The Netherlands’ popular and plain-speaking finance minister is insisting on harsh enforcement measures against countries that violate eurozone budget agreements as the price of any major new agreement to save the euro.
Such measures, possibly including a top European official with the power to veto the national budgets of countries that break deficit limits, are “non-negotiable”, Jan Kees de Jager said.
European leaders led by Germany’s Angela Merkel and France’s Nicolas Sarkozy are seeking agreement on a complete package of eurozone rescue measures before the G20 group of industrialised and emerging nations meets on November 3-4 in Cannes.
Mr de Jager’s remarks draw a line in the sand for the Netherlands, which has been the strongest advocate in the eurozone for forcing countries to accept reforms as a condition of receiving financial support.
In an interview with the Financial Times, Mr de Jager said the Netherlands would demand reforms from any countries applying for help from the eurozone’s joint emergency fund, the European financial stability facility.
That could set up a conflict with France, which has suggested it would seek EFSF help if it had to recapitalise some of its banks, which are heavily exposed to Greek debt.
“In all cases, if a country asks for support from the EFSF the Netherlands says there has to be a form of conditionality – even if it is only for support to recapitalise its banks,” Mr de Jager said.
He suggested countries needing EFSF help solely for bank recapitalisation might only be asked to reform their financial sector, rather than to implement austerity measures such as those demanded of Greece, Ireland and Portugal.
Mr de Jager applauded recently approved eurozone reforms putting in place tougher budget discipline, but said it was “not enough”. He said some of the more interventionist measures the Netherlands wants may require renegotiating European treaties.
“Treaty revision is unnecessary for perhaps 80 per cent of our proposals, but for some of our proposals it’s necessary,” he said.
Mr de Jager is currently rated the most popular politician in the Netherlands – a surprising distinction for a man who has pushed a series of eurozone rescue packages through parliament, even as Dutch voters have become increasingly angry at Europe and defensive of their own sovereignty. Surveys show over 60 per cent of the Dutch public oppose any further aid to Greece, while far-right and far-left parties opposed to eurozone support have gained dramatically in the polls.
But Mr de Jager and Mark Rutte, prime minister, have maintained their political capital by pushing to make eurozone aid packages tougher on beneficiaries.
Over the summer, they were the sharpest advocates of a “haircut” for private holders of Greek debt as part of the rescue package agreed to on July 21 by European leaders. Mr de Jager still defends that rescue package’s private-sector involvement measures, denying they played any role in subsequent contagion of investor fears to Spain and Italy.
The minister refused to comment on widespread reports that Germany is considering a much deeper restructuring of Greek debt to market prices, meaning a haircut of perhaps 60 per cent. He said the Dutch would wait for the report of the so-called troika of International Monetary Fund, European Central Bank and European Union inspectors on Greek budget reform measures.
With many in the eurozone calling for an increase in the size of the EFSF, Mr de Jager said the Netherlands was not opposed to such a move, but that it would come “at a price” – the governance reforms that his government demands as part of a comprehensive package including a credible solution for Greece and mechanisms for propping up banks and countries.
The G20 meeting in Cannes will focus on how to restart global growth. Some, including the US, have called for renewed stimulus measures from economically healthy countries such as the Netherlands, but Mr de Jager waved such proposals away.
“Sovereigns have to implement austerity measures to regain trust,” Mr de Jager said. “The negative effects of investors questioning whether or not governments will be able to pay back all their debts is much worse than a little bit less economic growth.”
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