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Dutch Freedom Party Wish To Leave Euro

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Geert Wilders of the Dutch Freedom Party is always a controversial character but he has called for, what would once have been unheard of, leaving the euro. It was a report from Lombard Street Research that prompted Wilders to call for a return to the guilder after it claimed it would cost €2.4 trillion to hold monetary union together.

 The euro is not in the interests of the Dutch people,” said Geert Wilders, the leader of the right-wing populist party with a sixth of the seats in the Dutch parliament. “We want to be the master of our own house and our own country, so we say yes to the guilder. Bring it on.”

Mr Wilders made his decision after receiving a report by London-based Lombard Street Research concluding that the Netherlands is badly handicapped by euro membership, and that it could cost EMU’s creditor core more than €2.4 trillion to hold monetary union together over the next four years. “If the politicians in The Hague disagree with our report, let them show the guts to hold a referendum. Let the Dutch people decide,” he said.

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The study said the eurozone cannot survive in its current form. The longer Europe’s politicians dither, the more costly it will become. “The euro can only survive if it becomes a fiscal transfer union with national sovereign debt subsumed in eurozone bonds,” said co-author Charles Dumas.

Greece will opt for a “negotiated exit” later this year, once the pain becomes excruciating. This will be after the French elections in May, but before the German electoral season begins in 2013.

Portugal will follow in “short order” as markets focus on its struggling banks and nasty logic of recession for debt dynamics. “At that point, if not before, attention will turn to Spain and Italy, both likely by then to be much weakened by savage austerity programmes now being implemented,” said Mr Dumas.

That is the moment when the creditor core will face the decision they have “ducked” for the past two years: either accept an EMU reflation strategy, along with debt pooling, fiscal union, and transfers; or accept a break-up.

The report further outlined the disadvantages to Holland from being in the euro.

The report said Holland had fallen behind non-euro Sweden and Switzerland since the launch of EMU. Its growth rate dropped from 3pc over the preceding 20 years to 1.25pc under the euro, compared with 2.25pc in Sweden and 1.75pc in Switzerland. The Swedes have stolen a march worth €3,500 per head over the past decade.

The report said Sweden and Switzerland have performed better on every front, relying on currency swings to check imbalances. “They created more jobs than the Dutch and especially the Germans. They enjoyed lower inflation. They were more successful in balancing their budgets. And they have run larger current account surpluses. Only wishful thinking could absolve the euro from blame.”

Holland had enjoyed a “one-off” gain of 2pc to 2.25pc of GDP from the launch of the euro, and transaction costs have fallen. However, the trade benefits have been scant. The value-added share of exports has not risen.

Political ramifications.

Mr Wilders said the study “goes against everything we are told in the media and by the left-wing elite on a daily basis”.

The Dutch government is unlikely to pay any attention to the findings, but the Freedom Party’s populist campaign may force Mr Rutte to take an even harder line in loan talks with Greece, Portugal and Ireland, or over the expansion of the EFSF rescue fund.

The Dutch are major net contributors to the EU budget and have long resented serving as a cash cow. They rejected the European Constitution by a wide margin in 2005. A bitter edge has crept into Dutch political discourse.

Mr Wilders is known for his astute political instincts. His demarche tells us all too clearly that Dutch patience is wearing very thin.

Source: The Telegraph

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Lesson For Ireland In Greece’s Default

Comments Off on Lesson For Ireland In Greece’s Default

Every since the banks went bust in Ireland the politicians have been saying that the taxpayers have to pay back the bank’s debt. If they didn’t repay those debts it would have disastrous consequences. Well if Iceland’s experience hasn’t proved this to be false, the Greece default last week certainly has. David McWilliams had this to say

Now there we were, thinking that financial markets didn’t like defaults. In fact, we were warned that if we were to do something as dastardly as not pay Anglo unsecured creditors, the sky would fall in. This line has been followed by our state as if it were gospel.

Yet on Friday, we see that not only is it not gospel, it is nonsense. The financial markets didn’t sell off, but rallied enthusiastically after the news that Greece had defaulted spectacularly on sovereign debt, not bank debt. So the markets that lent Greece money rallied on the news that Greece wasn’t going to pay the money back.

The largest sovereign default ever – and the only one in a developed country in 60 years – was embraced by the financial markets. In fact, for what it’s worth, the Greek stock market rallied too.

So what does this tell us?

It tells us that financial markets have no memory. They move on. It also means that when something becomes inevitable, sensible people accept it and make provisions. The fact that the default was not orderly or chaotic makes no real difference. Only weeks ago, creditors of Greece were saying that they wouldn’t accept default (as if they had a choice).

………

So what happened to the so-called vindictive financial markets, and what they would do to Greece if Greece defaulted? They rolled over. And what about the ATMs? Remember the notion that the ATMs wouldn’t work if bondholders didn’t get paid? Well, ATMs worked just fine in Athens on Friday evening.
More significant has been the U-turn by the troika. A few months ago, the EU view was that no default could be contemplated yet, on Friday, even the so-called hard-line Wolfgang SchÌuble, German finance minister, called the deal an “historic opportunity for the country”.

What of Ireland’s future

Now what does all this mean for us in Ireland, as we move forward?
It means that we, too, will get a debt deal on banking debt, not just the promissory note. The question is whether we are best to go for it now or wait for something much bigger down the road.

 

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