Toespraak minister Hoekstra tijdens ASE-Next! event
Minister Hoekstra (Financiën) sprak tijdens het ASE-Next!-event van de Universiteit van Amsterdam op woensdag 27 februari 2019. De tekst is alleen in het Engels beschikbaar.
Ladies and gentlemen, students and alumni,
It’s a privilege to be here today. Roel, thank you for your introduction and your invitation. I know you to be an outstanding economist, and you do fantastic work for the European Fiscal Board, one of the financial system’s key watchdogs. And we don’t have nearly enough watchdogs. Professor Massimo Giuliodori, it’s a pleasure to finally meet you.
Ladies and gentlemen, I’d like to talk to you about my experiences in Europe as Minister of Finance of the Netherlands. About what I’m trying to achieve and how. But I’ll begin by telling you a bit about my personal experiences when I was the same age as the students here in this hall.
First let me ask you a question: how many of you came from abroad to study here? I’m delighted that you’re here. And how many of the Dutch students have spent time abroad? To those of you who haven’t yet, I’d say: get out there and broaden your horizons!
Because studying or living abroad will benefit you much more than you think. Of course, you’ll encounter a different education system and alternative perspectives on science and scholarship. And if you’re Dutch, you could choose a destination that’s sunnier and drier than you’re used to at home. If you were to go to Rome, like I did, you could trade in your boerenkool (that’s kale and potato puree, for those who haven’t tried it yet) for the best pasta dishes in the world. Massimo made the opposite choice and I’m curious to hear what he thinks of Dutch cuisine.
But much more important is what you learn about yourself, about your home country and about other cultures. You learn that, in essence, people aren’t all that different. But our customs, social codes, norms and values can differ a lot. These are lessons that will raise your EQ much more than your IQ. You’ll gain a greater understanding and empathy for others that will benefit you for the rest of your life.
During my year in Rome, one evening – out of the blue – my landlord invited me and the other tenants out to dinner. A bunch of other people joined us too, including a few that my landlord hardly knew. People just kept coming and we had to find more and more chairs. This would never happen in the Netherlands. When we get together there’s a definite reason. And we make plans months in advance, checking our diaries, negotiating endlessly about dates and locations. And it’s simply not done to bring someone else along unannounced, let alone 10 people. The internationals here will no doubt recognise this.
This is only one example. But the lessons I learned – big and small – in Rome, St Maarten, the United States, Singapore and on my travels in Asia still help me today in my contacts with international colleagues. This doesn’t solve every problem, but it cultivates empathy and understanding.
And that’s important. Because as a finance minister, I spend a lot of time with international – and primarily European – colleagues. Anyone who follows the news about Europe – as I’m sure you all do – knows that there’s a lot going on in the world of finance. I wouldn’t say that the way of life I encountered in Rome – and truly enjoyed, by the way – is linked to Italy’s current budget challenges, because that would be too simplistic. It would be like saying I think what I think because I’m a Calvinist Dutchman.
Ladies and gentlemen, why is Europe a daily concern? Most of the people in this room only know Europe as a peaceful continent without internal borders. But the idea of European integration was born from the ashes of two devastating wars. The goal was a strong Europe, where economic cooperation would provide a foundation for peace and security. I lived in Berlin for many years. And after the Wall came down, I felt more acutely than ever before the need for a united Europe that can protect its people.
And that promise of protection, peace and prosperity has been fulfilled in the past decades. Today, European cooperation also offers countless opportunities for technological advancement and sustainable economic growth. For the Netherlands, there is no better alternative. We can’t and don’t want to go it alone.
Europe is a precious asset that deserves our full attention. To preserve it, we need to tackle issues and changes in many areas, including geopolitics and defence. But today I’ll limit my remarks to matters of finance and economics. And that makes sense, because the European Union was built on a financial and economic foundation. We must continue working to ensure that the EU is stable, robust and resilient. So that when the next crisis strikes, the people of Europe can emerge unharmed.
Unfortunately, the bad news is that we aren’t there yet. We’re nowhere near being ready for a severe economic downturn. During the last crisis, most member states worked hard to improve their public finances, boost growth potential and make their financial sector more resilient. But now that the economy has recovered, these efforts have stalled. The mountain of debt is considerably higher than before the crisis. Reforms have only been partially implemented. The banking union isn’t finished yet. And we’re acting as if states aren’t running any risks. The period of relative calm we now find ourselves in won’t last because we’re on shaky ground. We’re repeating mistakes of the past. We’re risking the purchasing power of future generations. That means you.
Ladies and gentlemen, we don’t have our shared house in order yet. Some EU countries are eager to add new storeys now that the foundations are there. But I wonder if that’s wise. We need to reinforce the foundations first. In the meantime, yes, we can think about the conditions for expanding the house of Europe.
What does that mean for the Netherlands’ position? And what do I stand for as its finance minister? First of all, I’m firmly committed to the agreements in the Stability and Growth Pact. More than 20 years ago in Maastricht, the member states agreed that national debt should be limited to 60 per cent of GDP and government deficits should not exceed three per cent of GDP. The reality is very different today. The fact is, average government debt in the eurozone was nearly 90 per cent of GDP last year. And some countries have great difficulty keeping their budget deficit below the 3 per cent limit. Even in good economic times like these.
