Dutch coalition falls. Noone knows why

[Diadem]

For the last 7 weeks the Dutch coalition had been negotiating about new spending cuts to get the economy back into gear. All these negotiations took place behind closed doors, which isn't terrible democratic, but somewhat understandable. It's easier to negotiate if you can talk freely. Anyway, all signs pointed towards them being almost done with their negotiations. They had already published some results, and they were busy drafting the final agreements.

Today, out of the blue, the PVV (A rightish-wing populist party that wasn't part of the coalition, but supported them to a majority) withdrew their support. No one seems to know why. I'm listening to their press conferences now, and both sides are positively vitriolic toward each other.

I don't think anyone is really surprised by this result. The entire coalition was a pretty long shot to begin with. But this is one of the weirdest crisis I've ever seen. No one knows what they have been talking about, no one knows why it suddenly ended.

[Diadem]

The English-speaking media have now picked up the story as well, so I can provide a link. Yeah!

http://www.nytimes.com/2012/04/22/world ... ected.html

[omgryebread]

I guess Wilders thinks this is a good time to force an election? He might be right if the measures were unpopular, but it would seem a bit of a phyrric victory if he did well in an election in a country that can't get a good austerity/tax plan in place.

[t1mm01994]

From my Dutch, politically interested but not particularly politically educated view: Wilders was losing votes in the tallies, and had to do something. Populists tend to have to do something populistic every now and then or their voters tend to leave them.
Wilders had been out of the media for a while, and now he had to make some measures that would undoubtedly crush his popularity, as it was pretty much all against the worker class. To prevent his party from a swift downfall, he had to pull some stunt; dropping the negotiations he had made for the past 7 days sounds about like the measure.

[Jonesthe Spy]

For Europe's sake, I hope Wilders fails spectacularly and it sets off the dominoes. The fact is austerity does not help struggling economies, it hurts them. I've been reading a bit about this - spurred on by Paul Krugman's columns in the NY Times - and as far I've seen austerity plans have never worked to get damaged economies going again. They make bankers and right-wingers who are opposed to government programs on principle happy, but that's it.

Think about it - market economies are driven by spending, doesn't matter if it's private or public spending. Shut down a big chunk of spending and things just get worse. Anyone who spends even a bit of time researching the New Deal can tell you that.

[lutzj]

For Europe's sake, I hope Wilders fails spectacularly and it sets off the dominoes. The fact is austerity does not help struggling economies, it hurts them. I've been reading a bit about this - spurred on by Paul Krugman's columns in the NY Times - and as far I've seen austerity plans have never worked to get damaged economies going again. They make bankers and right-wingers who are opposed to government programs on principle happy, but that's it.

Think about it - market economies are driven by spending, doesn't matter if it's private or public spending. Shut down a big chunk of spending and things just get worse. Anyone who spends even a bit of time researching the New Deal can tell you that.

Austerity isn't meant to help economies directly; it's a necessary measure to ensure that the government can continue borrowing money at reasonable rates, which enables more spending in the future. High interest rates on government bonds have a lot of bad indirect effects in addition to drowning taxpayers in interest payments.

[Diadem]

For Europe's sake, I hope Wilders fails spectacularly and it sets off the dominoes. The fact is austerity does not help struggling economies, it hurts them. I've been reading a bit about this - spurred on by Paul Krugman's columns in the NY Times - and as far I've seen austerity plans have never worked to get damaged economies going again. They make bankers and right-wingers who are opposed to government programs on principle happy, but that's it.

While this is true, it's not an unlimited truth. Unlimited spending will destroy your economy faster than you can say 'hyperinflation'. You have to find the right balance between keeping the deficit in check, and stimulating the economy by spending.

And 'austerity' does not entirely cover the content of the plans that were being discussed. There was some short-term stuff in there, but also a number of long-term improvements that need to be made one way or another. The Netherlands are one of the richest countries in the Euro zone. Our economy is pretty still pretty solid, and there is a reason we are one of the few countries in Europe that still has that triple-A rating. But there are also a few fundamental design errors in the way our economy is structured. Problems that are entirely solvable. But even solvable problems need to be solved. 20 years ago these same errors were already there, but they were mere trivialities. No one wanted to spend political capital on fixing them. 10 years ago they were serious problems, but nothing too major, and still no party wanted to spend political capital on trying to fix them. Right now, these same errors have grown to a point where our economy is seriously tanking because of them. Still, we have by no means passed the point of no return, if we act now we can fix these things relatively painlessly. And people are starting to wake up to the truth that they need to be fixed. But the political will is still weak, vested interests are huge.

