Golden Standard as the solution or the problem?

Until the First World War, the golden standard had become the de facto monetary norm for governments/countries. It consisted of a set of fixed exchange rates, which meant that local economies sometimes had to suffer, as devaluation was impossible. On the other hand, it allowed for a lot of international trade and stability and was thus praised and adopted. Until the First World War changed a lot and the golden standard was abandoned.

In his book, Beyen describes the major sentiment of policy makers after the First World War. And he calls it the desire to go 'back to normal'. A central theme in this desire was the re-establishment of the Golden Standard. Beyen also describes that monetary thinking at that time wasn't as advanced as in 1968 (when he wrote the book) He sketches that the system of fixed exchange rates in itself burdened the European economies, but policy makers weren't able to see this at the time: obsessed with getting back to normal.

Current flaws in Euroland thinking: still seeking a back to normal?
The musings and discussions all around Europe these days, in particular the new plans on a banking union, fascinate me enormously. The singlemindedness with which politicians now move forward into more Europe, more joint policy, more deposit guarantee may be variations on a similar desire: back to normal. Back to the Europe from before the crisis, using the same policy tools and concepts that we used before the financial and sovereign crisis broke out.

As a result, we are now witnessing policy makers, fully caught up in their goal to save Europe by designing futher institutions and policies.  But, essentially, our politicians and civil servants fail to recognize that the European car doesn't respond any more to twists of the steering wheel. The only thing that has helped (only temporarily) is throwing money at the problem.

Are we missing something here?
While our monetary thinking may evolved quite a bit since the 1930s, our knowledge of policy and strategy making is not as widely and heavily discussed and modeled. In theory we could all be aware of mechanisms such as groupthink, tunnel vision, decision complexity, resource complexity etcetera. But in practice we fail to properly recognize and address the fundamental errors in policy making.

Having read the autobiography of Beyen, I tend to believe that we are now learning new lessons in the Eurozone. And the lessons are not so much related to monetary theories but to international policy making under stress. I therefore hereby propose the concept of policy illusion to be better recognized in the future. It is the understandable tendency of policy makers to continue doing what you were doing all the time, even when the world fundamentally required a different way of looking.

And so we can now see our policy makers making policy by looking so intensely at the rear-view mirror that they will miss the fork in the road ahead.

Dutch magazine finds out that preview of Wilders' book is inaccurate...

Now that Geert Wilders has side-stepped in Dutch politics to become an opposition party, he has more time to promote his upcoming book, which will be published in the US. And it will of course be full of his ideology: how the islam is terrorising the West, how he is the victim and what we all should do about it. And a Dutch magazine has been allowed a read through of the book.

The interesting thing that occured is that the Magazine started fact-checking the book. Because somewhere near page 140 (in the Chapter Conquest) Wilders describes how he is being robbed by three Arab youth in his neighbourhood: Canal Island.

The true story however unfolds now in HP Magazine, which checked other books and sources (among which his own brother) to find out that:
- Wilders was attacked from behind and he has never ever seen the attackers,
- he was not in the Canal Island borough when being attacked but a well-to-do neighbourhood.

It's yet another example of how keen he is on living and portraying the world according to his truth.

Wilders stops his support for minority-government of the Netherlands...

The breaking news here in the Netherlands is that Geert Wilders has left the building. And 'the building' is the so-called Catshuis, the seat of our prime-Minister. It is here that, during the past 7 weeks, the VVD (liberals) and CDA (christian-democrats) have negotiated with the PVV (Freedom Party) to agree on further austerity measures. And our prime-Minister Mark Rutte has just explained to the public that the Freedom Party has stopped the negotiations and was no longer willing to take its responsibility for the measures. CDA-delegate Verhagen has mirrored this remark so we can see that the blame-game has now started.

