Open Europe Blog

Jeroen Dijsselbloem (L) and Olli Rehn (R)

The Netherlands, Germany’s most prominent triple A ally, has been through a bout of political upheaval in recent weeks, which could have brought down the government. The troubled coalition of the centre-right VVD and centre-left PvdA was struggling to find a majority in the Dutch Senate for its 2014 budget, which aims to comply with the EU’s deficit rules.

After several months of discussions with opposition parties the government narrowly managed to convince three opposition parties last Friday to support measures for the 2014 budget: the left-liberal D66 and two small Christian parties: the Christian Union and the SGP.

European Commissioner Olli Rehn’s conflicting statements on the issue illustrate how the Commission now must attempt to cajole the member states into line. He suggested in June that the Netherlands should ideally aim for a 2.8% deficit, with Finance Minister (and Eurogroup Chairman) Jeroen Dijsselbloem responding that the 3% EU deficit target was already difficult enough. This week Rehn praised the Netherlands for reaching a deal on a 3.3% deficit in 2014, even saying that the US should follow the example and “go Dutch”. By the way, the government’s own economic advisory agency, the CPB, thinks the real deficit will be 3.5%.

Martin Visser, the finance editor of the Netherlands’ most-read daily De Telegraaf commented that:

“Even before all the calculations are made, Rehn provides a political judgment instead of a purely economic one.”

When push comes to shove, the European Commission is always liable to grant a bit more wiggle room to national governments – illustrating the difficult in enforcing the EU’s souped-up budget rules. This week German Finance Minister Wolfgang Schäuble criticised Rehn’s decision to exempt large scale public investments from calculations of member states’ structural deficits, describing it as a “re-interpretation of criteria”. What constitutes a ‘structural deficit’ is, of course, always open to debate and therefore finessing.

On a side note, Dijsselbloem’s role as Eurogruop chair is undoubtedly getting tougher. Telling other eurozone member states to get their house in order when your own country has been in the EU’s “excessive deficit procedure” since 2009 must be increasingly difficult.

So, after a whole range of eurozone reforms (think Fiscal Pact, six-pack, two-pack etc) the lesson seems to be that legal rules just won’t trump politics.

Plus ça change…

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