The Bomb From The Dutch Freedom Party Is Finally Delivered...Timed to hit just before the PSI probably hits rocky waters later this week , before the March 9th conference call for the euroGroup to dicuss Second Greece bailout and before the March 20th 14.5 billion debt payment Greece is scheduled to pay

http://www.telegraph.co.uk/finance/financialcrisis/9124815/Dutch-Freedom-Party-pushes-euro-exit-as-2.4-trillion-rescue-bill-looms.html

Dutch Freedom Party pushes euro exit as €2.4 trillion rescue bill looms

The Dutch Freedom Party has called for a return to the Guilder, becoming the first political movement in the eurozone with a large popular base to opt for withdrawal from the single currency.

Geert Wilders made his decision after receiving a report by London-based Lombard Street Research concluding that the Netherlands is badly handicapped by euro membership Photo: EPA

Report Shows Netherlands Would Benefit by Leaving Eurozone; Country by Country Aggregate Costs; Dutch Freedom Party Wants Euro Exit Referendum; Critical Juncture for Eurozone

"The euro is not in the interests of the Dutch people," said Geert Wilders, the leader of the right-wing populist party with a sixth of the seats in the Dutch parliament. "We want to be the master of our own house and our own country, so we say yes to the guilder. Bring it on."

Mr Wilders made his decision after receiving a report by London-based Lombard Street Research concluding that the Netherlands is badly handicapped by euro membership, and that it could cost EMU’s creditor core more than €2.4 trillion to hold monetary union together over the next four years. "If the politicians in The Hague disagree with our report, let them show the guts to hold a referendum. Let the Dutch people decide," he said.

Mr Wilders is not part of the coalition. However, the minority government of Mark Rutte relies on the Freedom Party to pass legislation. The two men were in talks on Monday on €16bn of fresh austerity cuts needed stop the budget deficit jumping to 4.5pc of GDP.

The study said the eurozone cannot survive in its current form. The longer Europe’s politicians dither, the more costly it will become. "The euro can only survive if it becomes a fiscal transfer union with national sovereign debt subsumed in eurozone bonds," said co-author Charles Dumas.

Greece will opt for a "negotiated exit" later this year, once the pain becomes excruciating. This will be after the French elections in May, but before the German electoral season begins in 2013.

Portugal will follow in "short order" as markets focus on its struggling banks and nasty logic of recession for debt dynamics. "At that point, if not before, attention will turn to Spain and Italy, both likely by then to be much weakened by savage austerity programmes now being implemented," said Mr Dumas.

That is the moment when the creditor core will face the decision they have "ducked" for the past two years: either accept an EMU reflation strategy, along with debt pooling, fiscal union, and transfers; or accept a break-up.

Under an "optimistic scenario" it would cost €1.3 trillion to shore up Med-Europe, rising to more than €2.4 trillion if Italy and Spain need some form of bond relief. "The staggering trillion bill to preserve the euro only takes us to 2015. In reality, most of the debts will never be repaid and subsidies will need to continue, year in and year out," said Mr Dumas.

The report said exit by Italy would be relatively easy. The country would recover once it regained currency freedom, though foreign bondholders would take an exchange rate hit. Spain’s exit would be harder to manage since it has a primary budget deficit of 7pc of GDP, and its companies have large euro debts abroad.

Exits costs will rise relentlessly for both countries over time. Prolonged economic depression within EMU would render their debt mostly worthless in the end. So if there is to be break-up, "the sooner the better".

Italy and Spain are more likely to hang on as long as they can, until Northern patience snaps. Germany and Holland would then leave, causing a general return to the "sanity" of floating currencies.

The report said Holland had fallen behind non-euro Sweden and Switzerland since the launch of EMU. Its growth rate dropped from 3pc over the preceding 20 years to 1.25pc under the euro, compared with 2.25pc in Sweden and 1.75pc in Switzerland. The Swedes have stolen a march worth €3,500 per head over the past decade.

