Rubicon or Maginot? What’s the line on Dutch resistance to post-pandemic recovery plans?

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Why were the Dutch so reluctant to endorse a post-pandemic economic recovery package for the EU, such as the one proposed by the Commission, backed by France and Germany, chiefly insisted upon by Italy and Spain, and agreed by most other EU members?

Asked by the Italian press to take the Netherlands’ position, I recently wrote a brief analysis in the Corriere della Sera on some of the systemic-yet-hidden reasons that have driven the Netherlands’ coldness towards perceived ‘overly generous’ terms for the original common recovery plan.

Besides arguments in principle, the chief long-term concern for both the EU and the eurozone is Italy. There is little doubt that the decline of an economy ‘too big to fail’ (or bail) has only deleterious effects on our deeply integrated region. Unfortunately, Italy’s demographic and economic outlook to 2050 are ill-starred to say the least. In the worst-case scenario, the country risks slipping into a new Middle Ages era, where nominal unitary statehood is de facto crippled: the manufacturing north bound to Germany; banking, finance, and insurance absorbed by France; and the south left hanging between holiday destination and semi-desertic frontier hot spot.

Not a bright prospect for what less than 30 years ago was the fourth largest economy on the planet, and still today manages to claim a respectable second place for manufacturing among EU countries. In other words, Italy may become again, as it has been for over 1000 years, ‘up for grabs’ to the continent’s great players – with France soon reclaiming from Germany the role of hegemon of the Union (again, demographics – plus, an international standing that Germany can hardly match: an international language, a seat at the UN Security Council, territories scattered across the globe, an apparently formidable military, etc.).

Here, of concern is the weakness of Italy’s institutions. Chronic political instability and a constitutional system designed to produce a weak central government (not to mention limited institutional hold on territorial sub-entities) hobble its ability to adjust to a fast-evolving macroeconomic and geopolitical context, and properly react to crises. Any undertaking Giuseppe Conte (Italy’s current head of government) commits to may not outlast his tenure – which at present is shaky at best.

Not just economic concerns

The 21 July agreement reached by the European Council broaches another aspect that has not emerged in the media yet, but that I think is worth mentioning.

I believe that the current distribution of power within EU institutions is the actual reason driving Dutch Prime Minister Mark Rutte’s resistance and justifying his insistence on both i) tying as much as possible the EU’s recovery plans to the much-voiced ‘EU green deal’ and ii) maintaining European Council oversight with unanimity rule.

Italy currently occupies two of the four key positions that would otherwise exercise co-exclusive control and oversight of any recovery funds: the Commissioner for Economic and Monetary Affairs (Paolo Gentiloni), and the President of the EU Parliament (David Sassoli). And which is the Dutch Commissioner’s current portfolio? The EU Green Deal, of course.
Do you see what I’m seeing?

In other words, an otherwise politically powerless Netherlands (in the context of managing and overseeing the allocation of extra resources and liabilities to an EU budget to which it is already a significant per-capita contributor) insists on maintaining a role in the only organ where it can exercise power (i.e., the Council, through the unanimity rule), and to tie the recovery plans to the Green Deal (headed by a Dutch Commissioner, hence maintaining control over the funds to be assigned, and the subsequent monitoring of their use).

Is all this unfair or unreasonable? From a Dutch perspective, not at all. It is actually all the more understandable in light of the ideological set-up of this Commission, repeatedly (and wrongly) portrayed by Mr. Gentiloni (as well as by European Commission President Ursula Von der Leyen) as a ‘political Commission’. Far from making it more democratic – the word ‘political’ won’t change the nature or powers of the institution – this label is backlashing on what is supposed to be the neutral, executive and administrative (up to technocratic) arm of the Union.

Indeed, under the 2009 Lisbon Treaty, the Commission’s power is already balanced by the EU’s proper political organ and co-decision-maker, the Parliament (democratically elected) as well as the European Council, composed by the heads of governments of the Member States (usually, political and democratically elected as well). To make the Commission a third political actor in this arena not only is institutionally unsound, but also, I believe, a strategic mistake.

Therefore, the overall unstable political climates in several EU member states and institutions results in a generalised – and, to an extent, understandable – lack of trust towards each other and, especially, between contributors and recipients of funds. Here, Italy does well to emphasise its long-term budgetary discipline (the best in the EU), and the fact that it is among the most significant (net) contributors to the EU budget. The (silent) question in everyone’s mind is, however, for how long?

I do not find it surprising that Mr. Rutte, as the head of government of the Netherlands – the ‘largest of the smallest’ but, differently than the Visegrád group and much like Italy, also a founding member and a significant per capita and net contributor to the EU – seeks to generate political capital from his country’s position.

In fact, the Netherlands’ gamble of these past few days at the EU summit is arguably mostly a domestic political bet for Mr. Rutte. The compromise ultimately reached last night formally bows to the Dutch position but enforcing the agreed-upon control mechanisms will require political capital that the Netherlands is unlikely to enjoy by itself in the future.

Especially, after last night.

Hence, what the Dutch Prime Minister has drawn, seems to recall, more than a Rubicon, a Maginot line.

G. Matteo Vaccaro-Incisa is a Jean Monnet Senior Fellow at the EUI’s Robert Schuman Centre for Advanced Studies.