Dutch strategy of alliance with EU is opposite of UK solo run

Hague Letter: Even collaborative Netherlands cannot insulate itself from wider world

Dutch prime minister Mark Rutte: small countries – even former colonial powers – may learn more quickly there’s no such thing as national sovereignty. Photograph: Stephanie Lecocq

Dutch prime minister Mark Rutte: small countries – even former colonial powers – may learn more quickly there’s no such thing as national sovereignty. Photograph: Stephanie Lecocq

 

They’ll be remembered – by statisticians at least – as three golden months for the Dutch economy, March, April and May 2019, when seasonally adjusted unemployment fell to 3.3 per cent, its lowest since before the global financial meltdown in 2008 and the euro crisis that hit the following year.

Even in a world of Trump and Brexit, it seemed reasonable to see those months as evidence of a new stability after the turmoil of “the lost decade”. Especially since here was an economy with an AAA rating that had created 3.3 million new jobs between 2014 and 2017, with no sign of slowing.

What Ireland’s erstwhile social partners used to call “the challenges of prosperity” were – and still are, for the time being at least – everywhere to be seen.

Higher wages as a result of a more competitive jobs market have led to increased consumer spending. Heartened by customers’ new optimism, businesses have responded by digging into their cash reserves, investing 5.3 per cent more in the second quarter of 2018 than in the first.

Almost unnoticed, the first quarter of this year broke two records: first, it generated the highest number of new job vacancies ever for a quarter, at 316,000 – and second, it filled the highest number of vacancies ever in a single quarter, at 302,000.

And house prices have been booming again, of course. They rose by an average of 9 per cent in 2018 and will probably achieve 6 or 7 per cent this year, fuelled by record low interest rates.

Yet, as records were smashed and optimism bedded in, we saw the first solid evidence that the years of turmoil are far from over – and that even a country as wealthy and collaborative as the Netherlands cannot insulate itself from the unpredictability of the wider world.

Twilight zone

Look at the underlying trend: Dutch economic growth was 2.9 per cent in 2017, dropping slightly to 2.6 per cent in 2018, revised downwards from 2 per cent to 1.8 per cent for 2019, and then revised downwards again from 1.5 per cent to just 1.4 per cent for 2020. That’s not a pretty picture.

That key figure of 1.4 per cent for 2020 was confirmed last week by the government’s macro-economic think tank, the CPB, whose director, Laura van Geest, described the economic twilight zone in which the country is likely to reside until the new normal hits home.

“Unemployment will continue to be exceptionally low in 2020, and spending power will remain strong due to a combination of real wage increases and, to a lesser extent, policy measures . . .

“However, employment growth will level off, substantially, particularly in the private sector. In effect, that turning point is now behind us and the pace of the economy is already slowing.”

ABN-AMRO’s chief economist, Nico Klene, was starker: “The strong deceleration in economic growth will cause job growth to weaken and unemployment will rise again, particularly next year. In addition, the government surplus will fall sharply this year and next year.”

So the bottom line is that what’s currently keeping the Dutch economy coasting along is unrealistic consumer sentiment generating demand based on a time-lagged assessment of the country’s economic wellbeing.

Economic sovereignty

Not alone that, but – with the budget looming next month – the real cause of its problems is well beyond the power of Mark Rutte’s government to control: “stuttering” global trade leading to “slack” Dutch exports. So much for economic sovereignty.

The “known unknowns” buffering the international economy are the trade war, real or phony, between the United States and China; the prospect of a hard Brexit on October 31st; and political uncertainty in Italy, where a party opposed to monetary union could soon be running a country that owes European banks nearly half-a-trillion euro.

If a country as dogged in its pursuit of monetary integrity as the Netherlands cannot steer clear of such treacherous economic waters, it begs the question of how it – and others like it – is to pursue its broader national interest in a world increasingly dominated by unpredictable leaders.

Perhaps small countries – even former colonial powers – learn more quickly and less resentfully that for them there’s no such thing as national sovereignty, just carefully calibrated interdependence aimed at avoiding the worst blows of the hegemonic playground bully.

That’s why the Dutch strategy has typically been to ally itself to a powerful partner – the EU or Angela Merkel’s Germany – and then work to punch above its weight in diplomatic terms to maximise that influence. Pretty much the sensible opposite, in fact, of Britain’s Brexit chaos.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.