Crisis = Profit

The euro crisis has brought a windfall for the Dutch treasury as a result of historically low interest rates. Some costs of the crisis, such as the emergency loan to Greece and the costs of propping up faltering banks, are almost completely covered by this windfall, but economists warn against unwarranted optimism.

Most people believe that the Greek debt crisis is only costing us money, but daily de Volkskrant has discovered that this is not actually true. Interest rates on Dutch state bonds have been falling since 2007, the last year before the credit crisis. The Netherlands has benefitted from these historically low interest rates to a total amount of 7.5 billion euros.

These low interest rates are the result of the euro crisis: the Netherlands is seen as a country where people can safely invest their money without having to worry about whether they will ever get it back.

Grateful
So should the Dutch thank the Greeks for this multi-billion euro windfall? Economist Ton Vorst of the VU University Amsterdam says that would be a bit over the top. “We are paying lower interest rates, which is good. But we will have to wait and see whether we get our money back from the Greeks. If not, we will be facing serious losses.”

Tilburg University Banking and Finance Professor Harald Benink says: “These low interest rates are an unintended side effect of the crisis. We would have much preferred there never had been a crisis, because it’s costing us a lot more than just those 7.5 billion euros. For instance, take the fact that economic growth next year is not likely to be two percent, but zero percent. That is a difference of two percent on a national income of 600 billion euros. So that is costing the Dutch economy 12 billion euros."

Budget cuts
Ton Vorst expects Dutch citizens will not benefit greatly from the windfall. “The cabinet’s budget cuts are going ahead as planned. On the positive side, people will benefit from falling mortgage interest rates.” 

His colleague from Tilburg warns that these same citizens may lose a lot more money a little further down the line: “If we forgive the Greeks some of their debt, more money will have to be put into the emergency fund to prevent the crisis spreading to Spain and Italy. The extra money will come out of the taxpayers’ pockets. Potentially, the crisis may cost us much more than those 7.5 billion euros.” 

Johan Cruijff
So the Netherlands should not count its chickens before they are hatched, Professor Benink says. Yes, 7.5 billion is a lot of money, but what we have to give to Europe to resolve this crisis, those are much bigger amounts. Dutch football legend Johan Cruijff once said: “Every downside has its upside.” However, if he had been an economist, he would have said the opposite.

(gsh/rk)

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