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Wednesday, November 19, 2014

How close did the Dutch come to ditching the euro?

The Guilder - was it close to making a comeback? 
Yesterday, former Dutch Finance Mininister Jan Kees de Jager, who held the role until November 2012, revealed something very interesting. Apparently, the Dutch government, together with the German govenrment, made contingency plans during the height of the eurozone crisis for the two countries to ditch the euro. A “team” of lawyers, foreign policy experts and economists were employed to investigate different scenarios,. One was to reintroduce the “guilder”:
"The team met regularly on Friday afternoons, but could also be present very quickly in case we needed to make a decision"
He also revealed how Germany was closely involved but other countries were less keen to prepare:
"Some countries considered the fact that several scenarios were being discussed in Europe already very scary. Remarkably enough they did not do this. We were one of the few countries[to discuss scenarios], together with Germany. We even had a team discussing scenarios, Germany-Netherlands.”
Finance Minister Jeroen Dijsselbloem also admitted that the Dutch government was at one point “preparing for the worst case scenario”, saying:  
 “Heads of government, including the Dutch cabinet, always said: ‘We want to keep the euro together and to keep the euro as a single currency.’ That said, we also looked at what would happen if that didn't succeed”.
Dijsselbloem added that no guilder notes were actually printed, and unlike de Jager, he refused to confirm whether Germany had made similar preparations.

This of course is in line with what we've heard before. The Dutch Central Bank has already admitted it made some contingency plans for a euro exit in 2012, while De Volkskrant has revealed that, in June 2012, Prime Minister Mark Rutte threatened the possibility of the Netherlands exiting the euro. Nevertheless, the detail and the format of the planning highlights just how seriously this was taken.

We can't help but feel it puts the continuous protestations by ECB President Mario Draghi that the single currency is  "irreversible" into a new light...


Issue Today said...

I believe that what they did was the right thing. If the Dutch government made this plan public at that time the Euro would've lost its power and would for sure collapse. Now they still had an escape route!

jon livesey said...

I think you may be forgetting that the Guilder was tied to the DMark for decades, so it would have to be the Netherlands *and* Germany leaving the euro, or not leaving. It would not make much sense for either of them to act alone. So what de Jager says tells us quite a bit about what was being considered in Berlin at the same time.

Freedom Lover said...

Yet, as I heard it around about that same time, there was quite a full print run of new Deutschmarks. Which were then discretely stored away until they might be needed. Which could, quite easily, be sometime soon!

Unknown said...

This story, as interesting as it is, does add appreciation of the need to support the Juncker initiative to speed growth in partnership with large international corporations on major investments in Europe.
However, this story may generate greater credibility for a euro split that could work, where the richer countries leave - allowing a devaluation to occur in a somewhat manageable format of the euro for the remaining countries.
I feel a move where the new DM/DG is electronic rather than another piece of paper would make it far more viable to introduce in a cost-effective, controllable manner - but Germany is still slow to get away from cash.

Patrick Barron said...

It's just a matter of time before the euro collapses. Any responsible central bank should be planning to reintroduce some other currency very quickly, because once the deluge starts it will be quick and unstoppable.

R Davis said...

REUTERS June. 2012.
Every serious proposal to resolve the euro crisis, since 2009 has been vetoed by Germany.
Nobody should be surprised that Germany has become the greatest threat to Europe. Germany is to big a power to co-exist comfortably with its European neighbors in any political structure ruled purely by national interests. Yet it isn't big & powerful enough to dominate its neighbors decisively.
(so they have resorted to scaremongering)
The question is not weather Europe will agree to live under German leadership, but weather Germany will agree to live under EU leadership - or weather the other nations must form a united front against Germany to prevent the destruction of Europe, as they have repeatedly in the past.
(Germany need Europe & not the other way around, so I imagine that "days of wine & roses" were promised as incentive to form the EU in the first place.
Germany, believing at all time that they would lead a German Europe & not co-exist in a European Germany as they initially eluded to.Indeed the TTIP is Germany & the US - siblings running in the tall grass.)

Rik said...

ore important was how close were the Zjermans. According to the DNB chef they worked together with Germany on an exit plan.