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Sunday, 31 March 2013

VVD Politician Jos van Rey in The Netherlands lacks every sense of decency and good taste, as he wants run for the city council of Roermond again

He was a ‘regular’ visitor of these lines in December 2012; the former VVD senator and alderman of the Dutch city of Roermond, Jos van Rey.

Van Rey had been pressed with charges of corruption and of being bribed by the regional project developer and ‘local hero’ Piet van Pol. On top of that, he had allegedly leaked classified information from the nomination procedure for the mayorship of Roermond, to a candidate from his party VVD. These accusations forced Van Rey to lay down his position as senator and alderman.

In such a situation, one would expect that this seemingly failed and corrupted alderman and senator would rest the remaining days until his pension in silence and shame, realizing that he did things that cannot be forgiven to a politician.

Nevertheless, this is not the style of Jos van Rey. From the beginning, he never made the impression that he realized how serious the accusations against him were and just felt victimized by the national and local media, ‘who put him on the fire stake’.

These are the reasons that Van Rey again wants to run for the position of council member for Roermond, probably in order to ‘clean his sheet’ and ‘because he feels that the city needs a man of his stature and competences’.

The desired nomination of Van Rey is an action that outrages 80% of the people in Limburg, who are sick and tired of the solar kings, the corruption and nepotism in their beloved province.

Even the national representatives of the VVD party, who rarely interfere with local politics, rejected the new attempt of Van Rey to become city council-member again.

The Volkskrant ( wrote the following story upon this renewed soap opera, concerning ex-alderman and senator Jos van Rey: “The Limburg empire strikes back”:

Four in five citizens of Limburg reject the idea that Jos van Rey again runs for the city council of Roermond. The National Criminal Investigation Department (i.e. Nationale Recherche) started a legal case against the former VVD Alderman and senator of the First Chamber of Dutch Parliament, into multiple cases of corruption and bribery and leaking of classified information. The aforementioned results came from an inquiry among 1500 citizens from Limburg.

Seven in ten Limburg citizens do not have any trust in Van Rey as a politician. And 72% would consider it not in the interest of Roermond, when Van Rey would return in the city council. Only 13% considers this a positive fact.

Chairman Victor Cillekens of VVD Roermond rejects the poll. ‘The inquiry is held in the whole of Limburg and therefore not representative’, he thinks. ‘It would only be a representative inquiry when it would be held in Roermond alone’.

I have a message for Victor Cillekens of the VVD. This inquiry is not about being or not being from Roermond. And not about being a representative investigation or not. This inquiry is about structural honesty versus corruption and nepotism. And about people being sick and tired of corruption and dishonesty and politicians not understanding this very basic fact.

That Van Rey wants to run as a city council member and (probably) alderman again is understandable: he showed in the past that his judgment in political questions and questions concerning honesty, incorruptability and fairness as a government representative, has been sub-zero. Summarized: Van Rey didn’t and still doesn’t have a single notion that he did something wrong.

However, it is worrisome that chairman Victor Cillekens of VVD Roermond does also not understand that Van Rey is an infected person now: someone, who should never return in a political position anymore, unless he realizes that he did something seriously wrong and takes account for his past actions.

In spite of Van Rey’s inevitable qualities – give the emperor what is his – which should not be forgotten after all, he became a symbol of the fact that the VVD in Roermond seems out of touch with the current times and ideas. At the moment, the VVD in Roermond is a party in distress, which is in desperate need of being cleaned up thorougly.

Before this clean-up happens, the trust of an overwhelming majority of Limburg citizens in some of their politicians will not return anymore.

Saturday, 30 March 2013

Press releases by the Dutch Central Bureau of Statistics, which make minced meat of the current economic policy of the Dutch government

On 29 March 2013, the Dutch Central Bureau of Statistics ( presented two press releases on the Dutch economy.

In my opinion, these press releases made minced meat of:
Here are both press releases by the CBS:

According to Statistics Netherlands’ second estimate of economic growth, the Dutch economy shrank by 0.4% in the fourth quarter of 2012 compared with the preceding quarter. The first estimate, published on 14 February put the contraction at 0.2%.

Compared with twelve months previously, the economy shrank by 1.2% in the fourth quarter. According to the first estimate this was 0.9%. For the whole year, the economy contracted by 1.0% in 2012. The first estimate calculated this to be 0.9%.

On the basis of new information, consumption by the government has been adjusted downwards. Municipalities in particular have spent less than initially estimated. Consumption by households and the trade surplus were also slightly lower than previously estimated. Investment spending remained at the same level. Production by the mineral extraction sector was also corrected downwards.