The report said Sweden and Switzerland have performed better on every front, relying on currency swings to check imbalances. "They created more jobs than the Dutch and especially the Germans. They enjoyed lower inflation. They were more successful in balancing their budgets. And they have run larger current account surpluses. Only wishful thinking could absolve the euro from blame."

Holland had enjoyed a "one-off" gain of 2pc to 2.25pc of GDP from the launch of the euro, and transaction costs have fallen. However, the trade benefits have been scant. The value-added share of exports has not risen.

The pan-EMU convergence in borrowing costs cited for many years as the great success of EMU proved to be a curse. It let the South borrow too cheaply and too much, lulling creditors into a false sense of security, and ultimately led to the debt crisis.

The report conclude that EMU membership "locks the Netherlands into a system in which cost competitiveness is matched by massive structural over-valuation of costs in Med-Europe, resulting in deficits that will suck cash out of the core Eurozone".

Mr Wilders said the study "goes against everything we are told in the media and by the left-wing elite on a daily basis".

The Dutch government is unlikely to pay any attention to the findings, but the Freedom Party’s populist campaign may force Mr Rutte to take an even harder line in loan talks with Greece, Portugal and Ireland, or over the expansion of the EFSF rescue fund.

The Dutch are major net contributors to the EU budget and have long resented serving as a cash cow. They rejected the European Constitution by a wide margin in 2005. A bitter edge has crept into Dutch political discourse.

Mr Wilders is known for his astute political instincts. His demarche tells us all too clearly that Dutch patience is wearing very thin.

and.....

Report Shows Netherlands Would Benefit by Leaving Eurozone

Inquiring minds are reading a 73 page detailed report The Netherlands & The Euro that explains country by country why Italy, Greece, Portugal, and Spain are going to need lots more money, and the Netherlands and Germany will end up footing the bill.

The study highlights the fundamental flaws of the Economic and Monetary Union (EMU), the damage done by the euro to date to the Netherlands, and the potential costs down the road. The report conclusion is Netherlands should exit the EMU.

Here are some snips from the report regarding the finances of Italy, Spain, and Portugal. 

Italian Projections

It cannot be assumed that roll-over of existing debt as it matures can be done with private lenders, as in the past. Italy has virtually zero real growth, and interest rates that, at 6% or so, are 4-5% ahead of likely future inflation. A government debt burden well over 100% of GDP in a country whose real interest rate exceeds its real growth rate by 4% or more is theoretically unsustainable. The debt ratio is almost certain to mount indefinitely. In this context, it is realistic to analyse a scenario in which financial markets conclude that Italy has slipped into the “Greek trap”. In that case, official Eurozone financing will be needed not just for the budget deficit, but to refinance maturing debt as well. This would be a major added burden, as Italy’s maturities are €305 billion in 2012, €175 billion in 2013, and €140 billion in 2014 and 2015, before falling below €100 billion a year. In this scenario, financing Italy within the Eurozone could quadruple in cost to a five-year average of €250 billion a year.

All of the above highlights the risk that Italy’s debt will increase its net ratio to GDP from 100%. But the SGP, Maastricht criteria, and recent pact to “save” the euro, all require that Italy reduce its gross debt ratio to 60% of GDP or less. Clearly there is not the slightest chance of this within decades, unless Italy quits the euro and inflation rises. The setting of this target is fantasy – the 60% number is arbitrary, relating to no rational (or achievable) objective, though for Italy in the euro, with negligible potential nominal growth, the sustainable limit of government debt is clearly far below the current level.

