The Economic & Political Tale of Two Countries: Holland & the UK

The Netherlands and the UK are both  mentioned in recent reports with bad economic news.  After reports listed in my previous blog Europe & Euro Still in Hot Waters , I'm now referring to reports by the OECD and by the UK House of Commons Library, that real wages in the U.K. and the Netherlands declined the most in the Euro area over the last three years , after Greece and Portugal. Real wages declined by 5% in the U.K. and by 4.5% in the  Netherlands, while the decline in the Euro area as a whole has been less than 2%. This news was obviously not well received in the UK and the Netherlands:

On the British BBC, shadow Treasury minister Cathy Jamieson said:

"These figures show the full scale of David Cameron's cost of living crisis.......Working people are not only worse off under the Tories, we're also doing much worse than almost all other EU countries."

In the Dutch newspaper De Telegraaf, one of their financial columnists Harry Geels writes about the ongoing "impoverishment" of Holland, which according to Geels actually started in the 1990s and was partially caused by accepting too low of an exchange rate for the Dutch guilder, when it joined the new Euro in 2000 (to understand the background of this too low exchange rate, Dutch readers can read his report "De Wisselverlieszaak" (or "The Case of the Exchange rate Loss".)

As so often is the case, economics influences politics, and Oxford University economics professor Simon Wren Lewis, describes the similarities in political trends in both countries,

Europe & Euro Still in Hot Waters

(European Politicians, Robin Hood Tax/Flickr)

Although it's summer, and  many Europeans are away on vacation, the European economic situation seems to be getting again in hot waters, according to more and more experts. The influential financial blog, Naked Capitalism, just posted the following: European Pundits Starting to Give Up on the Eurozone.

First, quoting an interview by Roger Strassburg of the German blog NachDenkSeiten with U.S. (neo-Keynesian) economist James Galbraith while on his visit to Europe,  who was asked about his views on the situation in Europe:

"Roger Strassburg:  You weren’t against stimulus, though, were you?
James Galbraith:  I am against the use of that word as a description of any viable economic strategy.  Absolutely, I’m against the use of the word “stimulus”.  I think it should be purged from the vocabulary of anybody advocating an effective alternative to austerity, because it is not an effective alternative to austerity.


RS:  And the alternative would be?
JG:  The first necessity is to stabilize the patient, who is on the verge of collapse.  This is not about stimulus, it’s not about returning to growth, or returning to full employment, this is about preventing a disaster which will lead to the breakup of the Euro Zone and the European Union, and will lead in that direction in my view quite soon if nothing is done.  So that’s what I’ve been talking about over the last month...........

JG: The test of it (i.e. European deposit insurance) is that you want to avoid a situation in which there is a panic, a capricious run on the banking system, and I don’t think the Europeans are there.  And, of course, the problem that they have is that if it’s the national authority that’s paying out, then the bankruptcy of the state basically means that the deposit insurance fund isn’t credible, this is why it has to be done on a collective basis.

RS:  There’s a lot of resistance to that here.
JG:  Well, that may be, but, you know, nobody is safe in this situation.