15 December 2011

Wim Boonstra: The continent is isolated

Relations between Britain and the rest of Europe have traditionally been difficult. This dates back centuries. The Netherlands has also fought many battles with the British through the centuries. The Dutch particularly relish recalling De Ruyter’s glorious expedition to Chatham in the second Anglo-Dutch War (1667), while preferring to forget later, less triumphant sea battles. But despite these conflicts, the Dutch and British still have much in common. A historically open culture, a penchant for free trade and entrepreneurship are all characteristics that the Netherlands shares with fellow maritime power Britain. The UK and the Netherlands have a history of standing up for free trade and market forces in Europe. And that it important within an EU in which large countries, starting with France, are generally less keen on the free market.

This is why it would be unfavourable for the Netherlands if Britain were to set itself apart from the rest of the EU. There would obviously be some clear advantages to this separation because it would mean certain decisions could be taken and implemented more quickly. But it would naturally also entail a danger that the other twenty-six Member States would take certain poor measures. Just think of decisions on the frequently-mentioned financial transaction tax. Britain is squarely opposed to it, which is understandable given the City’s importance to the UK economy. Depending on the structure of the tax, its introduction could also be a terribly bad and expensive measure for Dutch pension funds. I do not exclude the possibility that the UK’s current position has increased the odds of the tax being introduced in the eurozone. The Netherlands is, after all, the only country in the eurozone that has large pension funds. Even if Dutch politicians have the insight to stand up for Dutch interests, there is still reason to fear that the Netherlands would soon have to give up this lonely position.

It would also not be good for Britain to sideline itself. The UK economy is not in good shape. If the country had been part of the eurozone (which luckily for the Dutch it is not), it would have been one of the weakest links by far. The UK has a high government deficit and government debt is consequently soaring. At this rate, the UK’s government debt will overtake Italy’s level within a few years. Combine this with relatively high inflation and a weak economy and it becomes clear that having your own currency does not guarantee economic success. At least it has not for the UK, which would certainly not have won any awards for the best-run economy in recent decades. In fact, before the Greek crisis, the UK was the last industrialised country that had to be brought under the yoke of the IMF back in the mid-1970s. What message is a government sending that is in such bad shape, but that does not really want to commit to budgetary discipline? It decidedly does not instil confidence. Cameron has not done his countrymen any favours.

It would be better for everyone if Britain were to quickly rejoin the dialogue as an active participant. It would be good for the UK, because they are part of the EU and their economic and political future is intertwined with that of the rest of Europe. It would be good for the Netherlands because diminished British influence could push the EU in a more protectionist direction. That would be terrible for a trading nation like the Netherlands. So draw the continent back out of its isolation.

Original article published in Dutch, “The continent is isolated”, ©Het Financieele Dagblad

© ELEC