POSTSCRIPT: TO MY WRITING ON April 22
by Frank Thomas
You are not going to believe this, but in 2 days, five Dutch parties including the fallen coalition parties VVD (conservative party) and CDA (centrist party) – but excluding coalition partner PVV (far right party) – have agreed April 26th to a more balanced budget accord that meets the EU rule (recently agreed to by the EU 27 countries) of NOT exceeding a 3% deficit level as percentage of GDP in 2013. Thus, a group of five parties that are generally more left of center did something in TWO DAYS that the existing predominantly right coalition government couldn’t achieve in SEVEN WEEKS !!
The five parties achieved the new budget agreement in a creative, pragmatic, equitable, humanistic BUT still very responsible manner. The conservative governing coalition failed in this task, including the coalition partner PVV - the far right party of Geert Wilders. The five parties STUCK to the 3% deficit rule for 2013 rather than spreading this austerity rule over 2-3 years, for example, ±4% in 2013 dropping to 3% or lower by 2015. As stated in my memo above, I favored the latter approach. But I’m glad the five party “quasi” interim coalition has not walked away from standing behind a deficit rule the Dutch government and especially its Finance Minister, Jan Kees de Jager, has been demanding that all EU countries follow.
The new five party group includes: VVD, CDA, as the former ruling coalition parties, plus D66 (centrist to left party), the Christian party (centrist to left party), and Green party (left) as the new parties joining the fallen VVD and CDA parties . The PvdA labor party, SP (socialist party), and PVV far right party have not joined the “quasi” interim coalition of five parties as these three parties fundamentally disagree with the timing of implementing the 3% deficit rule and want to wait and see what the voters say in September.
Pragmatism, setting aside egos, and making hard concessions in the interests of ALL Dutch citizens and their well-being ruled the day! This kind of courageous cooperation in politics to merge the best and brightest ideas for the benefit of the nation as a whole is tragically IMPOSSIBLE in the broken-down, money-corrupted, ideologically pure, polarized government system America is afflicted with today.
So, the Dutch “quasi” interim coalition government of five parties has turned decidedly to left of center in recognition of the public impatience with indecisive leadership and the extremely serious economic times Holland and Western countries are in. At the same time, the five parties are not walking away from the country’s high household debt level and social net costs. For example, the five parties have agreed to: reform the housing mortgage market by reducing the interest deduction while also reducing the taxes on the purchase price of homes, to undertake necessary reforms in retirement pensions, to raise the VAT tax on certain goods and to initiate a temporary tax increase on the higher income class.
These and other actions have been agreed to in order to reach the 3% deficit target WITHOUT damaging the purchasing power of retirees and the lower income classes … and WITHOUT making serious cuts in EDUCATION, INFRASTRUCTURE, and R&D Investments. While all citizens will feel some pain for 1 or 2 years, the ultimate cost of the new budget agreement is estimated to reduce GDP growth from ±1.4% in 2013 to ±0.75% … a not insignificant but also a not overly costly change. The lower GDP growth rate is a sacrifice the Dutch people, with their culture of ±10-12% savings rates, generally consider bearable and worthwhile to maintain their remarkable triple AAA financial rating as well as to achieve intermediate-term financial stability and GDP growth rates in the 2-3% range.
For the future, the Dutch are now talking seriously of putting into policy motion the practice to set aside a portion of healthy tax revenue receipts that come in good cyclical times as a reserve to be used in cyclical downturns. This will greatly help reduce the wild volatility and risk exposure to cyclical and/or irresponsible financial management-induced macro-micro economic downturns.
All this only reconfirms my lasting respect, trust and pride in the Dutch parliamentary coalition system of government. It does result in fallen governments, loss of continuity of leadership, and added costs. But, from my over 30 years experience living and working here, these drawbacks have not been serious obstacles to Holland’s development and ranking as one of the best performing economic and social societies in the world.
It still mystifies me why the PvdA and SP parties did not join in accepting the new budget plan agreed upon in just two days. But many things could change should these two parties capture a major share of the general public’s votes in the September elections. One often heard criticism of the socialist SP party – now enjoying a widespread popularity under the impressively open, down-to-earth, genuine Emile Roemer – is that the party’s leadership falls short on putting forth a vision and concrete set of ideas for solving the systemic problems the SP party sees under conservative economic model-type thinking and governance. The PvdA labor party also receives much of the same criticism.
So, stay tuned. Holland’s broadly representative coalition governing democracy is alive and well … and the nation is determined to stay true to a unique European principle, “We are all in this life together.”
Frank Thomas
The Netherlands
April 26, 2012