It's a dangerous crossroads for our country. If politicians remain cowardly, in 10 years time our country will be seriously fucked.

Another issue is that of Europe. Europe demands that all member states have a deficit of at most 3%, with some leniency for going over that for short periods of time, I don't know the exact rules. The Netherlands has always been of the countries insisting on strict regulations and strict implementation of those regulations. Even in recent years, we've been insisting that other countries fix their deficients. For us, one of the richest countries, to then not meet our own targets is just shameful. It would lose us a lot of influence. Plus it could very well cost us our triple-A rating, which would immediately cost the government 4 billion in interest payments, and something similar for companies. Better to spend a few billion on fixing our deficit then on additional interest payments.

[addams]

Diadem wrote:
"But there are also a few fundamental design errors in the way our economy is structured."

What are these design errors?
The rest of the post was based on these errors as fact. Right?
What are they?

Did I miss something?

Design Errors? Way back at the beginning of the modern world? When all the world had to begin, a new? 1945?

History is hard. It does bump up, hard, against Economics.

[johnny_7713]

For Europe's sake, I hope Wilders fails spectacularly and it sets off the dominoes. The fact is austerity does not help struggling economies, it hurts them. I've been reading a bit about this - spurred on by Paul Krugman's columns in the NY Times - and as far I've seen austerity plans have never worked to get damaged economies going again. They make bankers and right-wingers who are opposed to government programs on principle happy, but that's it.

Think about it - market economies are driven by spending, doesn't matter if it's private or public spending. Shut down a big chunk of spending and things just get worse. Anyone who spends even a bit of time researching the New Deal can tell you that.

Just for clarification: Wilders is against many austerity measures, which is also probably why he blew up the talks. However given his other policies I certainly do hope he fails spectacularly. This is a man who openly stated that the demographic developments in the Netherlands should be influenced so that it would in future no longer be representative for 2 members of the cabinet to be Muslim*. Not to go all Godwin, but I find this a highly worrying statement. The last time someone in these regions decided large scale demographic reorganizations were necessary my great-grandparents received a one way ticket to Minsk.

*A previous cabinet had 2 secretaries of state (assistant-ministers basically) who were Muslim, at least for sufficiently large values of Muslim, i.e. they were not very strict about it. This matches the percentage of Muslim members of Dutch society.

[Diadem]

Diadem wrote:
"But there are also a few fundamental design errors in the way our economy is structured."

What are these design errors?

Wow, I completely forgot to say that in my previous post didn't I?

The two major problems are the housing market and hmm... not not sure how to say that in English. Ontslagrecht. Ehm. The laws and regulations governing the dismissal of people. English doesn't seem to have a single word for that? You know talking about this in English is quite hard, with lots of specific Dutch terms that are difficult to translate. But I'll do my best.

Housing in The Netherlands has always been a problem. Housing has always been scarce, and very expensive. We're a densely populated country after all. But there are a number of regulations that exacerbate this problem. The big one is home mortgage interest deduction. If you have a mortgage, you are allowed to subtract the interest payments from your income, thus saving you a lot of income tax. The minor problem with this is that it's a very regressive subsidy. Rich people profit a lot more from it than middle class, and poor people do not profit at all. The major problem is that it stimulates lending, and lending big. And even not paying back your loan. There are lots of people with down payment-free mortgages in The Netherlands. They only pay interest, but they never pay back the actual loan. It also distorts the housing market, driving up prices, forcing these big mortgages on people. So it's basically very expensive all around for everybody.

Enter the second major problem with the housing market which is land speculation. Zoning regulations in The Netherlands are very, very strict. Land is marked for a specific destination (living, industry, agriculture, nature, etc) and these destinations are hard to change. But of course sometimes they are. A city expands, and designations some former farmland as the new location of a suburb. This means that the ground prices in that area will go up by a factor of 100 or so. Buy the land just before the regulation change and you're and instant millionaire. This obviously births corruption in the regional governments (zoning laws are written at a regional level). Worse though, it turns out that the biggest speculators are in fact the regional governments themselves. So the entire system turns out to be a major cluster fuck that drives up land prices to ridiculous heights, making living even more expensive than it already is.

A third, less important, problem are rent subsidies. If you rent a house (and since housing is so expensive no one below average income buys) and have a low income, you get part of your rent subsidized. That sounds like a nice idea, but the problem is that this rent subsidy depends on your income and the price of your house. More rent means more subsidy. Up to a maximum, if your rent goes above this maximum all subsidy disappears. So if you look at rent prices in The Netherlands then most are just below this maximum, then nothing at all for a long time, and then some very expensive private-market renting. An entire segment of the housing market is just missing in action because of the way this regulation is set up. You either rent subsidized housing for very little money, or generally shitty housing on the private market for a lot of money, there is no middle-way.