It is interesting to note that this step of Wilders occured only 12 hours after the group was provided with the data of the Dutch Planning Agency that had calculated the impact of the jointly agreed draft austerity-measures. And our foreign readers should also note that Wilders is increasingly losing momentum. Hero Brinkman has left the PVV, a couple of weeks ago. And the quite unelegant bashing of the Queen as well as Turkish official Gül last week, didn't win him a lot of supporters either (he immediately lost 2 seats in the polls).

So now we find ourselves in a tricky situation in the Netherlands: we need austerity measures and we need our government to act. But the support-construction with the Freedom Party have turned the past 2 years into a standstill with no serious economic reforms and lots of symbolic regulatory measures to please the public (and the PVV-voter).  So while everyone in the Netherlands understands the need to reform, it is also clear that it is now time for new elections. The experiment with PVV has failed to work.

Our Prime Minister has of course phoned the Queen but has not resigned yet. He stated that the situation is so serious that he wants to discuss further steps with Parliament. And he leaves open the possibility that there will first be an agreement on government finances and afterwards elections. While some parties will want to follow this pragmatic route, it remains to be seen if the big opposition parties such as the left wing Socialistische Partij and the Partij van de Arbeid are willing to cooperate.

Geert Wilders has also given a press conference, just now, and he specifically blames Europe. He had outlined that he has stepped away, that he no longer supports the minority-government. And he stated that especially the cuts for elderly pensioners formed a serious issue for him.In the press-talk afterwards he repeatedly outlined that he did not wish to comply with the 3% rule of Brussel. So he started blaming Brussels and he started the election game.

It is clear to me that for Wilders, the duration of his cooperation with the minority-government was long enough to gain creditibility as a true states-man. And as he is losing support among the public, as his party starts to crumble, he must have decided that if ever, now is the time to capitalize on his popularity and to try his jump to become the biggest party in the Netherlands. In doing so he demonstrates once more that his major quality does not pertain to leading a party or a state, but is one of walking away from the debate and challenges that are really relevant to the nation.

Silly Geert Wilders seeks attention with anti-eastern European website

This blog is to update and inform the foreign readers about the current status of things here in the Netherlands. And in particular with respect to our narcistic party leader Wilders of the PVV. He has set up a website where complaints can be filed about neighbours from Eastern Europe, when they make too much noise. According to the Freedom Party PVV, the site is a great succes, with 14000 complaints filed on the first day and 40.000 after a week.

It is interesting to note the subsequent debate in the Netherlands (and rest of Europe). First of all, it appears that no one recalculates the data of the PVV. So the silly claim of 14000 in one day (meaning 10 complaints per minute, during 24 hours) goes unchallenged. And the same goes for the claim of 40.000 in one week (4 complaints a minute, during 7 days of non stop operation). Even if the PVV would themselves be filling in the forms on their website (which they did in a previous incident, about traffic incidents in The Hague), they would have a hard time typing it all.

Second, we had this bureau of discrimination, stating quickly that the site of Wilders would not constitute discrimination. Well, it seems to me clear that the site is discriminatory. But foreign readers should note that here in the Netherlands we lost our ability to value and protect human rights. We have had judges here that outlined that Wilders was not doing hatespeech (only to be corrected one month later when Breivik demonstrated that the effect even crossed our borders). And some maintain the fiction that this site is not discriminatory. In doing so, we completely forget our historic heritage (liberty of religion, as stated in the Union of Utrecht in the 16th century) as well as the relevant international guidances on human rights. So our Prime Minister turns a blind eye to the issue.

The reasons for doing so are not illogical by the way. Our Prime-Minister essentially chooses to ignore most of the stupid actions of the Freedom Party and its narcist leader. And in psychological terms that is indeed a correct approach which clearly works. The Freedom party is losing a lot of traction in voting polls with the Socialist Party (SP) gaining a lot. And the effect is so strong that Wilders himself starts showing up in interviews and tv programs. And that is new: he would normally just tweet and never give interviews. So he feels the heat and now seeks to regain influence.