Employment fell by slightly less than previously reported. Compared with the third quarter, there were 17,000 fewer employee jobs in the fourth quarter. According to the first estimate, the decrease was 18,000. And compared with the same period in the previous year there were 89,000 fewer jobs, not 93,000 fewer. This is a 1.1% decrease. The wage per working year wage was 1.0% higher than in the fourth quarter of 2011.

That the estimate for 2012Q4, which initially spoke of 0.2% contraction in the Dutch economy, has been negatively adjusted by -0.2% yesterday, did hardly come as a surprise for me. In the beginning of 2013, I found it rather surprising that the Dutch economy only shrunk by 0.2% in 2012Q4, according to the CBS. At that time, all signals on the Dutch economy were dark red! 

Yesterday, we found out that these original estimates indeed had been too optimistic. And in April 2013, we will definitely learn that 2013Q1 will have had a contracting economy as well. The data (after adjustments) for the current period might be even worse than in the last quarter of 2012.

  • Sharpest fall in available income in over 20 years
  • Mortgage debt rises by only 0.1%
  • Lower business profits

Real disposable income of households in the Netherlands has fallen for the fifth year in a row: by 3.2% in 2012. This is the largest decrease in disposable income since the series started in 1982. The decrease was caused by lower employment, higher tax and premium transfers, and inflation. At 2.5%, inflation was well above the average 1.6% rise in collectively negotiated wage rates. Partly because of the fall in income, consumption expenditure by households fell by 1.4% in 2012.

Because of the stagnation on the house market and higher mortgage repayments, the total mortgage debt rose by only 0.1%. In the years 1994-2007 this mortgage debt rose by an average 12% per year.

Well, there you have it. The government policies of Rutte I and Rutte II led to a 3% decline in household income in 2012, for a considerable part caused by ‘higher tax and premium transfers, and inflation’.

By the way, you can bet that most of the inflation mentioned here is spurred by increased government premiums as well: how about the ever rising parking costs in Dutch cities and costs for municipal permits and government services? How about the soaring rates for traffic penalties, which turned The Netherlands into one of the most expensive countries in Europe, in only a few years?!

While the people of The Netherlands earned less income and even lost their jobs, due to the difficult economic situation, almost all national and local taxes, premiums and fees for government services soared during the last few years. The Dutch central and local governments are addicted to tax money and nobody can stop this addiction, it seems!

Most Dutch citizens cannot help, but feeling like a piggy bank for the government. The consequences will be crystal-clear, in my humble opinion: no growth in 2013 and almost no growth 2014. You may remind me of these predictions!

Friday, 29 March 2013

A shocking testimony of municipal greed and stupidity in Dutch city of Almere: op-ed letter to a local newspaper.

Three weeks ago, on 9 March, 2013, I wrote an article on a fuzzy and eventually disastrous deal between the municipality of Almere and the Commercial Real Estate management company Eurocommerce.

In this deal, Eurocommerce used an old school in the city of Zwolle and some building terrain in Almere as collateral for a huge €7.5 million loan from the municipality of Almere. With this loan, Eurocommerce bought terrain near the Central Station of Almere and developed two giant skyscrapers on it.

This skyscraper project was finished when the credit crisis and the earlier started Commercial Real Estate crisis were almost at their peaks, making it nearly impossible to sell or rent so much office space. When Eurocommerce eventually defaulted in July 2012, Almere got stuck with a bill of €3.3 million in Eurocommerce debt that would not be paid back.

In the aforementioned article, I wrote the following snippets:

I didn’t and still don’t understand why the Almere municipality approved of these two landmark buildings. Was it because the mayor and her aldermen wanted ‘a visible monument for their achievements’?! Did their combined vanity need CRE of ‘epic proportions’?! Who knows, but knowing the mayor of Almere, Annemarie Jorritsma, I wouldn’t be surprised.

Unfortunately, I’m certain that the mayor of Almere and the aldermen responsible for this presumed blunder, will walk without any consequences. As they mostly do… The poor citizens of Almere are the ones that must foot the bill for this exuberance.

The same municipality did its destructive work in Almere Buiten, a suburb of Almere and the place where I live. About four years ago, the municipality started a building frenzy in the midst of the credit and CRE crisis, in order to ‘refurbish’ ( or perhaps ruin) the center of this suburb: a classic shopping mall, combined with a mid-sized furniture and Do-It-Yourself plaza. The numerous new and megalomanic buildings had to be financed through the introduction of paid parking, with a considerable tariff of €2 per hour in Almere-Buiten.

What a lot of people and especially the shopowners already feared in advance, happened indeed: the slightly outdated, but cosy and usually crowded shopping mall and the furniture & DIY-plaza were turned into desolate and windy centers with too many high-rise buildings and too little heart. The introduced parking fees and the credit crisis did the rest of the destructive work.  