I understand that the 3 per cent deficit norm and the 60 per cent debt limit are fairly arbitrary in themselves and the member states could have opted for different numbers. But that’s not the point. The point is we made these agreements more than 20 years ago for a reason. Good rules contribute to society. And these budgetary rules foster a healthy and resilient economy. If the 19 euro countries had their budgets in order, there would be 19 national buffers. 19 economies capable of weathering heavy storms. This would make the eurozone as a whole stronger. And prevent taxpayers from other countries having to foot the bill for those that don’t have their economy in order.
My second point is related to the first: how do we make sure we can live up to these agreements? The only way is for countries to reform. The structure can only withstand the test of time if member states transform their economies to meet the challenges of the 21st century: an ageing population, a growing dependence on technology and an increasingly flexible labour market. But that won’t be easy, because in the short term reforms tend to provoke alarm and dissatisfaction among the public. Reform requires courage and leadership. With the recent yellow vest protests in France we’ve seen how political will sometimes clashes hard with reality.
The third point I’d like to make is this: when a member state with unsustainable debt asks for help, investors must be the first to help pay for the bailout. I want to prevent a situation where we privatise profits and socialise losses. Investors in government bonds are aware of the risk they’re taking. It’s only logical that they share in the costs. The other member states – and by that I mean the taxpayers of Europe – shouldn’t have to foot the bill.
The same goes for the banking union, and that is my fourth point. The banking union is a kind of fire insurance. You know how it works: the more policyholders there are, the lower the insurance premiums.
However, there’s a big ‘but’: the risk that participants run must be comparable. If you all live in a stone house, and I live in a haystack, you would be less inclined to participate in the same policy as me. Here and now, and in the future. That’s why banks need more buffers. Banks need to do something about their non-performing loans. The risk-weighting of government bonds on bank balance sheets must be improved, so that taxpayers don’t get stuck with the bill. In short, we must first reduce the risks before we share them. Reducing the risks must and will be the first step. Sharing risks can only be the second step. These are essential conditions for working towards a European deposit insurance scheme.
My fifth and final point is this. The Netherlands believes that ambitions for the capital market union should be higher. Our economy relies on companies that want to grow and innovate. And they need capital to do that. In Europe, companies are too dependent on banks for capital. So in times of crisis when banks tighten up their lending practices, you want to be able to tap other sources. The example of the US shows that there’s much to gain in terms of cross-border absorption of shocks through capital markets. The availability of venture capital fosters startups, which are crucial for growth, productivity and job creation.
So, that was a brief overview of what I want to achieve. But then comes the question: how? This is where some of the skills I acquired as a student come in handy. An important starting point is that you need to make a convincing case and not just try to impose your will. That requires a lot of talking, fine-tuning, and wheeling and dealing.
And now we find ourselves on a new playing field. With the UK’s exit, the Netherlands is losing one of its closest allies in the EU. In Europe we’ve always felt most comfortable when there was balance between Germany, France and the United Kingdom, so Brexit poses a strategic dilemma. We’ve always had strong ties with our neighbours across the Channel, based on shared values and history. Our 2 countries work together closely on security, defence and trade. And the UK has supported the Netherlands within Europe on many of the issues that are important to us, such as modernising the EU budget, reducing overregulation and promoting subsidiarity. Now we’re losing that support and we need to figure out how to respond.
As in the past, we will continue to work intensively with Germany and the other Benelux countries. We’ve also looked for new partners with enough combined weight to compensate for the loss of the UK. Partners that share our views on budget discipline, financial prudence and free trade. We found these new allies in the North.
But that’s not all. We also need to work more closely with France. And we can because there’s more scope for it than in the past. First of all, because we’re both having to cope with the loss of the UK. And secondly, because the current French government is closer to the Netherlands in its views on the need for national reform than many past French governments have been.
On this new and changing playing field, we’re constantly in search of coalitions, agreements and compromises. And behind closed doors, at long meetings that go on deep into the night, negotiations can be fierce. But then it helps to have strong personal relationships that can take a few knocks. I’ll come back in a few years and tell you about some of the fascinating details.
Ladies and gentlemen, I’d like to leave the topic of finance in Europe and turn my attention to the students here today. This is the best time of your life: the world is at your feet, it seems like anything is possible and you have the freedom to embark on a voyage of discovery. But I can tell you that life after university is pretty great, too. I’d like to give you a piece of advice that applies now and in the future: follow your own path. Do what interests you. If you choose a path that truly suits you, success will follow.
Another lesson I’ve learned is that it’s important to ask for help. Look for mentors. I’ve always been amazed by the willingness of people who didn’t owe me anything to help me. Young people often underestimate how much others enjoy talking about their own experiences or introducing you to others. So, don’t hesitate to ask for help.
And the third lesson is for the alumni here today. Whether you’ve just started your career or are already retired, I’d like to share these wise words with you: ‘Life is about learning. When you stop learning, you die.’ It’s true that we learn in the classroom, but – forgive me, Roel and Massimo – we learn even more out in the real world.