But then again, when the subject involves discrimination, one may think twice when turning the blind eye. Fortunatety we have a lot of creative Dutch people that quickly set up all kinds of websites to hug the Polish, to report all scary PVV-MP's and so on. So foreigner shouldn't take this stuff to seriously; it's certainly isn't the common opinion. See also how our Dutch Commissioner Kroes aptly responded: why not create a website to complain about blonded hair?  So the thing that our Prime-Minister should do is to inform and advise all foreign nations to use a similar approach: just ignore Wilders on this one.

And while I'm tempted to do the same, I figured it might be good to explain this to the foreign readers. So do note that this whole charade is the proverbial 'cornered cat that jumps strangely' (as we say here in the Netherlands).

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...

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.

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.

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.

Shame on the Vatican, Benedictus and Roman Catholic Church for sanctifying Pope John Paul 2 !!

Today is a remarkable day. Most important is of course the fact that this old man started blogging, exactly one year ago, about his suprise. En as from today we will be doing the same in English. But there is quite a bit more that deserves our attention and surprise today.

No, I'm not referring to the 65th birthday party of our leftwing Labour party. Although that event does in itself create an atmosphere of wonder, I will leave the so-called 'left church' to themselves to focus at the one and only Roman Catholic Church. The Pope, Benedictus has managed, in a flurry of self-abuse, to beatify predecessor John Paul II. He chose today in order to beat the Guiness Book of Records which until today had Mother Theresa as the person who became saint the fastest. And that is of course why Benedict wanted to get this done today, so that saint John Paul would beat Mother Theresa with 6 days.

As you can see, I am quite astounded and schocked. We knew of course that the Roman Catholic Church was a church with an unhealthy distinction between what is preached and what is practiced. And that is surprising, given the fact that the Bible contains quite a beautiful example of a compassionate, objective human being who tries to live in peace, love and without pre-occupations or prejudices. It's unfortunate that the RC Church has built such a big marketing machine around this example and has succeeded in turning away from the example, to the extend that the RC Church now has become the sort of Pharisees that Jezus would have his struggle with. And if I would have been Roman Catholic myself, today would have been the day that I would resign my membership.


Why?


Well, it seems to me that one of the most relevant developments in the last years is the discovery of numerous examplex of abuse of power en child abuse. Which has been covered with a blanket of deaffenning silence by the Church itself. And if we look at the man who contributed to the texts and instructions that helped keep the blanket of silence intact, we must recognize that it is th current Pope, Benedictus. And the main goal of these instructions was to keep the image of the Church clean, not so much to behave merciful or compassionate towards the victims. Pope Benedict has as a member of some working group contributed to that document (''Crimen Sollicitationis' of March 16, 1962, also know as: how to hush clerical child abuse by using church law rather than civil proceedings) which subsequently was ratified and sent out by the Pope. Of course the Vatican had to deal with the effects of all this becoming public knowledge and has witnessed a further decrease in attendance and faithul followers. And although Benedictus ('he, who speeks well')  did try to apologize for the role of the Church, today turns out that thas was a mere blind (I hope I use this expression in the right way).

It appears to me that the beatification of a Pope who for image-reasons prescribed secrecy with respect to child abuse can be viewed as a direct 'slap in the face' for all the victims of child abuse and the subsequent secrecy/denial. But the Roman Church is apparently unable to cleanse itself internally and to point out to Benedict the consequences of his coldhearted and dry-eyed behaviour. Well, they will find out when in a half year time they are wondering what the sudden decrease is, around May 2011, in the stats for church membership.

And while Benedict and his Church couldn't care less about the particular opinion of this old man, I cannot stop myself from writing: 'Shame, shame and deep shame on you and your Church !'