Both the shopping mall and furniture plaza were almost overnight abandoned by the lovers of fun-shopping, in favour of the center of Almere and other cities. This left many shopowners in desperation. The people didn’t want to pay €5 in parking fees for a few hours of shopping in Almere Buiten, when Almere Center and other cities offered more shops and better entertainment, against equal parking fees.

At this moment, the refurbishing process is still not finished, but there is already considerable vacancy at the shopping space and many other shops are at the end of their financial stamina.

The following snippets come from an article in the local newspaper ‘Almere Vandaag’ of 28 December 2012:

Paid parking in Almere Buiten leads to heated discussions within the Almere community. In 2012, the shopowners of Buiten saw their annual sales decline by no less than 25%.

“We are in a state of shock”, according to Rob van der Tweet of shopowners community BuitenMere, while looking back at 2012. “Various shopowners are really drowning now”, adds franchiser-owner Maarten Vroom of the Hema store in Buiten. 

“A considerable number of shopowners already had to close their doors for good and many others are currently at the brink of closing their shop”.

Today, Henk Thomas, an inhabitant of Almere Buiten, sent an op-ed letter to the local newspaper ‘Almere Vandaag’. As this letter says it all, I print it integrally:

Paid Parking in Almere Buiten

The discussion upon paid parking in Almere Buiten is in full swing, currently. The municipality of Almere suggested to mount barriers in Almere Buiten, but in the nearby cities of Bussum and Hilversum, this has already proven a blatant waste of money.

When Doemere [the furniture and DIY-plaza – EL] was deployed about 15 years ago, the municipality confirmed that there would not be paid parking in the future. But hey, what is a promise worth these days?!

When you walk through Doemere, you see the pauperization and deterioration in the properties. Advancing the display windows - suggested by representatives of the municipality - doesn’t help in my opinion. There will only be even more burglaries than today. 

When will the community wake up?! When you do some shopping at Albert Heijn or other shops for a few hours, you pay €5 for this: community policy! If nothing changes, Doemere pauperizes and will be gone in two years.

I have nothing to add, but a few pictures, to this disturbing outcry, as a testimony of municipal greed and blatant stupidity in Almere. This greed and stupidity ruined both the appearance and livelihood of my beloved city-area, and the future and wellbeing of many independent shopowners, who see their business vaporize. A business, which took them so much energy to build up.

Vacancy and desolation in a small shopping mall
Picture copyright of  Ernst's Economy for You
Click to enlarge
Vacancy and desolation in a small shopping mall
Picture copyright of  Ernst's Economy for You
Click to enlarge

Vacancy and desolation in a small shopping mall
Picture copyright of  Ernst's Economy for You
Click to enlarge

Vacancy and desolation in a small shopping mall
Picture copyright of  Ernst's Economy for You
Click to enlarge

Vacancy and desolation in a small shopping mall
Picture copyright of  Ernst's Economy for You
Click to enlarge


Thursday, 28 March 2013

The former Dutch state postal service PostNL will hire 500 disabled / ex-welfare workers to become mail-deliverers, seemingly ‘out of the goodness of their heart’. Unfortunately, there is a catch, like there always is.

“I love the smell of subsidy in the morning.
It smells like … a free lunch”

Paraphrased from ‘Colonel William Kilgore’ 

A few months ago, the Dutch former state postal service PostNL passed these lines, due to the unwanted side-effects of the flexibilization of their workforce.

Today, however, PostNL was ‘back with a vengeance’ at BNR Business radio ( The company had much better news: 

PostNL stated that it is intending to hire 500 people with ‘a distance to the labour market':
  • People that received welfare for a prolonged time;
  • Physically and/or mentally disabled workers; 
In an interview with BNR, CEO Werner van Bastelaar of PostNL stated that the company took this action in order to take its societal responsibility. ‘Expenses were not an issue here’. Of course, they were not...

Here are the pertinent snips from the interview [this and the next featured interview in this article are available behind the link – EL]:

Bastelaar: "The expenses that we make to hire these people, are the same expenses that we would make when we would hire regular mail-deliverers. So, expenses and cost-saving are not an issue here.

We pay amounts that are common in this market and, on top of that, we pay the 'Sociale Werkplaats Bedrijven' to counsel these people.

[Sociale Werkplaats Bedrijven or SWB are the pseudo-commercial branches of the so-called Social Workshops in The Netherlands. These Social Workshops are heavily subsidized general workshops, where disabled workers and other people with 'a distance to the labour market' can get working experience, while being in a safe environment- EL]

The job is and will remain a ‘welfare’  thing, as these people will not receive a direct contract from PostNL. The purpose is to reintegrate people in the labour market, who initially have a distance to it. This distance could either be formed as a consequence of people being long-term welfare recipients or by the fact that people are physically / mentally disabled. Both categories have under normal circumstances little chance for a real job. We do our best to get these people to work again.

