The Dutch minister of finance and eurogroup president Jeroen Dijsselbloem became (in-) famous in Europe overnight, with the handling of the crisis in Cyprus. He is decent, he is smart, and he belongs to the younger generation that is set to take over from Angela Merkel and François Hollande over the next decade. Indeed, it is better to call him Jeroen rather than Mr. Dijsselbloem and keep him as a household name, as common as that of a soccer player, not only since he will stay on the stage for a longer time but also because it is easier to communicate up close rather than over a long distance. If one thing has become clear from the Cyprus event is that Europe has to communicate a lot.
The Cyprus government had four years since 2008 to resolve its banking problem and had refused to do so. In September 2012 the EU presented plans for a European Banking Union. These plans distinguish between system banks that have to be saved at all costs and normal banks that may collapse. The Cyprus government could have read those plans, especially since Cyprus even was the EU-President in the second half of 2012. The Cyprus government still refused to resolve its problems and apparently hoped that the EU would provide ample funds. Alternatively said, the Cyprus banking elite didn’t mind to use its own population as hostages, hoping that the bluff poker would work. The key message from the EU to Cyprus is that the EU did actually help, for otherwise the chaos would be much bigger. It is up to Cyprus now to get rid of its brutal elite, and find similar decent and smart people like Jeroen to clean up the mess.
It is good to know that Jeroen made an entrance on the political stage in Holland in about the same manner as now in Europe. He made his mark as the chairperson of a parliamentary enquiry into education. It is hard to believe, but the system of education in Holland had been spiralling downwards, and Jeroen suddenly was on national television, explaining what had gone wrong and what should be done to repair it. Overnight he was a national hero. A key thing to see is that this fame endured, and didn’t disappear as sudden as it had come, as we see with so many hypes nowadays. Jeroen is there to stay.
Europe has had strange political leaders, like Helmut Kohl from Germany who got lost in an illegal party financing deal and Jacques Chirac from France who got convicted to two years of prison for diverting public funds. With leaders like that, you may question what they say or do. Think of Cyprus again, or of Berlusconi. The Greek who hate Angela Merkel should rather protest against Berlusconi and his lame promises. In any case, with Jeroen, we do not need to fear for this. Jeroen isn’t perfect and may make errors, but given that he is decent and smart, an error still means that no mischief is intended, so that he can learn from mistakes, and he tends to be open to new information that can help to correct such errors.
The key message of this article is that there is new information. Up to now, economic science has been explaining that a common currency like the euro also requires a political union. This is called the theory of the optimal currency area. In the Treaty of Maastricht of 1992, the political leaders created the euro but rejected the political union. The euro indeed was badly managed. Europe now goes from crisis to crisis, potentially making the minds of the population ripe to accept a United States of Europe, and give up national sovereignty, but also with the risk of rising nationalism and the break-up of what already exists.
Now, however, there is a new economic theory, that would allow to maintain both the euro and national sovereignty, provided that each nation adopts its own national Economic Supreme Court (ESC), that supervises national economic policy. The national ESC would be staffed by national economic scientists, who know their nation better than distant Brussels, and who operate under the rules of science, rather than the hidden rules of a distant bureaucracy. The international co-ordination that is required for a common currency comes about by the international scientific co-operation of the various ESCs, that is transparent and open to science and the public. This new economic theory plus a scheme how to handle the euro is discussed in the paper “Money as gold versus money as water” available at the Munich archive for economic papers.
Since I am Dutch and present this analysis from Holland, and since Jeroen is Dutch and is the minister of finance of Holland, readers may think that Jeroen and I have discussed this new theory, and that he is well-informed on this. Unfortunately, it doesn’t work like that. A huge unemployment and political chaos across Europe and complex communications and diplomacies over a few thousand kilometers apparently are required, to cross the few kilometers from my desk to his desk. There is also censorship of science in Holland since 1990. The Dutch Central Planning Bureau (CPB) is not an Economic Supreme Court and does not apply the proper rules of science. Next to “Greek statistics” there is “Dutch economic science”. Thus Jeroen entertains a misperception about the quality of his economic advisors and he lacks information about the new economic theory. Thus Europe needs some education on Jeroen, and Jeroen needs some education on Europe. The best thing that Europe can do is help Jeroen gain more information indeed where this is lacking now.
Thomas Colignatus is an econometrician and teacher of mathematics in Scheveningen, Holland. The article “Money as gold versus money as water” is available at http://mpra.ub.uni-muenchen.de/45759/