It's official: the euro zone is in recession. Figures released today show a 0.2 percent fall in growth in the zone as a whole for the second quarter in a row.
Against this background, the world's heavyweight economies are heading for the G20 summit in Washington this weekend to deal with the aftermath of the financial crisis. And the Netherlands will be punching above its weight. There is an extra seat at the table reserved for the Dutch.
Prime Minister Jan Peter Balkenende, however, had to fly back from Washington even before the G20 began because his father had died. The Netherlands will be represented at the summit by Junior Finance Minister, Jan Kees de Jager.
It's being billed as the most historic financial summit since the Bretton Woods conference laid the foundations for the World Bank and the International Monetary Fund more than 60 years ago. Around the world, the effects of the financial crisis are taking their toll, as more and more countries slip into recession.
SlumpEurope's largest economy, Germany, reported it was in recession this week, followed by Spain and Italy. France is teetering on the brink, with only 0.1 percent growth in the third quarter. In the Netherlands there was zero growth. The euro zone as a whole is in a slump. With this added pressure, all eyes are now on Washington, as the G20 countries meet to come up with a plan to prevent such a crisis from ever happening again.
The Netherlands is too small to be part of the G20. Its members are the big industrialised Western countries, the European Union, Russia, and the major new economies like China, Brazil and India. But two days before the summit was due to begin, word finally came from the Elysée Palace: Dutch Prime Minister Jan Peter Balkenende would also be allowed to join the meeting aimed at securing the world's financial stability. The invitation came personally from French President Nicolas Sarcozy, as France currently holds the EU presidency. And after all, it's only fitting. It was the Netherlands that took the lead in tackling the financial crisis in Europe.
Prime Minister Jan Peter Balkenende made no secret of the fact that he wanted to join the meeting in Washington. When no invitation arrived on the mat, he used another tactic to get his point across. He and Finance Minister Wouter Bos sent in an article to the French newspaper Le Monde and the German edition of the Financial Times setting out their views on financial sector reform.
Mr Bos and Mr Balkenende made three concrete proposals:
• Stop the payment of excessive bonuses to bankers.
• Introduce a European system of supervision and crisis management, to enable a swift joint response to any future problems.
• Give the International Monetary Fund a firmer mandate to oversee the policy of national governments.
Roel Jansen, socio-economics editor of the Dutch newspaper NRC Handelsblad, predicts that the proposals won't be ignored at the summit.
"These are far-reaching measures which by no means everyone in Europe agrees on, but you'll see that they'll feature in the discussion this weekend."
No plan
Jansen and a colleague reconstructed the Dutch role in the European approach to the crisis.
In September Europe had a rude awakening from the dream that the crisis would mainly affect the United States. On the other side of the Atlantic, major banks and insurers were rocking on their foundations, and Treasury Secretary Henry Paulson made 700 billion dollars available to take over bad loans and provide safety nets. Meanwhile, Europe had no plan.
The Finance Ministry in The Hague realised something had to be done. One senior official had seen the light, as journalist Roel Janssen discovered.
"The Dutch deputy chief treasurer Bernard ter Haar went home one evening and thought, 'I've got to come up with something.' And he simply sat down at his computer and worked out a page of proposals. The next day he handed them to the minister."
Mr Ter Haar proposed putting money directly into banks, instead of taking over bad loans. Direct capital investment would strengthen the banks' financial buffer.
Momentum
Finance Minister Wouter Bos asked Mr Ter Haar to discuss his ideas with his counterparts in other EU countries. There was immediate interest from Britain. British Finance Minister Alistair Darling called Wouter Bos, and the plan gathered momentum.
At a mid-October emergency European summit, British Prime Minister Gordon Brown presented the Dutch plan, and as a consequence the other countries hailed him as leader. Mr Sarkozy was enthusiastic and - in the words of Roel Janssen - "they set off into the world together". The Netherlands didn't take the credit, but Janssen believes it did earn respect in Europe.
"After all, it was a highly innovative idea, which was first put forward by the Netherlands, and was then embraced by the others. And everyone now says, 'That's the way to do it'. And even the Americans are doing it now, so they've made the best of a bad job."
Plenty of money
It is this recognition, added to the article by Mr Balkenende and Mr Bos in the international press, that has ultimately led to the invitation to the G20. Will the Netherlands have any say at the meeting? Roel Janssen thinks so. The country is taken seriously in the international financial world because of the large number of major Dutch-owned banks and insurance companies.
What's more, the Netherlands has a huge savings surplus, which means plenty of money, and that does a lot to bolster the country's political position. This will be handy for Mr Balkenende in Washington at the weekend. Because with no extra weight behind it, in the end at "Bretton Woods II", the Netherlands is just a little country pulling up a chair with the superpowers.
Marina Brouwer & Michael Blass
Radio Netherlands
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Will the G20 be able to reach any agreement? Listen to economist Will Hutton, author and columnist for The Observer in London.
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