PostNL will be guiding these people thoroughly, by using the expertise of the SWB-companies, but we will also set some conditions for them. They must be mentally, as well as physically capable to deliver the mail.

And as a matter of fact, the people that we intend to hire are indeed capable of delivering the mail. Until now, the experiences have been satisfactory; the people are very motivated. The quality of mail delivery probably won't suffer from it."

Well, does that sound great or does that sound great?! Almost too good to be true… and it probably is!

The recent history of PostNL is that of a company which fired a lot of real postmen with fixed contracts, in exchange for mail-deliverers with flexible contracts, who are either paid per item or on a part-time basis.

The following lines are from the earlier mentioned article (see the 2nd link in this article), that I wrote on 5 December, 2012:

In order to keep the company profitable under the deteriorated circumstances for normal mail, the board of directors decided to discharge thousands of the official postmen with fixed contracts and to replace them with flexworkers that worked on a payment-by-the-piece basis.They did so to cut the excess fixed expenses per letter.

This decision caused massive unrest among the fixed contract workers, who suddenly saw their secured future deteriorate. They quite rightly feared the ‘false’ competition of non-qualified, parttime workers (often youngsters), who would receive much lower payments for the same amount of work. Especially for the older, often highly compensated workers their discharge meant often a dismal course to longterm unemployment.

Like I already wrote in this article, I do understand that PostNL tries to cut expenses to stay competitive. When its most important competitors radically cut their expenses, a company has to cut its own expenses, in order to stay in business.

Nevertheless, the negative side-effects of the aforementioned actions by PostNL have been that the older postmen who had been fired, often became unemployed with a grim future of prolonged joblessness ahead. And the new mail-deliverers with their freelance or flex-contracts, stayed behind with a salary that, since then, has often been below the official minimum wage per month in The Netherlands.

Read for instance this article for additional information on the hazards of freelancing and working with flex-contracts, as this is, in my opinion, the nasty flipside of unemployment.

Summarizing: in recent years, PostNL has not exactly been ‘the usual suspect’, when it came to societal involvedness and philanthropy of large companies in The Netherlands. Therefore it would be naive to solely count on the philanthropic intentions of PostNL, when it decides to hire 500 workers with a large distance to the labour market.

The assumption that PostNL does not hire these disabled or ex-welfare workers only from the kindness of its heart, was emphasized in a second interview (see the link behind the first interview for the Dutch-spoken, taped version of this second interview). BNR held it this afternoon with professor Ronald Dekker, labour economist of the Tilburg University:

Dekker: "PostNL stated that these ‘people with distance to the labour market’ have the same costs as regular mail-deliverers, but this is not per sé true. PostNL does not bear any employer’s responsibility for these workers, as the company does not offer them a direct contract.

This strongly reduces the risks of such workers: for instance, they don’t have to be paid during times of illness. Besides that, when such a mail-deliverer is found to be not fit for the job eventually, there will be no lay off-expenses for PostNL. 

These risks have been sold off within this contract, without any additional expenses for PostNL. As PostNL  doesn't have to pay one cent for these risks, such a contract form is much cheaper than the contracts with regular workers.

It will be great for disabled people and long-term welfare recipients to have such a job, but I have still mixed feelings about it. It is always nice when large companies take their societal responsibility, but in this case the whole construction fits just in too nicely with PostNL’s  goal to save loan expenses.

On top of that, it is slightly cynical that PostNL can now hire these disabled people, due to the fact that the company firmly guided thousands of mailmen to the exit, over the last few years."

I had to leave some very interesting sidelines out of the transcript from BNR’s interview with Ronald Dekker. Nevertheless, for everybody who understands Dutch, the whole interview is a 'must-listen'.

Unfortunately, PostNL seems one of those companies, which cause that many of the new flex-workers and freelancers might turn into 'the poor of the 21st century'. People in this situation are called ‘freelancers’, but in reality they are nowhere near of earning a decent salary. A decent salary would include:  enough money for pension-building, health and working incapacity insurances, with on top of that a utility ‘for a rainy day’ aka a future without an assignment.

When the contracts of such freelancers will eventually be abolished by their principals, they often stay behind without a penny in savings at the bank.

The same is true for the flex-workers at PostNL, with their parttime contracts. People like these flexworkers must often have two or three jobs to earn a decent salary to live from.

That is a very worrisome development and it will only get worse in the coming years.