Spanish Projections

Portugal is in desperate trouble – well beyond rescue, with business net debts at 16 times net cash flow – and Spain, and possibly France, in serious trouble: their ratios of around 12 times net cash flow being about that of Japan in 1996 that was followed by six years of zero growth. The analysis here will focus on Spain, its grim conclusions simply being grimmer for Portugal. French risks will be seen to be less.The Spanish government has actively pursued a tighter fiscal stance, in line with the current Eurozone insistence on austerity. It is likely to prove counter-productive. Unemployment has already mounted from 8% in late 2007 to over 20%. The government’s GDP estimates have ceased to be credible, registering a real decline of just under 5% in the recession, with negligible recovery since. It is highly improbable that such a recession, less than that of the US, Germany or Britain, would lead to a 12 percentage-point rise in unemployment, even with the lay-off of masses of low-productivity casual construction labour, much of it migrants from eastern Europe. But, as elsewhere, denial followed by bluff has been the standard Eurozone response to critics throughout the crisis. Almost certainly, the true fall in GDP has been much greater.

Spain’s business finances, in the context of austerity, are caught in the same vice as Italy’s government finances. As long as they stay in the Euro, austerity is worsening, not reducing, the debt problem. The only solution to these debt problems is growth, and that is precisely what the Berlin-Brussels-Paris political élite is ensuring will not happen.

The risk, obviously, is to the Spanish banking system. Even after Japan’s six-year “drying-out” period, its banks had to undergo a substantial debt write-down in early 2003 (8% of GDP) before economic recovery became sound. In Spain, it is unlikely that exaggerated asset values – especially in real estate, but also in business generally – can withstand the coming economic downswing. Once they start to tumble, the call on the government to bail out the banks could cause its debt to soar. This is like Ireland a couple of years ago, when it dealt with the business debt problem, so that government debt, which has soared, now accommodates the business debt excesses of the boom. A recession in Spain now probably implies serious debt service problems in business, asset liquidation leading to falling asset prices, and major bank write-offs requiring government recapitalisation. There is a major danger that current austerity policies will lead straight to depression.

Portugal Projections

Portugal will probably be out of the EMU quickly if Greece goes, and this will bring the focus onto the two large Med-Europe countries, Italy and Spain, of which Italy will probably be “next up”. The debt crises of Ireland, Portugal and Spain (in order of overall debt/GDP ratio, all of them with a higher ratio than Greece or Italy) lie in the private sector, and are therefore “slowburn”. In Portugal, where the chief export market is potentially recessionary Spain, where cost competitiveness is worse than Spain, and the business debt burden much higher at 16 times net cash flow, as is government debt relative to GDP, the private sector is actually still in deficit – the current-account deficit is larger than the budget deficit.

It is almost impossible to see how Portugal can avoid a crash. It is a poorer country than Greece, so the Franco-German decision to insist on no further government debt write-offs after Greece means the country is likely to be returned to penury – having in any case had very little growth since it joined the euro at its inception.

In this projection of Portuguese financial needs, the assumption is that coping with the extremity of business debt ratios creates a crisis that requires the write-off of existing debt over three years, as in Greece above. The projected government debt of zero in 2015 is therefore fictitious in the sense that the existing debt will have been replaced by a large volume of government debt to finance a banking recapitalisation. This could be substantially larger than Ireland’s 2010 31% of GDP, as Portugal’s business debt is larger than Ireland’s was. Portugal’s future debt capacity will be extremely low, as it has negligible potential growth and, assuming it stays in the euro, no inflation either – yet market interest rates are likely to be quite high.Austerity + Subsidy – Not a Cure

In summary terms, curing a country’s excessive debt problem requires one (or more) of the three ‘de’s: devaluation, default or deflation. The Eurozone has ruled out the first two – and adopting the third seems likely to achieve a fourth ‘de’: depression.

