Where It All Comes Unstuck

Neil Clark writes:

Supporters of the Euro could, up to yesterday, have claimed that the problems of countries in the Eurozone had been overstated, and that the only places where there had been significant political fall-out were Greece and Italy, whose economies weren't too strong in the first place.

But yesterday's events in The Netherlands have blown that argument right out of the water. For the first time, the government of a prosperous northern Europe country - one which has been held up by EU enthusiasts as a model of how things should be done - has collapsed on account of the continuing Euro crisis.

Prime Minister Mark Rutte, who led a liberal/conservative coalition, was forced to hand in his resignation to Queen Beatrix after Geert Wilders, the controversial leader of the anti-immigration, anti-EU Freedom Party (PVV), refused to support a tough new austerity programme intended to meet The Netherlands' obligations to reduce its budget deficit to below three per cent of GDP, as stipulated by the EU's fiscal pact.

The failure to get his programme through is a huge embarrassment to Rutte, a key ally of Germany's Angela Merkel, and one of the strongest advocates of the fiscal pact. Looking at the bigger picture, it's hard to overstate what a major setback to the long-term future of the Euro the fall of Rutte and his government represents.

This is not a country on the fringes of the European project like Slovenia or Slovakia - whose governments also fell over austerity packages last year - but one of the continent's biggest economies and a nation that's been at the centre of the moves towards greater European integration for decades.

The Netherlands was a founder member of the EEC - the forerunner to the EU, established in 1957. It was a founder member of the Euro in 2002. And it was, of course, in a Dutch town, Maastricht, that the famous treaty which paved the way for the introduction of the Euro was signed in 1992.

But if they have, up to now, been enthusiastic Europeans, the cheerful, laid-back Dutch - rated the fourth happiest people in the world in the 2012 UN 'World Happiness Report' - are keen on the good life, too.

The key to understanding the Dutch psyche is gezzelig. It translates roughly as cosy, agreeable, relaxing – a culture of comfort and togetherness. The Dutch love gezzelig. Sipping a glass of advocaat in an Amsterdam bar is gezzelig. So, too, is going for a picnic in the park on a summer's day with your best friends.

But a E15 billion package of government spending cuts is most certainly not gezzelig and would directly threaten the comfortable standard of living to which the Dutch have grown accustomed.

Rutte's proposed austerity programme would, among other measures, have introduced a €9 fee for every medical prescription, an across-the-board salary and benefit freeze, an end to student grants and the bringing forward by five years (to 2015) of the raising of the retirement age to 66.

Unsurprisingly a growing number of Dutch voters have been questioning whether the future of the single currency is worth such sacrifices. Almost half the Dutch now feel that replacing the Guilder with the Euro was a bad idea. There is increasing nostalgia for the good old days of the 1960s and 70s, when the Dutch, as founder members of the EEC, enjoyed secure employment, high levels of economic growth, steadily rising living standards and even won the Eurovision Song Contest.

"The main benefits we see from the Union were available, to a large extent, under the European Community. The ongoing political integration, driven by ideological zeal, are (sic) doing more harm than good," was the verdict of a Dutch commenter to De Telegraaf's website.

The Netherlands' pro-EU political elite still hope that an austerity package can be salvaged and be got through Parliament before the 30 April deadline. But even if the Dutch Labour Party - which up until now has called for less drastic cuts in public spending - performs a U-turn and helps the Liberals and Christian Democrats pass an austerity bill, the problems will not go away.

It's not just Geert Wilders, whose party received more than 15 per cent of the vote in the last national elections in 2010, who is banging the drum against the EU's fiscal pact. The Socialist Party of the NL argues that spending cuts ordered by Brussels are destroying the Dutch economy.

If the main parties of the centre-right and centre-left don't change tack on Europe, they are likely to be outflanked in the coming general election by the more populist parties of the left and right who accuse them of selling out in order to appease bureaucrats in Brussels and international finance.

It is no coincidence that the two big winners in France on Sunday were the Socialist Francois Hollande, fighting on an anti-austerity platform, and the National Front leader Marine Le Pen, whose anti-Brussels rhetoric helped give her party a record 18 per cent vote.

As stock markets tumble across Europe, with traders getting out of the Euro and seeking safety in the American dollar, what happens next in The Netherlands is critical.

While the Euro could feasibly survive the exit of Greece or even Italy, the exit of 'the model Europeans' would surely deal it a fatal blow. How ironic it would be if the country where the single currency project was formally agreed 20 years ago, is also the place where it all comes unstuck.