Irony and austerity - The fall of the Dutch government

Mark Rutte, the Dutch Prime Minister

The Dutch coalition government collapsed just a few days ago, due to its failure to reach a compromise over a budget that would comply with the Maastricht fiscal criteria of the 3% deficit and 60% debt. According to the German newspaper Bild, this makes the Netherlands the 8th country whose government fell over eurocrisis-related issues.

I recall that back in September 2011 Mr. Mark Rutte, the Dutch Prime Minister, called for an expulsion of Greece from the eurozone, due to the alleged inability of the Greek authorities to comply with the rules of the EU and the demands from its trio of lenders - the "troika" (EU-ECB-IMF). At the time articles where written, tv and radio shows were broadcasted, praising the Dutch premier for his audacity to "finally" break a "taboo".

Many did not miss the opportunity to use his dictum to reproduce the scurrilous theory of the unproductive periphery and the industrious center (of the eurozone). They drew delight in analyzing the hidden meaning of his wise pontification, while perhaps indadvertedly obfuscating the systemic nature of the crisis, narrowing it down to a case of excessive public debt and uncompetitiveness in the periphery.

Mr. Rutte always was among the most vociferous and bitterest critics of Greece, among others, for its imbalanced fiscal finances, while he remained the probably most fervent detractor of the idea of a system-wide strategy that would deal with the crisis in its totally, arguing instead that monolithic fiscal discipline, a somewhat religious devotion to the provisions of the Stability and Growth Pact, was all that was necessary. This advocate of the essentially prejudicial austerity fetish that plagues the EU, now sees his government fall apart because of missing the fiscal targets he so trenchantly defended. In ancient Greece this would make for a great play of Tragedy, in which irony would take center stage to pass to the audience the importance of thinking outside the box, of looking into the unseen, and of avoiding hubris or otherwise risk falling into a trap of one's own making.

So what is really the gist of this incident? Certainly not that suddenly the case of Greece and the case of the Netherlands can be compared using a common denominator. But then what lies behind these events?

It is nothing more than the long-standing, well-established argument that the crisis we are dealing with is systemic. Striping away the particularities of each case, there are flaws in the very system overriding each and every facet of the broader crisis. We all know—Mr. Rutte and the other plonky austerians included— that the eurozone, a monetary union, was a flawed venture from the outset (for instance see articles on TARGET2 payment system).

First of all, it was a political project for further integration utilizing economic means, in a process of incrementalist steps towards the establishment of a political union. Secondly, it formed a currency union with member-states that had not achieved real convergence in terms of productive capacities. Thirdly, it lacked essential mechanisms and institutions that could mitigate asymmetric shocks—such as the complete absence of a fiscal union backing the currency, with powers to directly raise revenue and issue (euro-)bonds on its own accord. Fourthly, it did not preempt the erratic capital flows in the periphery that resulted in the propping up of all sorts of bubbles, by means of effectively regulating the now-sectarianated European banking system. All this within a context of an EU that has yet to develop a European identity and public sphere, while it still suffers from all sorts of imperfections concerning its governance.

For as long as we try to anxiously conceal the systemic aspect of the crisis, we will witness yet more failures and will have to endure for much longer the inane austerity palaver and the counter-productive, technocratic EU bungling that have so far only succeeded in prolonging the chilling effects of the crisis. This is not an apologetic for whatever malignancies may exist in each national economy, nor does it provide any excuse for previous malpractices. On the contrary, these are part of the broader problem and need to be taken into consideration, in proportion to their actual impact.

Coming back to the Dutch government, I am convinced that they are indeed very serious with their fiscal finances. Their belief in fiscal discipline is sincere and not some typical humbuggery of political posture. Believing that this is the case, one may only begin to pose profound questions on the very rationale of the Maastricht criteria. Could it be that these chimerical macroeconomic targets require a thorough revision in their technicalities and their underlying (conventional) wisdom?

The moral of the collapse of the Dutch government is that the austerity nostrums, based upon unexamined dogmas and tissues of fallacious assumptions, are not a solution to our problem, for they do not treat the source of the disease, but only its symptoms—the macroeconomic imbalances. The irony of Mr. Rutte's failure together with the shifting of the tectonic plates in European politics, could perhaps provide the impulse for some kind of metapolitical action, that will address the crisis systematically from a federal level. What remains certain is that things cannot—and must not—stay as they are, though judging from the sprectalized notions that govern the modi operandi of Europe's leaders, we might never see this realized in a timely and adequate fashion.

Picture source: Wikipedia

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