Bernanke sticks to low rates.... risky... but understandable

These days I watched and listened the first press conference by Ben Bernanke, in which he elaborated on the US-FOMC monetary policy. After a nervous start, he started getting the hang of it when it all became 'technical'. Whereas Trichet is a fully certified clueless-empty-can-but-very-capable-regent who brushes off all complicated questions with a number of standard mantras, Bernanke was in good shape. The guy very obviously knows what he is talking about and that is a huge relief in comparison to Trichet. I noticed that in general, also the US-FED-watchers shared the view that this was a good first premiere by Bernanke (see also here).

Wat Bernanke told us, is that the FOMC, with its double mandate on price stability and employment, chose to prioritize the economic growth and employment by maintaining low interest rates for the time being. The quantitative easing will end in June, but there will be reinvestments of matured bonds. The Fed considers a stop on this reinvesting as a tightening of monetary policy and will only do so after due consideration and on the basis of an explicit FOMC decision. So, for now, we will face a prolongued period (at least three months) of low interest rates in the US. Employment is the main thing.

The market effects were quickly visible with a happy stock market and a diving dollar. Meanwhile I was pondering the thought if the economy in the US would really be in such a bad shape that it deserved further easy-money? Or could there be another angle at all this?

I realised that we are in the run up to new elections and recalled literature from a while ago: research by the FED that observed a correlation between the behaviour of the FED/FOMC and the pre-election year. This would be either an explicit or implicit case of the principal-agent situation. Meaning that in the year before the elections, the US Presidents appreciates a solid economy which then creates jobs that he can show off with in the election year. And from that perspective, the FED-decision is quite clear (and a case in point).

Still, this is playing with fire, as we are in the same situation that brought us the financial crisis: a prolongued perod with low interest rates, which may seduce markets into taking too much risk. Which may lead to the situation where we get rid of the hangover by taking a new beer, the day after (as we all know, the recipe for die-hard alcoholism). En also our central bank (De Nederlandsche Bank NV) states a serious warning in its financial stability report which does not sound happy at all:
Just as in the run-up to the crisis, we can observe overliquidity in the worldwide financial system, with global imbalances. These developments may, in the medium term, threathen the financial stability, when once again bubbles in financial markets or unsustainable debts will come into being. We have almost stretched the accomodative monetary policies that we see worldwide, to their maximum limits.

In sum, the historic days are not over yet. As we are very much aware how we came into this crisis, it remains a risky approach to stick to low interest rate policies. Time will tell.

Bernanke playing with fire and burning his fingers... or outright brilliant?

This week is the second round of Quantitative Easing in the American market. Bernanke throws another 600 billion into the market to boost the US into economic growth. Most Dutch economists have mixed negative feelings about this and point out that the US Fed are choosing the lower interest policy weapon since the Asia crisis, to boost the economy. But we should note that the US Federal Reserve has a dual mission. They must:
- guard the monetary base / interest rate and stability of the coin AND
- create employment,
as compared to the European Central Bank that must only:
- guard the stability of the coin / monetary base / interest rate.

Why this interesting difference?

It is all because of the previous crisis, more than 100 years ago in the US, when the Fed was founded and when there was a huge unemployment. That resulted in the inclusion of the employment goal into the FED mandate. And its this goal that is now leading the US Federal Reserve Board to fill up the tank with more gasoline, when it's already full. And we all now what happens in such a case: spill-overs.

The size of the American economy is one, that results in spillover effects that will travel the whole world. Other currencies are experiencing the pressure and one only hopes that the American motor will indeed kickstart as a result of the easing. The latest unemployment data of the US appear to be hopeful, but then again: no one is solving the Fanny and Freddy problem. And we are only starting to discover what the effects will be of the robo-signing during foreclosures in the USA.

So, while in the US we see some extra demand for Treasuries now that Uncle Ben is out shopping, pension funds all over the world are choosing a hands-off approach of periferal treasuries. And that leaves us in amidst historical times that only afterwards allows us a final verdict on Bernanke: was he burning his fingers or being outright brilliant?