The problem is that no party really wants to change this. I mean sure the left wants to do away with mortgage interest deduction, but they don't have a majority. The right wants to limit rent subsidies, but they don't have a majority either. The more centrist parties do not want to touch either subject with a 10-foot pole for fear of losing voters. Also, these things are so deeply ingrained in our economy that they aren't that easily fixed. You can't just do away with the mortgage interest deduction. Literally the majority of all housing owners in The Netherlands would go bankrupt if it was just abolished with no form of compensation. But it needs to be abolished, there's no doubt there. Worse is that everybody knows that it is going to be abolished sooner or later. It's become unaffordable. So house sales have pretty much ground to a halt at the moment, everybody is looking at the government and waiting to see what will be decided before buying a house.


I'd write a similar treatise on the labour market. But I'm late for an appointment, so another time

[addams]

Diadem wrote:
"But there are also a few fundamental design errors in the way our economy is structured."

What are these design errors?

Wow, I completely forgot to say that in my previous post didn't I?

The two major problems are the housing market and hmm... not not sure how to say that in English. Ontslagrecht. Ehm. The laws and regulations governing the dismissal of people. English doesn't seem to have a single word for that? You know talking about this in English is quite hard, with lots of specific Dutch terms that are difficult to translate. But I'll do my best.

Housing in The Netherlands has always been a problem. Housing has always been scarce, and very expensive. We're a densely populated country after all. But there are a number of regulations that exacerbate this problem. The big one is home mortgage interest deduction. If you have a mortgage, you are allowed to subtract the interest payments from your income, thus saving you a lot of income tax. The minor problem with this is that it's a very regressive subsidy. Rich people profit a lot more from it than middle class, and poor people do not profit at all. The major problem is that it stimulates lending, and lending big. And even not paying back your loan. There are lots of people with down payment-free mortgages in The Netherlands. They only pay interest, but they never pay back the actual loan. It also distorts the housing market, driving up prices, forcing these big mortgages on people. So it's basically very expensive all around for everybody.

Enter the second major problem with the housing market which is land speculation. Zoning regulations in The Netherlands are very, very strict. Land is marked for a specific destination (living, industry, agriculture, nature, etc) and these destinations are hard to change. But of course sometimes they are. A city expands, and designations some former farmland as the new location of a suburb. This means that the ground prices in that area will go up by a factor of 100 or so. Buy the land just before the regulation change and you're and instant millionaire. This obviously births corruption in the regional governments (zoning laws are written at a regional level). Worse though, it turns out that the biggest speculators are in fact the regional governments themselves. So the entire system turns out to be a major cluster fuck that drives up land prices to ridiculous heights, making living even more expensive than it already is.

A third, less important, problem are rent subsidies. If you rent a house (and since housing is so expensive no one below average income buys) and have a low income, you get part of your rent subsidized. That sounds like a nice idea, but the problem is that this rent subsidy depends on your income and the price of your house. More rent means more subsidy. Up to a maximum, if your rent goes above this maximum all subsidy disappears. So if you look at rent prices in The Netherlands then most are just below this maximum, then nothing at all for a long time, and then some very expensive private-market renting. An entire segment of the housing market is just missing in action because of the way this regulation is set up. You either rent subsidized housing for very little money, or generally shitty housing on the private market for a lot of money, there is no middle-way.

The problem is that no party really wants to change this. I mean sure the left wants to do away with mortgage interest deduction, but they don't have a majority. The right wants to limit rent subsidies, but they don't have a majority either. The more centrist parties do not want to touch either subject with a 10-foot pole for fear of losing voters. Also, these things are so deeply ingrained in our economy that they aren't that easily fixed. You can't just do away with the mortgage interest deduction. Literally the majority of all housing owners in The Netherlands would go bankrupt if it was just abolished with no form of compensation. But it needs to be abolished, there's no doubt there. Worse is that everybody knows that it is going to be abolished sooner or later. It's become unaffordable. So house sales have pretty much ground to a halt at the moment, everybody is looking at the government and waiting to see what will be decided before buying a house.


I'd write a similar treatise on the labour market. But I'm late for an appointment, so another time

Alright; That was good.
I, vaguely, remember the reason that interest on home mortgages being tax deductible made sense. But; That was a long time ago and it does not effect me, anymore.