Monday, 25 March 2013

Cyprus: the Euro-group showed character against the large depositholders and the Russian political pressure. Yet, their decision will definitely lead to a breach of trust between the Euro-zone and its citizens.

This morning, the deal was done, concerning Cyprus. The Euro-group, in cooperation with President Nikos Anastasiades of the small island-state, took the decision that depositholders on the island with deposits beneath €100,000 would be safeguarded from any losses.

On the other hand, at every Cypriot bank, the depositholders with deposits above €100,000 would share in the burden. Biggest victims were the depositholders at Laika Bank, who would lose everything above €100,000 and the depositholders at the Bank of Cyprus, who would lose a substantial share of their deposit above €100,000.

The Bank of Cyprus would take over the good parts of Laika Bank, while the bad parts of this bank would be shipwrecked at the expense of the biggest depositholders.

You have to give the emperor what is his: the Euro-group didn’t give in to the pressure that had been put on by the Kremlin, the day before yesterday, through its strawman Alexander Nekrassov.

To put it even stronger, Euro-group chairman Jeroen Dijsselbloem has been boasting against the Guardian and the Financial Times, that today’s approach might be the blueprint for tomorrow’s bank bailouts:

“Taking away the risk from the financial sector and taking it on to the public shoulders is not the right approach,” Mr Dijsselbloem, who is also the Dutch finance minister, said.

“If we want to have a healthy, sound financial sector, the only way is to say: ‘Look, where you take the risks, you must deal with them, and if you can’t deal with them you shouldn’t have taken them on and the consequence might be that it is end of story’,” he added. “That’s an approach that I think we, now that we are out of the heat of the crisis, should consequently take.”

I am not at all happy about this approach by the Euro-group and Dijsselbloem.  I consider it a reckless opening of Pandora's box, without realizing what the consequences might be.

The results of this financial mess:
  • Russian, British and Cypriot depositors who will lose loads of money. Money that was lawfully theirs (until the opposite is proven) and that was probably not so black and of unclear descent, as many pundits and populists have tried to make you believe;
  • Savers and investors all over Europe who are scared sh*tless that their riskfree savings are seemingly not so risk-free anymore as they always thought;
  • This very knowledge will perhaps not lead to massive bankruns all over Europe, but savers will certainly demand a higher interest rate than the insulting rates that most banks in the ‘safe’ European countries pay, currently;
  • A few odd bankruns in Greece, Spain, Portugal and Italy might occur in the coming years, when one of the banks in these countries gets into trouble;
  • Even the banks in former financial powerhouses, like Luxembourg, Switzerland and The Netherlands might notice that ‘riskfree savings' accounts’ are a thing of the past.
    • The amount of risk that savers experience in these countries, due to the events in Cyprus, wil definitely lead to higher demands when it comes to interest payments. In my opinion, interest payments below the official inflation rate in a country will become a no go-area.
  • The Kremlin is outraged and it will definitely look for ways to get even with especially Germany, which undoubtedly will be seen as the architect behind the current solution.
    • It's not yet clear what the repercussions will be, but that there will be serious repercussions, is a certainty in my opinion;
  • Perhaps, these events will form the beginning of Eurocrisis 3.0; 

Besides these acute and future consequences of the Cyprus banking crisis, I truly think that the last two weeks' events will form a serious breach of trust between the European citizens and their pennywise, poundfoolish governments.

Especially in countries like The Netherlands and others, people can’t live without a bank-account anymore. 

No company is prepared to pay its workers’ salaries in cash anymore and no large supplier of utilities allows you to pay your monthly bills in cash. Cash money is slowly, but surely abolished in many shops and supermarkets and paying cash on the internet is virtually impossible.
In other words: people without a bank account do not have a life anymore. People who stash their savings in a vault or an old sock at home, become ‘suspicious types who probably try to evade taxes’ or (according to the worse option) ‘who try to support terrorism’.

There is one more thing: people with savings' amounts above €100,000 are not automatically lawyers, tax evaders, Porsche-drivers, ‘fat cat' bankers and Russian mobsters. Those people are also normal citizens, who have been living frugally and put their excess salary in a savings’ account. People, who sold their house recently and stashed their excess value at the bank. Or people, who inherited some money from their parents.

Especially in countries like The Netherlands, Belgium and many others in Europe, consumers have little choice between banks. In these countries a few, extremely large banks divide the whole consumer market among eachother. The consumer, when he doesn’t want to go abroad with his money (‘very suspicious!’), must do business with these banks, which also operate large business divisions.

The last thing that a saver wants to hear in such countries, is that he lost all his belongings above €100,000, due to a banking crisis that he couldn’t prevent. He also doesn’t want to hear, that he could have known that the smaller bank, which paid him a little amount of interest above the insulting 1.75% that he received at the largest banks, had been a preventable risk. And that this preventable risk will cost him some of his deposits.

