“If we want to achieve a sustainable Europe that is ready for the future, then we must be willing to do what it takes: It requires us to better harmonise our economic policies, and to jointly invest in sustainable growth. Firmly based on member states assuming responsibility for putting their own house in order,” President of the Dutch central bank Klaas Knot said yesterday.
Knot admitted that the current model has led to divergence among EU member states and added that countries with stronger economies, such as the Netherlands, have benefited more than countries with weaker economies.
Referring to Italy and Greece, he said their levels of public debt would still be too high to weather another recession without taking far-reaching austerity measures.
“They will have to go to great lengths to maintain public investment under these circumstances. Foreign investors will not be thrilled by the prospect of a structurally higher tax burden. This means there is a risk that these countries could fall further behind again. Which would again overshadow our objective of creating a stronger monetary union.”
He emphasised that alignment implies reciprocity, and a fair division of rights and responsibilities.
“For us, here in the Netherlands, it would mean having to relinquish a degree of our national autonomy. I realise that is a difficult step to take. No country is prepared to give up part of its sovereignty lightly. It takes courage. And what will we get in return? The prospect of a more stable and prosperous monetary union, in which all countries equally share the costs and benefits.”
“We could also choose not to work towards further European integration and more risk-sharing. That’s also an option, certainly. But there is a price to pay for that option. The price involves increasing economic inequality between the euro countries, more debt crises, more emergency support and lower levels of prosperity. It would make the euro unsustainable,” he warned.
Read the full speech in English here.