EU-DIGEST

Netherlands: Germany and France jeopardize pact - by Robert Wielaard

The Netherlands charged Tuesday that France and Germany are running their economies so differently that they are threatening the rules that underpin the stability of the euro. Dutch Finance Minister Wouter Bos said France and Germany "are sending different signals about how they regard the necessity to put public finances in order." He told reporters that it was "worrisome" that neither Berlin not Paris will acknowledge publicly that they are taking vastly different paths to return their slumping economies to growth. That, he added, was eroding confidence in the euro budget rules that require governments to contain debt within certain limits. While the German government has advocated limiting debt and bringing government spending back in line, French President Nicolas Sarkozy has said "he sees no reason to commit himself in that sense" and plans to allow the deficit widen to stoke growth, Bos said. "That kind of nonintervention can have devastating effects" on the euro stability rules at a time when most of the 16 euro-zone nations have budget gaps far exceeding the limit of 3 percent of gross national product, he said.While the German government has advocated limiting debt and bringing government spending back in line, French President Nicolas Sarkozy has said "he sees no reason to commit himself in that sense" and plans to allow the deficit widen to stoke growth, Bos said.

"That kind of nonintervention can have devastating effects" on the euro stability rules at a time when most of the 16 euro-zone nations have budget gaps far exceeding the limit of 3 percent of gross national product, he said.

Labels: Economy, EU, euro, France, Germany, Netherlands, Sarkozy, Wouter Bos

Does European Social Democracy have a Future?

There is one impressive exception to the conventional wisdom among European social democrats that if you ignore or demonize the new left it will go away. Wouter Bos is the leader of the Dutch Labour Party and currently finance minister in the coalition government that was formed after the last Dutch general election. A young man who two years ago was an unrepentant modernizer in the Tony Blair/Gordon Brown mold, he has been thinking long and hard about the social democratic predicament. Above all, he is concerned about what the threat from the left means, not just for his own party but for the political future of social democracy across Europe. The value of Bos’s analysis—which he presented to the Hertfordshire conference—is that it goes far below the surface of what some seem to regard wrongly as transient and superficial shifts in electoral commitments and preferences. The word crisis is overdone and may still be too strong to describe the outlook for social democracy in Europe, but fundamental social and economic trends suggest it faces an uphill struggle if it hopes to make a strong and effective comeback in the years ahead.

Bos has gone so far as to suggest that European social democracy in its present modernizing form is facing a new and formidable political challenge that threatens its historic dominance on the continent’s center-left. He is concerned with what he sees as the growth in diversity and fragmentation in European societies that are caused mainly by the impact of the dynamic and destructive forces of globalization on everyday life. People are becoming more divided in their own perceived interests and not just by class and gender but by ethnicity, religion, education, family, work, and career patterns as well as in their incomes and the amount of wealth and power they enjoy. National borders in Europe are growing more porous and less relevant with the free movement of capital, goods and services, and now labor through mass migrations.

Labels: Europe, Social Democrats, Wouter Bos

Dutch Finance Minister Bos: "No Risk Of Economic Recession In Europe"

"There is no risk that Europe's economy will experience a recession this year, Dutch Finance Minister Wouter Bos said Tuesday. And speaking to reporters ahead of a meeting of finance ministers from the 27 members of the European Union, Belgian Finance Minister Didier Reynders concurred, but added there is a risk of a slowdown. Reynders added that the E.U. finance ministers, known as Ecofin, will monitor developments in global financial markets "very closely." European and Asian stock markets plummeted Monday, and Asian markets lost further ground Tuesday. But Jean-Claude Juncker, who heads the Euro Group of finance ministers from the 15 E.U. members that use the euro, repeated his view that the euro-zone economy is in better shape that its U.S. counterpart, and added that "it won't happen that we in Europe" have to resort to launching fiscal stimulus packages, as the U.S. administration did last week. Asked if E.U. economies would enter recession, Bos said "no, no." He added that the Dutch economy was well positioned to deal with the turmoil in financial markets, which he attributed to "uncertainty" about the outlook for the U.S. economy. "The fundamentals are very good," Bos said. "We can take a blow and still be healthy."

Editorial Note EU-Digest: "Mr. Wouter Bos probably is right, based on the actual situation. Euro area's GDP in 2007 will be about $11.9 trillion(according to IMF estimates). U.S. imports from the Euro area have totaled $245 billion in 2007 through November; let's say $267 billion for the full year. So the Euro area's exports to the U.S. account for just two and a quarter percent of its GDP. How much of a drop in US imports (Europe's exports) might we have in a U.S. recession? Last recession US imports fell by 5.5 percent. If with the fall of the dollar, US imports really drop, by say ten percent. That would cut 0.2 percent off Europe's growth rate, plus multiplier effects if any. That by itself does not send Europe into recession. As for the echo effect, U.S. exports to the Euro area amount to about 1.3 percent of US GDP. So by taking 1.3 percent of a 0.2 percent drop and you get a trivially small number, less than three thousandths of one percent. So forget an echo recession in Europe. That is if we base it only on what is happening in the US."

Labels: EU Economy, US recession, Wouter Bos

Netherlands keen to attract Islamic banking says Wouter Bos, Dutch Finance Minister

The Dutch government will look into ways to attract Islamic banking to the Netherlands, the finance ministry said in a letter to parliament. "We think there are chances for the Dutch financial sector," said Finance Minister Wouter Bos in a letter on Friday answering questions from lawmakers. "Dubai and London are developing into the international centres for Islamic banking. The Netherlands is fit to also play a role here," Bos added.

Labels: EU, Islamic Banking, Netherlands, Wouter Bos