With unchanged Eurozone membership, the only method of adjusting costs and prices in Med-Europe to be competitive without extreme and constantly reinforced austerity, leading to depression, would be stimulation of rapid inflation in The Netherlands and Germany for a decade or two; and acceptance over that adjustment period of large fiscal subsidy payments to the deficit countries – not loans to be repaid later, but unrequited transfers. Such transfers are already happening through banking systems being subsidised by access to the ECB’s repo “window” to finance themselves at interest rates well below those paid by their own governments

The danger for The Netherlands is that the potential for subsidy needed by Med-Europe is open-ended. All official scenarios are based on a rapid reversion to recovery, both in Eurozone economies and financial markets. Official scenarios never anticipate recession or financial crisis. This is part of the problem. The imbalances that are poisoning the Eurozone economies cannot be acknowledged because their cure, once they are acknowledged, clearly requires major exits from the euro, or its disbandment. Unacknowledged, they remain unaddressed, so continued financial deterioration is likely, unless the core Eurozone countries step in and provide the continuing subsidies outlined above.

Aggregate Potential Costs of Current EMU Membership

Dutch Freedom Party Wants Euro Exit Referendum

Bloomberg reports Dutch Freedom Party Wants Euro Exit Referendum

The Dutch Freedom party wants voters in the Netherlands to decide in a referendum whether the country should return to the guilder, De Telegraaf reported today, citing an interview with party leader Geert Wilders.

The Freedom Party hired Lombard Street Research to investigate the cost of maintaining the Euro zone and alternative scenarios if countries elect to leave, according to a statement by London-based FTI Consulting. The report will be presented in The Hague on March 5.

How Significant is the Dutch Freedom Party?

Inquiring minds may be wondering how big and influential the Dutch Partij voor de Vrijheid (‘PVV’, the Party for Freedom) might be. It's a good question, too. The short answer is the PVV is a critical part of the coalition holding the Netherlands government together.

Reuters explains in commentary from November, Analysis: Populists exploit euro zone crisis to gain influence

In the Netherlands, eurosceptic politician Geert Wilders is staging a campaign which could push the minority government to the brink of collapse after barely a year in power.

Last week, Wilders proposed that the Netherlands should hold a referendum on whether to ditch the euro and embrace the Dutch guilder again, pending a study of the long-term economic costs.

The government relies on the support of Wilders's Freedom Party (PVV), even though it is not in the ruling coalition.PVV won the third-largest number of seats in parliament in elections last year, mainly because of its tough stance on immigration and Islam. It has a pact with the coalition of Liberals (VVD) and Christian Democrats (CDA), giving the pro-euro government the majority it needs to pass legislation.

Wilders denies he wants to bring down the government over the euro but he is playing up a split on a major issue between the coalition and the party on which it relies for survival.

"The euro and Europe is the key element of our foreign policy. How can we have a split between VVD-CDA who strongly support Europe, and PVV? This is the most dangerous issue for our cabinet," Eijffinger told Reuters.

"If you disagree on such enormously important issues then it becomes harder and harder to avoid accidents. At a certain moment it will accelerate."
The Freedom Party has become the second-most popular party in Dutch opinion polls, mainly because it opposes the costly bailouts of the euro zone's heavily indebted members.

By proposing a referendum, Wilders has heightened tensions between his party and the government. The euro zone debt crisis has already toppled several governments and now threatens to engulf Dutch Prime Minister Mark Rutte.Rutte has shot down the idea of quitting the euro, saying it would be disastrous for the export-oriented Dutch economy.

But his government has been criticized for supporting bailouts of countries such as Ireland and Portugal, and a stability fund intended for future rescues as the euro zone debt crisis spreads like wildfire to bigger economies like Italy.

Opinion polls suggest many Dutch still hanker for the guilder, and resent having to pay for Europe's more profligate members, particularly while the Dutch government is cutting spending on healthcare, education, and social security benefits.

A poll at the weekend found 32 percent favored quitting the euro, 60 percent were against leaving, and 43 percent wanted a referendum on whether to return to the guilder. Another poll found that a majority wished the country had stuck with the guilder.

With elections due in 2013, Austria's Freedom Party is neck and neck with the governing Social Democrats and ahead of the conservative People's Party, the junior party in the coalition.

"Now even Paris and Berlin are thinking about splitting up the euro zone. We in the Freedom Party suggested this at the start of the euro crisis because in truth it is the only correct solution. This is the only way to save Europe," Strache said.

