Dijsselbloem is right!

 

Jan Joost Teunissen

Just a few days ago, I was disappointed by Jeroen Dijsselbloem ... and now I am excited and would like to give him a compliment, even a great compliment!

He challenged the financial sector, telling them that from now on it would not be the taxpayer who would pay for the risks they have taken, but themselves and that the party - where profits were private and losses borne by the community - was over!

Naturally he received a lot of criticism for his surprising stance, both as leader of the Euro group and as Minister of Finance of the Netherlands. The criticism came, not surprisingly, from people who had set aside a lot of money in the Cypriot banks. And it came from politicians who said that, okay, he was right to finally tackle the financial sector, but he should have done this silently and not openly and publicly as it would stir emotions in the financial markets and among savers who would no longer trust that their money was safe in the banks. Thus it could prompt a widespread run on European banks when the next banking crisis emerged in another European country. And if that country were a large country, then the whole euro system might tumble. It would not be the first time that a chain reaction would damage the world financial system. This young and inexperienced Dutch minister of finance has behaved incompetently and irresponsibly. He should be replaced as soon as possible by someone more experienced who is familiar with financial markets and knows what one can say and do, and what one cannot say and do!

Since late Tuesday evening I have followed the harsh and emotional attacks on Dijsselbloem. What was actually the criticism? No more than that he had sown anxiety among people who work in the financial markets or among people who defend the markets through thick and thin. And, obviously, among savers who have put more than 100,000 euros in the Cypriot banks that are now being "cut up" or dissolved.

Dijsselbloem’s new policy is clear: "Shareholders, bondholders and big savers: from now on, you will have to contribute to the rescue or restructuring of a bankrupt bank."

Good, I think, finally there is the beginning of a change of policy vis-à-vis the financial sector! It's high time!

The only exception I would make is for people and companies in Cyprus that are "unreasonably" affected by the new policy of Dijsselbloem and his colleagues. If a business customer of a bank has all his money in a bankrupt bank, it seems unjust that he will lose an important part of the money that exceeds 100,000 euros. If I would still be in the position that Fondad would have over 100,000 euros on a business bank account and I would have established Fondad in Cyprus instead of the Netherlands, I would now protest and say that our work was made impossible if our bank was dissolved and we had lost a significant portion of our revenues.

For the rest, I have nothing but praise for the initiative by Dijsselbloem, and his openness about it. Without that openness, without the media echoing his words, the financial sector could have continued to lean backwards and let the taxpayer pay for its risks, revenues and losses.

I hope Dijsselbloem’s initiative will be the beginning of a democratization and socialization of the international financial system, in which governments and politicians take back the reins instead of, as they have done way too long, giving the financial sector free play. The current crisis in Cyprus, in Europe and in the rest of the world, gives good reasons for such democratization and socialization.