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'Thank you bankers, thank you regulators'

17 December 2008

'Thank you bankers, thank you regulators'

Today parliament held a debate with the government on the latter's "autumn finance note". Central to the discussion was the question of the extent to which the government's budget must be readjusted. SP finance spokesman Ewout Irrgang's view is that cutbacks would in present circumstances be ill-advised. He argues instead for investment in the economy. But he aimed his fire also at "failing, grasping, and until recently exceptionally arrogant bankers.”.

Ewout IrrgangThis is what Ewout Irrgang said during the debate:

"We're all Keynesians now”, said President Nixon in 1971. With hindsight, however, the world stood then on the eve of a conservative revolution which began with Thatcher and Reagan but in the Netherlands, too, sunk its roots in the cabinets of Lubbers, Kok, and Balkenende.

We are now seeing, worldwide, the wondrous return of John Maynard Keynes. To an extent it seems that the pendulum is swinging back, and that it was high time for this after thirty years of the radical right. It is in the end this right wing radicalism which, with its unbridled liberalisation of the financial markets, gave the initial impetus to the current financial-economic crisis.

But at the same time the wondrous return of Keynes is also to do with the nature of the crisis. to which Keynesian policies are the logical answer.

For the first time in history the world must confront a global banking crisis and the global credit crisis which this has spawned.

For the first time in history, all major economies are entering recession at precisely the same time.

For the first time in history, consumers throughout the world are going to be buying less and businesses ceasing to invest.

The problem is therefore not one of excessive demand, for there is more than enough productive capacity in the world.

The problem is that there is too little demand. It is for this reason that throughout the world factories are closing, with the consequence that there is still less demand as income is lost through unemployment. A vicious circle that leads from recession to depression.

It is a situation of life-threatening danger which has never before arisen. At the same time the monetary policy of the central banks threatens to be largely ineffective.

In the US, interest rates were yesterday lowered to almost nothing. Europe could follow within half a year. Central banks will then have no other course than to print money, a relatively extreme measure.

In such a situation it should not be monetary policy, but budgetary policy which, by means of a world-wide increase in state spending, offers relief. The IMF recommends a package of measures equivalent to 2% GDP.

President-elect Obama promises strong measures. The British are taking strong measures, as are the French. In Europe an agreement has been reached for a package of measures worth more than 1% GDP, to be topped up by the member states themselves.

As a small, open economy we are profiting mightily from other countries' stimulus packages. But this minister is himself rather letting things ride. Somewhat creative accountancy with measures which were to a large extent already planned is claimed as a six billion euro package.

According to the Brussels-based 'Bruegel' think-tank, the Netherlands has, at 0.21%, one of the smallest stimulus packages in Europe. We are, in other words, the anti-social elements of Europe. Free riders, who profit but don't contribute. What do you think of that, Finance Minister Bos?

I ask that also because, while the whole of Europe is embracing Keynes anew, in the Netherlands, led by the Christian Democrats and the neoliberal VVD, there's discussion of cutbacks. The world turned upside down.

And how does this actually relate to the European agreements on stimulation? Not at all? Does Bos believe that the discussion in the Netherlands over cutbacks is sending a healthy message to consumers and firms? That they must now also fear cuts in state spending?

The Autumn Finance Note is in general a relatively minor set of observations on the condition of state finances during the budget year in progress. By mid-December, however, that year is almost up. We can now discuss in a peaceful manner the most exciting Autumn Note ever. The national debt has shot up by €80 billion. And despite the financial crisis we are still hearing only the budget surplus's swansong before the budget deficit returns, probably never to leave us again.

To date the financial crisis has not cost the taxpayer €80 billion. Set against the €80 billion in additional debt, there are also additional resources which, moreover, bring additional income, as the Autumn Note correctly remarks.

But from this same Autumn Note we can see that the aid given by Bos to the banks is expected to cost, in the coming year, €469 million net. That's €65 per household.

Failing, grasping, and until recently exceptionally arrogant bankers are being saved by Bos, and for this reason every Dutch family or other household will pay in 2009 €65. Thank you, bankers. Thank you, regulators.

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