In an interview with the newspaper Oesterreich in May, he warned: "We have to get out of the euro before it plunges us into the abyss. We need a new currency along with other strong-currency countries."

Critical Juncture for Eurozone

This new report could very well topple the government of  Dutch Prime Minister Mark Rutte. Put that bit of news together with the fact that French Presidential candidate wants to redo portions of the just signed "Merkozy" treaty. Polls show French president Nicolas Sarkozy will not survive the next set of elections.

German chancellor Angela Merkel is rapidly losing support as well. Ironically, the breakup of Merkel's coalition might be to a coalition wanting to lend still more support the nanny-zone.

Regardless, the net effect of the demise of the governments of Germany, France, and the Netherlands would be for far more feuding, adding to the overall pressure for a eurozone breakup.

The eurozone is at a critical juncture now. If governments in the Netherlands, Germany, and France collapse, and I think they will, the eurozone could be nearing the inevitable breakup stage already.

and the report above follows the news that the Dutch will miss their deficit goals as welll as Spain ....

http://www.washingtonpost.com/business/economy/more-dutch-austerity-coming-as-think-tank-says-budget-deficit-to-remain-at-45-percent-in-2013/2012/03/01/gIQAp3xxjR_story.html

THE HAGUE, Netherlands — Dutch Prime Minister Mark Rutte, a harsh critic of violators of the European Union’s sound budget rules, acknowledged Thursday that his government will far exceed the EU-mandated maximum budget deficit.

“We are missing all the deficit targets we set for ourselves,” Rutte said in Brussels after a government think tank reported the country will post a 4.5 percent budget deficit this year, well over the 3 percent maximum deficit allowed under EU rules.

The excessive deficit is forcing Rutte into budget slashing talks with his coalition partners. Leader of the free-market VVD party, Rutte came to power in 2011 pledging to cut spending by €18 billion ($24.2 billion) and now has to cut at least €9 billion ($12.1 billion) more.

The Netherlands is a fierce critic of reckless spending by other EU nations, notably Greece, and prides itself in its own financial rectitude.

Now Rutte faces tough negotiations with his coalition partner the Christian Democrats and anti-Islam lawmaker Geert Wilders, whose Freedom Party supports his minority government on key votes, but is not part of the coalition.

“We must not be blinded by the numbers,” Wilders told Dutch national broadcaster NOS. “We have to do what is good for the Netherlands, good for Dutch citizens and good for the economy.”

In the budget talks starting Monday, Wilders is expected to call for slashing overseas aid and further cutting the budget for immigration and integration of new migrants — moves that would likely be unpalatable for Christian Democrats.

Mindful of Wilders’ EU-critical views, Rutte insisted his government will not cut spending because the EU wants that, “but because we ourselves think that is necessary.”

Rutte spoke to reporters on arrival at an EU summit that was to debate Europe’s prospects for economic growth.

The Dutch economy is currently in recession, but the Central Plan Bureau forecast that it will grow by 1.25 percent in 2013.

The AAA-rated Dutch economy has long been considered one of Europe’s strongest, but as a trading nation with a large banking sector, the Netherlands has been hit hard by the financial crises in recent years.

The head of the , Coen Teulings, this week warned that insisting on EU nations meeting the 3 percent deficit target next year could only deepen the region’s financial crisis.

“Immediate austerity measures would aggravate the recession,” Teulings wrote in an opinion piece for the Financial Times, co-authored with Jean Pisani-Ferry, director of the European economic think tank Breugel.

In the past when Wilders has refused to support the government, Rutte has managed to shore up his majority with the help of opposition parties. But the opposition is now calling on Rutte to kick start the recession-hit Dutch economy and promote economic growth instead of slashing spending.

“This Cabinet’s economic policy is bankrupt,” said Jeroen Dijsselbloem of the main opposition Labor Party. “Tough austerity measures damage the economy. The Cabinet has hit a dead end. Things have to change.”