Today, the Euro-group has betrayed the trust of tens of millions of European citizens and citizens in other countries; a price for which it will pay dearly, in my opinion. 

When you don’t believe me, than please look at today’s stock rates at the international stock exchanges. Exaggerating or not, the rates at these stock exchanges have always been a fine thermometer for risk in the market. Today’s stock rates were RED, virtually everywhere! Risk on…!

Sunday, 24 March 2013

Is the question ‘Cyprus’ turning into a game of chicken between the European Union and Russia?! The Kremlin might teach Germany the meaning of the proverb ‘pennywise, poundfoolish’

Perhaps, the Dutch Finance Minister and chairman of the Euro-group Jeroen Dijsselbloem will sometimes wake up in the middle of the night, in the coming months, soaking wet from perspiration: "What the heck went wrong with Cyprus?! It was my first exam and I flunked it… badly!"

What started as a relatively small issue, concerning a relatively small island in the Euro-zone, that needed a relatively small amount of money, is turning into a serious testcase; not only for Dijsselbloem himself, but also for the Euro and the European Union.

Maybe it is good to summarize the situation round Cyprus: 

Cyprus was one of those relatively small nations with a top-heavy banking industry. Just like Luxembourg, Ireland, Iceland and… The Netherlands.

The island had been favoured by British investors, but also by Russian businessmen and some ‘suspiciously rich’ Russians: people of whom the source of their wealth was not so clear. 

The Russian people loved the island from way back and felt connected with it, due to their mutual orthodox religion, the beauty of the island, the fine climate, the general safety for their wifes and children, contrary to the domestic situation and last, but not least… a favourable taxing climate.

These wealthy Russians caused an enormous influx of money into the Cypriot banks. In contrary to populist believes, this was not black and grey money alone. There was also a vast amount of white money from genuine Russian businessmen. People, who didn’t trust the Russian banks and decided not to take a risk with their capital, but instead took it over to Cyprus.

People, like Dmitry Kostygin, co-owner of the popular Russian chains of luxury products "Wild Orchid" (lingerie), "Rive Gauche" (perfumes and cosmetics) and "Yulmart” (computers and household appliances).

The investments in Cyprus went fine for a number of years, but then things started to go wrong. 

Investments by the Cypriot banks in the island’s main energy plant went awry, when the plant caught fire due to an explosion in a nearby gunpowder storage. Besides that, the island became the victim of its historically strong ties to Greece, when its investments in Greek sovereign bonds and loans to Greek banks lost a large share of their initial value. This had devastating results for the balances of the Cypriot banks and thus for the financial situation of Cyprus itself.

Soon, the island, with its top-heavy financial industry threatened to become a second Greece. At that point the European Union decided that the country should be helped to overcome the desperate financial situation. However, the EU and especially the Euro-group with Dutchman Dijsselbloem at the helm – in the best European tradition – caused so much commotion that a relatively small and easily containable problem is now threatening to become an economic conflict between the EU and Russia. It all seems to be a simple question of being pennywise, but poundfoolish.

If the Euro-group would just have given Cyprus the amount that it needed to save the banks and the local economy, the whole Cypriot banking crisis would have been over before it even started. It would have costed the European tax-payers money, that’s definitely true. Nevertheless, the amount of money would have been controllable.

As you know, that is not what happened: the EU didn’t want to pay more than €10 billion from the total €17 billion of Cypriot debt; the rest should be coughed up by Cyprus itself.

In a messy, last-minute meeting, where it had not been clear at all who was in charge and who did what, the Euro-group decided to let the Cypriot depositholders bleed for the losses of the Cypriot banks. 

‘Someone’ (was it the Cypriot president Nikos Anastasiades or German Finance Minister Wolfgang Schäuble?) decided that the small depositholders beneath €100,000 should also do their part of burden-sharing, in order to save the important, large depositholders from losing a substantial share of their deposits.

Since then, the Cypriot soap unfolds before the very eyes of the flabbergasted Russian and British investors and the also shocked financial markets. Everyday a new episode with more cliffhangers and more intrigues…:
  • Will the small depositholders do burdensharing in spite of all protests?
  • Did some Russian investors, with close relations to the Cypriot government, receive a warning in advance by President Nikos Anastatiades himself?
  • Will Cyprus ring the doomsday clock for the Euro again, as many American pundits do believe? 
 Stay tuned, ‘cause there is much more to come! 

In the first episode of this series, you could read that PM Rutte of The Netherlands disliked the fact that he had to bail out Russian depositholders: it gave him a bad taste in his mouth. Unfortunately, I have bad news for him. 