I will be watching for the next installment.
"Labor in Holland"

[Thesh]

Home ownership is one of the few sources of wealth middle class people have. Tax incentives encourage people to buy houses and hold wealth, rather than rent and basically thow their money away.

[addams]

Home ownership is one of the few sources of wealth middle class people have. Tax incentives encourage people to buy houses and hold wealth, rather than rent and basically thow their money away.

O.K. I will buy into the idea that a home is wealth, of sorts.
But; A home is so much more.

Spoiler:

I bought my own home. Then, I bought a building to build a business in. It was so much more than simple money.

That is a long story. Our homes become so much more than money. They are shelter and comfort and a bunch of other stuff.


Not a subject I can speak to anymore. A violent political divide took my home away.
No. I was not over invested. I could see the end of payments. I was nearly debt free. Someone got the deal of the century. I had to sell, if, possible and get the Fuck Out!

I am stuck with a big case of, "What Next?"
For people like me, 'Nothing.' May be the answer.

[Dark567]

Home ownership is one of the few sources of wealth middle class people have. Tax incentives encourage people to buy houses and hold wealth, rather than rent and basically thow their money away.

I've never bought the argument that renting is throwing your money away. Often quite the opposite. If rent is cheap compared to buying(lets say a PE of higher then 15), you will almost certainly build up more wealth by saving or investing the money. Buying a house shouldn't be looked at any differently than buying stock as a way to build wealth, sometimes the prices are too high compared to the other alternatives.

[Thesh]

That's great in a perfect world, but our world is far from perfect. Most people don't invest their extra income, the spend it on entertainment.

Also, if you consider that my house I could easily rent out for only 200 less than it costs me each month (including pmi, insurance, and taxes, not my $10,000 per year write off). Some places might be cheaper, but here if you can save the money, ownership makes more sense in every way.

[addams]

Home ownership is one of the few sources of wealth middle class people have. Tax incentives encourage people to buy houses and hold wealth, rather than rent and basically thow their money away.

I've never bought the argument that renting is throwing your money away. Often quite the opposite. If rent is cheap compared to buying(lets say a PE of higher then 15), you will almost certainly build up more wealth by saving or investing the money. Buying a house shouldn't be looked at any differently than buying stock as a way to build wealth, sometimes the prices are too high compared to the other alternatives.

It is not all about the money. It is about having a home.
If, you are happy in your home, then, it really does not matter who owns it.

[Dark567]

Also, if you consider that my house I could easily rent out for only 200 less than it costs me each month (including pmi, insurance, and taxes, not my $10,000 per year write off). Some places might be cheaper, but here if you can save the money, ownership makes more sense in every way.

In your instance yes. But that's not necessarily the case. If you could rent a house $500,000 dollar house, for $5000 a year, you are almost certainly better off renting. The price-to-rent ratio matters. The way to throw your money away would be to buy the house.

[Griffin]

There's also the fact that buying a home on a mortgage is risky as heck. That's tying a lot of your assets up in one item - you lose liquidity, and thus a lot of opportunity costs. An item with maintenance costs, sometimes high ones. An item that cannot be moved, an item with a value dependent primarily on factors beyond your control. And the money you'll be paying on interest is just as "thrown" away as your rent was before, assuming you have a mortgage. What's the functional difference between renting a house and renting the money used to buy it, for most people?

Even assuming you purchase a home outright, there are still opportunity costs - could you make more money renting it out and staying, yourself, somewhere else? (the answer is, fairly often, yes, and I know people who do that exact thing)

As an example of the opportunity costs: No longer can you up and move across across the county for a job paying 15k more - who knows how much you'll lost if you try, selling your home and purchasing a new one. Obviously, there's a chance you'll recoup most of your investment, but there's a chance you'll lost a chunk of it, too. You need to put the house on the market (and pay double costs for the duration) and hope someone wants it. Even more than financially, purchasing a house is a psychological anchor.

Of course buying is better, over the long term (once you actually own the house, instead of the bank), but over the long term every single one of us is dead, so there's obviously other important factors to take into a account. The decision to buy or rent is almost always situational.

[addams]

I'd write a similar treatise on the labour market. But I'm late for an appointment, so another time

Diadem? We are waiting.

Labor in Holland by Daidem to follow shortly?

[Zamfir]

I've been reading a bit about this - spurred on by Paul Krugman's columns in the NY Times -and as far I've seen austerity plans have never worked to get damaged economies going again.

i krugman's writings on other countries than the US always make a bit suspicious. No matter which country he is nominally talking about, it's always a morality tale for US readers with clear implication for US policy. And no matter which complicated aspect of the world economy is under discussion, it always just happens to support his policy proposals, and other people are stupid.

