The case against Dijsselbloem

The euro group is to be led by a Dutchman, the new finance minister J. Dijsselbloem. After Berlin and Brussels, the government in Paris has signaled its approval, the newspaper “Handelsblatt” reports. According to the paper, the nomination is merely a formality. But what qualifies the newcomer Dijsselbloem for this strategically important position? Shockingly little.

Jean-Claude Juncker is in a hurry. Since several months he wanted to leave the top job of the euro group. Besides his health problems, Juncker is apparently fed up with the German dominance and the miserable handling of the Greek crisis.

Finance Minister Schäuble wanted to take over but failed to overcome the opposition of France. His French counterpart Moscovici was vetoed from Berlin. So a replacement candidate was needed. But where to take?

Clear criteria for the search do not exist. A “program country” that is under a bailout is ruled out in Brussels. So Ireland and Portugal were out of the question.

Belgium would be ok, but it is already represented by Council President Van Rompuy. A Finn would go well, too, but there is already Monetary Affairs Commissioner Rehn.

According to Handelsblatt, Berlin insisted that the next euro group chief comes from a triple-A country.

So it fell to Dijsselbloem. He is only for a few months in office, but he is from the Netherlands, which still have the top rating. But for how long? Given the severe economic crisis, the Netherlands will loose the triple-A could soon.

The Dutch Central Bank predicts a decline in economic output by 0.6 percent in 2013. The budget deficit in 2013 and 2014 will be at 3.5 percent of GDP.

This does not seem to bother the “Handelsblatt”, nor the federal government. Much more important seems to be that Dijsselbloem stands “for a strict austerity”. Another asset is that he is a social democrat, which is supposed to calm the French Socialists.

In my view, these are pretty weak arguments. To me, the most important fact about Dijsselbloem is that his country, Finland and Germany have set up a special club within the euro group – with exclusive mini-summits and harsh opposition to the banking union.

This elitist trio does not exist in the Treaty on European Union or in any Euro group log. It legitimates itself solely with the Triple-A provided by the three major U.S. credit rating agencies, i.e., with the favor of the markets.

What if the markets withdraw confidence in the Netherlands? Will Germany, Finland and the Netherlands be allowed to continue fiddling in the euro group when Dijsselblum was appointed group chief? What happens when the Hague misses the deficit target? Will the euro group threaten its own leader with sanctions? Will it make an exception for the boss?

Until these questions are not answered, there are only few reasons for, but many against the candidate …

This is the english translation of my blog post “Gegen Dijsselbloem”. The original post is here.