The Russian online newspaper DNI (i.e. 'Today’s news') stated that Russian depositholders have targeted some other countries in order to store their black/grey/white money: one of those countries is (who will be surprised…) The Netherlands. The following snippet comes from this article. It is translated by Google Translate and somewhat improved by me:

The situation in Cyprus was condemned by Russian entrepreneurs, many of whom kept their money in Cyprus banks, according to the business newspaper "The View". According to Moody's, about one third of all deposits in Cypriot banks - up to €27 billion euros from the total amount of €68.4 billion – is owned by Russians. 

According to analysts, the consequences from the situation in Cyprus will be that business will be transferred to other jurisdictions: Luxembourg, the Netherlands and Switzerland. Russian businessmen, who are perturbed that a viable solution from the Cypriot authorities stays away, are planning to evacuate their business from the island.

Of course, you can rest assured that our fair and honest PM Mark Rutte will be present at Schiphol Airport to personally stop these Russian investors with their black money. Even the thought of them, bringing their money to The Netherlands, makes him sick…

Nevertheless, the soap around Cyprus could get a nasty new episode. Yesterday, the Kremlin unofficially warned the EU, through an ostensible insider, that burdensharing by large Russian depositholders could have serious repercussions for European (read: German) companies. 

Russia is supposedly having a treaty with Cyprus that states that Russian investments will always be paid back in full and cannot be considered for any kind of burdensharing.

The following snippets come from The Guardian:

Fears mount that Russia could act against European companies if charge on deposits hits €30bn Russian investments

Fears are growing of Russian reprisals against European businesses as EU authorities desperately seek a deal to save the Cypriot economy by imposing a 25% levy on bank deposits of more than €100,000.

As the island scrambled to put together a rescue programme, its finance minister, Michalis Sarris, said "significant progress" had been made on the latest levy plan in talks with officials from the European Union, the European Central Bank and the International Monetary Fund.

The government in Nicosia faces a deadline of Monday to reach an agreement or the European Central Bank says it will cut off emergency cash to the island, spelling the likely financial collapse of its banking system and a potential exit from the European single currency.

However, with Russian investors having an estimated €30bn (£26bn) deposited in banks on the island, the growing optimism about a deal was accompanied by fears of retaliation from Moscow. Alexander Nekrassov, a former Kremlin adviser, said: "If it is the case that there will be a 25% levy on deposits greater than €100,000 then some Russians will suffer very badly.

"Then, of course, Moscow will be looking for ways to punish the EU. There are a number of large German companies operating in Russia. You could possibly look at freezing assets or taxing assets. The Kremlin is adopting a wait and see policy."

Nekrassov rejected suggestions that Russia might hit back by cutting off gas supplies, a tactic the country used in 2009 after the collapse of talks with Ukraine to end a row over unpaid bills and energy pricing.

"Gas is no longer a weapon," Nekrassov said. "When Russia did that before, it realised that the foreign energy lobby reacted and efforts to find alternative sources were increased. If Russia kept threatening, it knows that nobody would be buying its gas in 20 years' time."

There you have it. This is the situation…, whether you like it or not. The Russians play hardball and they don’t play it by the book, if they need to. For me personally, it is not a question of agreeing or disagreeing with such gungho policy. As a matter of fact, I disagree with this, of course. However, you ought to know that the Russians do business this way.

If you know and you still tempt them like the Euro-group did, you must face the consequences of your policy. I have little doubt that this Alexander Nekrassov is sent by the Kremlin itself to give the EU an unofficial, but crystal-clear warning.

Tonight, the negotations on the future of Cyprus will be started. It is still very unclear in which direction these negotiations will go:
  • Will Cyprus receive the money it needs (ALL the money)?! 
  • Or will Cyprus be forced to let its depositholders do burdensharing, in spite of the warnings by the Kremlin?! 
  • Third, perhaps Cyprus will even be forced to the exit of the Euro-zone, due to conditions and constraints by the troika (IMF, ECB and European Commission) that it cannot and will not fulfill. 
Personally, I think that the politics of burden-sharing, although it didn’t sound very unreasonable, has been a grave mistake from the beginning.

It has been done for the wrong reasons in my humble opinion, namely to punish ‘scary’ people from the ‘scary’ Russian empire. People, by the way, whose black / grey / white money is more than welcome in other European countries with banks that are much too large for their country’s financial stamina (Switzerland, The Netherlands and Luxembourg). And now this burdensharing has led to a big, financial mess. 

Yet another financial mess in a long line of financial blunders by the Euro-zone… A mess, that Dutch minister Dijsselbloem will surely cost some sleepless nights. 

