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Dutch Freedom Party pushes euro exit as €2.4 trillion rescue bill looms
"The euro is not in the interests of the Dutch people," said Geert Wilders, the leader of the right-wing populist party with a sixth of the seats in the Dutch parliament. "We want to be the master of our own house and our own country, so we say yes to the guilder. Bring it on."
Mr Wilders made his decision after receiving a report by London-based Lombard Street Research concluding that the Netherlands is badly handicapped by euro membership, and that it could cost EMU’s creditor core more than €2.4 trillion to hold monetary union together over the next four years. "If the politicians in The Hague disagree with our report, let them show the guts to hold a referendum. Let the Dutch people decide," he said.
Mr Wilders is not part of the coalition. However, the minority government of Mark Rutte relies on the Freedom Party to pass legislation. The two men were in talks on Monday on €16bn of fresh austerity cuts needed stop the budget deficit jumping to 4.5pc of GDP.
The study said the eurozone cannot survive in its current form. The longer Europe’s politicians dither, the more costly it will become. "The euro can only survive if it becomes a fiscal transfer union with national sovereign debt subsumed in eurozone bonds," said co-author Charles Dumas.
Greece will opt for a "negotiated exit" later this year, once the pain becomes excruciating.
Some other notable comments:
'Portugal will follow in "short order" ..."At that point, if not before, attention will turn to Spain and Italy, both likely by then to be much weakened by savage austerity programmes now being implemented," said Mr Dumas.
That is the moment when the creditor core will face the decision they have "ducked" for the past two years: either accept an EMU reflation strategy, along with debt pooling, fiscal union, and transfers; or accept a break-up.
Under an "optimistic scenario" it would cost €1.3 trillion to shore up Med-Europe, rising to more than €2.4 trillion if Italy and Spain need some form of bond relief. "The staggering trillion bill to preserve the euro only takes us to 2015. In reality, most of the debts will never be repaid and subsidies will need to continue, year in and year out," said Mr Dumas.
... 'As many readers will already have seen, Premier [of Spain] Mariano Rajoy has refused point blank to comply with the austerity demands of the European Commission and the European Council...
Taking what he called a "sovereign decision", he simply announced that he intends to ignore the EU deficit target of 4.4pc of GDP for this year, setting his own target of 5.8pc instead (down from 8.5pc in 2011).
In the twenty years or so that I have been following EU affairs closely, I cannot remember such a bold and open act of defiance by any state. Usually such matters are fudged. Countries stretch the line, but do not actually cross it.'
... 'The report said exit by Italy would be relatively easy. The country would recover once it regained currency freedom, though foreign bondholders would take an exchange rate hit. Spain’s exit would be harder to manage since it has a primary budget deficit of 7pc of GDP, and its companies have large euro debts abroad.
Exit costs will rise relentlessly for both countries over time. Prolonged economic depression within EMU would render their debt mostly worthless in the end. So if there is to be break-up, "the sooner the better".
Italy and Spain are more likely to hang on as long as they can, until Northern patience snaps. Germany and Holland would then leave, causing a general return to the "sanity" of floating currencies.'
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And that's not all, it continues at length!
http://www.telegraph.co.uk/finance/fina ... looms.html
