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The guilder was exchanged for the euro at an exchange rate that was too low. Instead of the slightly more than 2.20 guilders, the coin should have been exchanged for 1.94. This is the conclusion of André ten Dam in an interview with Holland Gold. He noted that after the introduction of the euro there was a lot of discussion about the price increases in the shops and went to investigate. Between 2005 and 2009, he studied the introduction of the euro and concluded that the Netherlands has indeed suffered an exchange rate loss, as a result of which we have lost purchasing power. Ten Dam spoke to insiders who confirmed his theory.
According to his calculations, the total losses as a result of this too low exchange rate amount to hundreds of billions of euros. We suffered these losses in the period from the digital introduction of the euro in 1999 to 2006. According to him, this is reflected in the inflation figures of that time. Due to the low exchange rate, imports became more expensive and wages lagged behind. It was only after the euro crisis that there was more room for criticism of the euro. Together with Harry Geels, André ten Dam published a report in 2009 in which he warned of the risks of the currency union. That was before the debt crisis broke out in Europe and the central bank had to come up with large-scale support programs to keep the currency union together.
Ten Dam notes that there were many political interests at stake in the introduction of the euro and that critical voices were left out of the debate as much as possible. There was little room for negative comments. He saw that it had a negative effect on the careers of economists such as Arjo Klamer and Alfred Kleinknecht, who were very critical of the design of the currency union from the beginning. The CPB tried to downplay this exchange rate loss in a thin report, which lacked proper substantiation. Ten Dam noticed that in 2005 there was still a lot of interest in his story about the exchange rate loss, but when he finished the report in 2009 there was little enthusiasm for it in the media.
This is despite the fact that the problems of the currency union only seem to be getting worse. According to ten Dam, it is possible to set up the currency union in such a way that we have the advantages of the single currency, but not the disadvantages. This model (named after his son Matheo) is basically the mirror image of how the euro was in the beginning. At that time, the euro was introduced by bank entry and was shown on bank statements, while we still paid with national currencies. The unit of account was the euro and the guilder was used by means of payment. In ten Dam's model, this is exactly the other way around, which means that the euro will remain legal tender in the currency union, but that the national currency will once again become the unit of account in each country.
In this system, countries can devalue and revalue their own currency, just as they were able to do before the introduction of the euro. For example, a country like Greece can depreciate its own currency against the euro. According to Ten Dam, the discussion about these kinds of fundamental reforms is necessary in order to be able to move forward with the currency union and to prevent the mutual relations between the euro countries from coming under further pressure. He foresees major problems in the coming years. However, it is difficult to find support for this alternative implementation of the euro, because it does not fit in with the image of parties that want to keep the euro on the one hand and parties that want to leave the euro altogether on the other. In this video, ten Dam further explains his alternative plan for the currency union.
