Dutch economists: a common European approach to the coronacrisis is also in our best interest
Minister of Finance Wopke Hoekstra and Prime Minister Mark Rutte made the wrong decision on European aid to Italy. More than sixty prominent Dutch economists signed an open letter published yesterday in de Volkskrant calling on the government to change its position. Bas Jacobs, Sijbren Cnossen Professor of Public Economics, and Assistant Professor Kevin Spiritus from Erasmus School of Economics are among the signatories.
A call on the Dutch government
Several prominent economists consider the Dutch position on a common European financing strategy for dealing with the corona crisis unjustifiable and call on the government to change its policy and support this approach instead. It would be in our own interest if countries like Italy, Spain, and Portugal, are able to tackle the corona crisis effectively.
According to the economists, obstructing a shared approach is counterproductive for two reasons. First, the European Central Bank (ECB) will have to act on its own. This is undesirable, as it lacks a democratic direction and legitimacy when governments are side-lined. They argue that the ECB alone cannot be effective. It requires support from government leaders, the EU, and national parliaments who must ensure democratic legitimacy by fighting the crisis with a common budgetary footing.
The second reason is that the Netherlands must monitor its effectiveness in Europe. We have to choose our moments, the economists say.
Initial steps for European action have already been taken. The European Commission has secured tens of billions within the current budget, and budget requirements have been eased. The ECB has also announced it will buy up over 1,000 billion euros in debt in order to stimulate the economy. Most measures, however, are national in their nature. It is striking how the northern EU member states can spend more money than the southern ones. Weaker countries must also be able to pursue support policies. The coronavirus is a common enemy, which requires common policies.
A situation-specific solution
What is needed is a solution specific for this situation. A clear step in that direction would be the activation of the existing European Stability Mechanism emergency fund by offering credit lines to member states. These would have to be crisis-specific and thus independent of reform programmes and their conditionalities. It may also be possible to explore the idea of 'crisis bonds’, but again focussed on this corona crisis.
The message of the economists is that now is not the time for discussion. Several countries obviously need to reform and get their financial matters in order. To achieve this, the Netherlands will have to make themselves heard in the future, but for the time being the common threat of the virus first requires leniency and help.