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Sep 9, 2011 | 04:00 GMT

6 mins read

Dutch Savvy at Work Between Germany and the Eurozone

The Netherlands has put forth a plan that would create a new position in European structures to oversee the finances and even operations of eurozone states receiving bailouts. If it works it would not only help stabilize the eurozone, but would short-circuit Germany’s developing plans for controlling Europe.
Dutch Prime Minister Mark Rutte released a plan Sept. 7 that would establish a new EU special commissioner to oversee eurozone states receiving bailouts. The proposed authority would serve in an advisory role for states that are receiving bailouts and have successfully implemented austerity measures and cut government debt. At the same time, though, the commissioner would have the authority to impose financial penalties, suspend EU subsidies, adjust tax and spending policies, revoke EU voting rights, or even eject a state from the eurozone if the state proved unable or unwilling to implement the required budget cuts. This sort of intrusive eurozone-wide enforcement mechanism is nearly identical to what Germany has quietly pursued for several months now, but a Dutch twist on the plan would actually deny Germany the political and economic power that Berlin hopes to gain by modifying EU structures. Rutte said he has already secured preliminary Finnish and German support for the proposal. Finland's support should come as no surprise. Like the Dutch, the Finns want the eurozone to succeed, which requires all of its members to strictly follow the same set of rules. In particular, the current Finnish government, which was elected in part due to anti-bailout sentiment, does not want any eurozone state to enjoy the benefits of eurozone membership without also following the budgetary rules. The Finnish government is blocking certain EU reforms until Helsinki is granted collateral for any loan guarantees it agrees to as part of the ongoing bailout processes. Helsinki is exceptionally perturbed that Greece, which provided inaccurate data in order to qualify for eurozone membership in the first place, is regularly found not to be implementing sufficient budgetary controls. The Germans, while on the surface supporting the Dutch proposal, are far less enthusiastic. Fiscal discipline is an idea the Germans obviously view positively — and an intrusive management system to enforce that discipline is something that the Germans would support. After all, the prime selling point of the bailout reforms currently being debated in the German parliament is that states needing bailouts must first submit to European oversight, which means de facto German oversight. Germany's plan to rework modern Europe in its image has a key tradeoff at its base: access to German financial guarantees is exchanged for fiscal and political controls. While the Dutch are strong supporters of fiscal and political responsibility, they view sovereignty as a higher priority. Located between the regional heavyweights of the United Kingdom, France and Germany, maintaining sovereignty has rarely come easy for the Netherlands. The Dutch maneuver the region's major powers against each other while acting as a go-between in trade and diplomacy, so that all of the larger players see a value in the Netherlands' ongoing existence. (One of the reasons the Dutch are so pro-American and such enthusiastic NATO members is that the Americans can serve as a counterweight to the major European states, most notably Germany.) It may seem unlikely, therefore, that the Dutch would champion a policy that would help strengthen German control over the rest of Europe. Apparent similarities aside, the difference between German plans and the Dutch proposal comes down to one critical word: commissioner. The Dutch proposal would put this authority under the aegis of the European Commission itself. The Commission is a sort of executive branch of the European Union. It does not report to the EU member governments singularly or even collectively. It is intended as an independent, professionalized bureaucracy that can only be removed by an act of the European Parliament. The Dutch proposal would empower this largely independent branch of the European Union to serve as the adviser for financially wayward states — and in the case of those that fail egregiously, their strict disciplinarian as well. In contrast, the German ideal would see this authority reside in the bailout fund itself, not the Commission. The bailout fund, the European Financial Stability Facility (EFSF), is a German-designed institution. In the most recent revisions, agreed upon in a July plan and currently being debated within each EU member state, the link between the EFSF and the Commission was severed. This places authority over the bailout processes in the hands of eurozone governments themselves. Essentially this authority resides in the hands of the country that provides the biggest financial guarantees to the fund: Germany. Berlin's long-term plan is to use control of the bailout funds to translate Germany's superior financial position into political and economic dominance of Europe. In essence, the Germans wish to establish new institutions that are controlled by Berlin and independent of the existing EU format, while the Dutch are trying to prevent this by enmeshing the new authority in existing EU institutions that Germany can never fully control. The Dutch proposal puts Germany in an awkward position. If Berlin rejects the proposal, it will find it difficult if not impossible to forward a near-identical plan (that nakedly places power in German hands). If Berlin accepts the Dutch proposal, it will be sacrificing a substantial volume of financial resources, while forfeiting the ability to reap political gains on the back end (and might even one day find itself on the receiving end of the new commissioner's authority). The timing of the proposal by the Netherlands is also significant. On Sept. 8, the German parliament opened a debate on the merits of the changes to the EFSF. The German government has taken steady aim at transforming the European Union into an institution that guarantees German national interests, but the Germans have yet to have an open national debate on what levers of state power are appropriate for use within Europe, or even what German goals for Europe might be. The reason for this is obvious: A national debate in Germany about the relative merits of — and methods for — dominating Europe would be more than a touch worrying for Germany's European neighbors. But the Germans have to start somewhere, and today’s debates are the first step on the road to Germany's coming to terms with its as-yet-undeclared national interests. The timing of the announcement of the Netherlands' proposal — one day before the highly sensitive debate began — is not an accident. Berlin has long known that convincing other European states to sacrifice sovereignty to Germany would require, among other things, a new treaty. In the Bundestag debates raging today, German Chancellor Angela Merkel has made it clear that such a new treaty would codify Germany’s position on fiscal matters as the formal EU position. The implication is that Europe will be modified to suit Germany. Rutte’s proposal threatens to co-opt and redirect that effort to a destination far less conducive to German interests, and far more conducive to the ongoing independence of the Netherlands and everyone else in Europe. And it does so before the Germans have begun an earnest, internal debate on what their end goal is, and how to reach it.

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