[Dark567]

I've been reading a bit about this - spurred on by Paul Krugman's columns in the NY Times -and as far I've seen austerity plans have never worked to get damaged economies going again.

i krugman's writings on other countries than the US always make a bit suspicious. No matter which country he is nominally talking about, it's always a morality tale for US readers with clear implication for US policy. And no matter which complicated aspect of the world economy is under discussion, it always just happens to support his policy proposals, and other people are stupid.

See Krugman used to be a decent economist when he wasn't a mouth piece for progressives via the New York Times. Before he wrote there, he had some good work on international trade and this, where he assaults the left for its support of minimum wage. Of course now he's a partisan hack so he would never mention his research that criticizes his own side anymore. :-/

[Diadem]

It's a lot of fun to see all the political games at work with new elections just a few months away.

The traditionally biggest left-wing party in The Netherlands is the Labour Party (PvdA). But they have been feeling the hot breath of the Socialist Party (SP) in their necks for years now. The SP is far more uncompromising left-wing, and euro-sceptic to boot, and this is popular with a significant part of the electorate. Labour elected a new party early last month, and has been moving sharply left since then, obviously in an attempt to take wind out of the sails of the SP.

After the coalition fell this weekend, the two coalition partners (the Christian conservatives (CDA) and the liberals (VVD) (Liberal in the European sense of the word)) were faced with the problem of having to make a budget for next year without a majority (the budget talks being the very thing over which the PVV withdrew their support after 7 weeks of negotiations). So they were seeking allies. Labour was quite aggressive in its position, demanding quite a lot in exchange for support for a new budget.

And now comes what I think is quite a brilliant political manoeuvre. The other smaller parties in parliament (progressive-Christian CU, progressive-liberal D66 and left-wing green GL) allied with the two coalition partners and hammered out a budget proposal in 2 days. What they failed to with with PVV in 7 weeks they managed to do in 2 days with a very complex group of 5 that normally disagree over almost anything. This leaves the PVV and the socialist party (SP) on the sidelines. But no one is surprised by that, they weren't going to agree with anything remotely reasonable anyway. But more importantly it puts Labour (PvdA) in an impossible position.

If they support the new budget, they will get none of the glory, but share in all of the blame. They'll look weak and indecisive.
If they do not support the new proposals, they looks obstructionist, putting party interests about national interests. They'll be forced to compete with the Socialist Party for the left-wing-protest-vote, a fight they can't win.

I think their new party leader is actually a quite charismatic and competent politician. But he really got outmanoeuvred in a very painful way.

In the coming election every single party will be aiming their guns at the PVV. That's obvious. And they fully deserve that. But it now looks like there'll be quite a few aimed at the PvdA as well. Quite unexpected.

Oh btw, I know I still have to reply to a few posts in this thread. I've had very little time lately. I'll try to get around to it soonish.

[Wieke]

I've been watching the Tweede Kamer's debate on 2013's budget for the past 1.5 hours. And it has been quite surprisingly not-boring. Sure some of the questions/interjections got quite repetitive and wilder's arguments/speech was quite predictable and booooring (pensions, the elderly and how evil europe hates them, also henk and ingrid). And weirdly enough did Haersma Buma (parlementairy group leader of CDA) display a sense of humor, shame he has so far refused to become a candidate party leader.

The most of the parties in the Kunduz-coalition (CDA, VVD, D66, GL, CU named after a missions to kunduz which they all supported) were arguing that while the budget isn't perfect and probably won't last beyond the next formations at least it is a budget and it should improve the citizens, markets and europe's trust in the dutch economy and politics. D66, GL and CU also argued that the current budget is more social and fair than what we would otherwise have gotten. (Some of the existing austerity measures will be reversed as part of the new budget.)

The counter arguments of the other parties (mainly PVDA and SP) consisted mainly of either the budget is a useless one (cause most if not all of the measures required to enact the budget won't pass through the tweede kamer until after the next elections in september) or it isn't good enough (not social, green or fair enough).

PVV pretty much got ignored during the debate and Wilders didn't seem to care much (he seemed to be playing with his mobile phone most of the time).



Regardless of the debate, the sudden speed with which this compromise was arrived at is surprising. Seven weeks in the Catshuis, nothing, 2 days after the government fell, success. Which is a good thing in my opinion, cause the lack of momentum in the catshuis was pretty damn boring.

It has been quite satisfying to see Sap (Leader of GreenLeft) get a good number of green measures into the budget. I'm hoping it will help them recover some of the seats lost in the current polls (in the current polls GL lost 5 of their 10 seats).