Jean Wanningen: "Are you willing to bring €50 billion to the European family?"

European countries must make new agreements on fiscal policy and enforce them more strictly. This is what Jean Wanningen, economist and author of the books 'The Eurofraud' and 'Eurodynamics' argues in conversation with Paul Buitink of Holland Gold. In this way, we will be able to tackle the debt problems of the southern euro countries at the source and prevent us from ending up in a transfer union that will cost us a lot of money. Countries that cannot comply with these agreements must be able to leave the currency union without leaving the European Union.

According to Wanningen, after the euro crisis, European countries went down the wrong road with Eurobonds, which allow them to borrow money jointly on the capital market. According to him, this form of joint debt financing not only lacks a sound financial basis, it also takes away the incentive for the southern countries to put their budgets in order. As a result, we as the Netherlands will pay much more interest on our national debt.

'Transfer union could cost us €50 billion a year'

According to Wanningen's estimates, the costs of a so-called transfer union for the Netherlands alone could amount to €50 billion per year. This is difficult to justify to taxpayers, who are now faced with rising inflation and skyrocketing energy bills. They will not appreciate the fact that we are going to guarantee the debts of other countries. Certainly not if those countries do not take the European budget rules very seriously.

Ultimately, according to the economist, collaboration is the best way to get things done. This applies not only within the Netherlands, but also internationally. "But that doesn't mean you can't make demands of your partners. If the agreements are not kept, what is the point of making them?" According to him, we need to convince the southern countries of Europe that it is also in their interest to abide by the budgetary rules.

Wrong ECB policy

According to Wanningen, we should have used the European debt crisis to put member states' budgets in order. According to him, the fact that this is not happening is partly due to the ECB's monetary policy. The central bank has set up its asset purchase programme in such a way that it can fully reinvest redemptions on government bonds of the Netherlands and Germany in Italian, Spanish and Greek government bonds.

In doing so, the ECB is reducing interest rate differentials between government bonds of different euro countries, which is exactly what Eurobonds are aiming for. This policy will end up costing us a lot of money, because it does not enforce fiscal discipline and distorts the market.

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