The euro? A boon for the countries of the North. Word of the central bank of Holland

The euro? A boon for the countries of the North. Word of the central bank of Holland

The euro has impoverished Southern European countries such as Italy, argued Klaas Knot, governor of the Dutch central bank. The article by Tino Oldani for Italy Today

Finally a Dutchman who doesn't tell lies. I am referring to Klaas Knot , 53, governor of the Central Bank of the Netherlands, who in a recent lectio magistralis held at Hendrik Jan Schoo, explained to his compatriots that the introduction of the euro was a great advantage for them. as it was for the countries of Northern Europe, while for the countries of the South, Italy in the lead, it caused a progressive impoverishment of the economy and families. A gap that has lasted for 20 years, accentuated by the economic crisis induced by Covid-19, from which the Recovery Fund will certainly not be enough to get out.

Klaas's lesson (on the web, in English) differs considerably from the anti-Italian positions expressed several times by the Dutch premier Mark Rutte, who in a video on youtube showed that he shared the invitation of a dock worker not to give even a euro of aid to Italy, considered a cicada country that lives in the latch of frugal countries. Not only. A few days later, at the EU summit of 17-21 July, Rutte did everything to hinder the granting of aid to our country with the Recovery Fund, imposing a series of conditionalities which, in fact, subject the disbursement of funds to halt clauses , including the possible veto of the Netherlands on the Italian projects to be financed.

Right from the title of his lecture, Governor Klaas aims to give a series of indications for the European Union to emerge from Covd-19 "more resilient, prosperous and sustainable". Before getting there, however, he recalls the history of the euro and its consequences, with some passages that are, to say the least, unusual for their frankness, especially if spoken by a Northern European banker. “The creation of the euro was, above all, a political project. After the fall of the Berlin Wall and the reunification of Germany, the major European partners, starting with France, wanted to be sure that Germany would continue to be part of a united Europe. Hence the agreement between Mitterrand and Kohl: unification for you, the euro for us ».

In addition to that politics, explains Klaas, there were strong economic reasons for the single currency: "First of all, a single European market, where the intense trade exchanges between member countries would have benefited from the common currency". Benefits that, however, have especially rewarded the countries of Northern Europe. In this regard, with a table (page 4), Klaas demonstrates that Luxembourg has benefited the most from the single market, with a benefit of 20,000 euros per year per family, followed by Holland with 7,500 euros, Germany with 4,000 , while Italy does not reach 500 euros, second to last in the standings, followed only by Greece. "If we also take into account the annual contribution that Holland pays to the European Union budget", comments Klaas, "there is a substantial gain for our welfare, so we have to thank the European single market for our large share of cake".

Then there is the downside. "Unfortunately, a single currency also has disadvantages," says Klaas. “For example, a common currency means an equal interest rate, and that rate is not always suitable for each country. It can contribute to the build-up of debt or the spike in property prices. Fixed exchange rates not only offer stability, but also imply that member countries can no longer use their exchange rate to restore their competitiveness. As a result, not all euro area countries have benefited equally from the common currency. To be honest: countries with stronger economies, such as the Netherlands, have benefited more than countries with weaker economies ».

An example? "Let's compare Holland and Italy," says Klaas. «To keep Italian products competitive with Dutch ones, the Italian currency would have had to depreciate against our currency. Before the florin and the lira became irreversibly linked, we regularly witnessed this depreciation of the lira. But this is no longer possible ». Again: «Thanks to the euro, Holland enjoyed stronger competitiveness than it would have if it had kept its own currency. This has boosted our exports, with benefits for the entire economy and for the Dutch government Treasury. The opposite is true for countries like Italy, where productivity is lower. Simplifying: the absence of an exchange rate between the countries of the euro area is a benefit for the stronger economies, while it is a disadvantage for the weaker ones ».

At this point, Klaas' analysis, paradoxical as it may seem, coincides with what Eurosceptic intellectuals such as the economist Paolo Savona and the members of the Lega Alberto Bagnai and Claudio Borghi have been arguing in Italy for some time, considered dangerous enemies of the Europe from the journalists and the self-styled pro-Europeans of the Democratic Party, from Romano Prodi down. A short-sighted left, which would do well to read and study Klaas's lesson, which obviously does not stop there.

If the euro is «a disadvantage for the weaker economies», consequently «the stronger and weaker economies tend to diverge even in public debt. This has persisted for a long time and leads us to the problems we saw in 2011 in the sovereign debt crisis, where the disintegration of the euro came close to, something we do not want to see again ”. A challenge that, however, recurs with the post-Covid-19 crisis, the surge in public debts in all EU countries and the launch of the Recovery Fund. In this regard, the recipes suggested by Klaas to the EU and to the Dutch government itself are interesting. We'll talk again.

This is a machine translation from Italian language of a post published on Start Magazine at the URL on Sat, 19 Sep 2020 08:00:56 +0000.