Of course Cyprus made mistakes. And of course Cyprus should not have had such large banks as it did. But from the officials; who bothered to tell this to the Cypriots five years ago, when the country entered the Euro-zone?! May I see fingers, please?!

Friday, 22 March 2013

Dutch unemployment is soaring, according to the CBS. This sheds an unfavorable light on the Central Planning Bureau’s promises of economic improvement in the second half of 2013

Today, the Central Bureau of Statistics (CBS) in The Netherlands presented the unemployment data for February, 2013. Not surprisingly, the data was not good at all:

  • 21,000 new unemployed in February
  • Unemployment rate further up to 7.7% 

The most recent figures released by Statistics Netherlands show that unemployment adjusted for seasonal variation grew by 21,000 in February to 613,000. The average monthly increase over the past three months was 20,000. Within a period of three months, the unemployment rate has gone up from 7.0 to 7.7%.

Unemployment grew more rapidly among men than among women. Three months ago, 6.8% in the male labour force were unemployed, versus 7.7% in February. The corresponding figures for women are 7.2 and 7.8%.

According to the International Labour Organisation (ILO), 6.2% of the Dutch labour force were unemployed in February, as against 6.0% in January.

In my opinion, this is really bad data, but it didn’t come unexpected at all. Before the start of 2012, I  expected already that the unemployment would soar during that year.

I was too early, as it  didn’t happen at the time; at least, not in the tempo that I expected.

Nevertheless, in 2013 the velocity of unemployment growth suddenly increased. This was in synch with my prediction, that I wrote in my Outlook for 2012:

Many companies, like the one that I work for, wrote red figures over the last three years since 2008. And although some companies still managed to make a decent profit during this period, I don’t expect the Dutch companies to maintain their excess personnel when the current recession proves to be a nasty one. The period of mass lay-offs that I noticed during this year has only just started, is my conviction.

During 2012 and 2013, the recession proved indeed to be a nasty one: a recession with a depression-ish appearance. 

And indeed, the Dutch companies started to get rid of excess personnel. This development is far from over yet. To the contrary, it is rather gaining momentum.

However, few weeks ago, the pundits of the Central Planning Bureau (CPB) predicted a slight economic revival for the second half of 2013:

Despite a slight recovery later on in the year, GDP volume in 2013 will fall by 0.5%. For 2014, the economy is expected to grow again by 1%.

At that time I already declared that this was an overly optimistic outlook, especially when it came to unemployment: 
  • I’m really puzzled how the CPB can think that the unemployment will remain relatively stable in 2013 and 2014 and the private consumption might even improve in 2014:
    • Mass lay-offs have been the name of the game, since mid-2011 and their number is only soaring in the financial industry, Building&Construction, Transport&Distribution and a dozen of other industries in The Netherlands;
    • In my humble opinion, unemployment will rise further until 8.25% at the end of 2013 and perhaps even 9% in 2014;
    • This will have a devastating effect on consumption: this will not only drop in 2013, but also in 2014, is my conviction; 

After seeing today’s unemployment data, this predicted revival in 2013HY2 and 2014 seems indeed just a figment of the CPB’s imagination..., as in ‘wishful thinking’.

As a matter of fact, I am very close to accusing the CPB of just stating what the Dutch politicians want to hear, when it comes to the revival of economic growth and especially the reduction of unemployment.

I keep the leaving executive director of the Central Planning Bureau, Coen Teulings, in high regard. At a number of occasions, he showed the guts to bring an uneasy message to unwilling political ears. 

However, in case of the economic growth and the rising unemployment, he seemed to have sugar-coated the difficult messages that he brought. That is a grave mistake, in my opinion.

For the economy to recover and unemployment to drop, a few conditions must be fulfilled: 
  • There must be (an outlook to) improvement in certain key-areas of the economy;
  • The problems that caused the crisis in the first place, must be (partially) out of the way;
  • There must be drivers for (extra) jobs:
    • For unemployment to drop, the growth in demand for workers by companies and the government must exceed the growth of the working population. Otherwise the unemployment remains either stable or it grows; 
If we look into these bullets, you will agree with me that the chance for a quick economic recovery  is very dim:

Bullet 1

For bullet 1, let’s have a look at these key areas:

Outlook for economic recovery and unemployment reduction
Click to enlarge

Bullet 2

It is my opinion that the crisis in The Netherlands has mainly been caused by a toxic combination of:
  • external factors (i.e. the emerging dire economic situation in the United States and the southern countries of the Eurozone);
  • undercapitalized Dutch banks;
  • the plummeting housing market, which strongly reduced the value of people ‘possessions’; 
External factors

The economic situation in the United States has slightly improved, with the help of unprecedented quantitative easing programs. However, since there have been such large financial aid programs, the effects are not very impressive. In my opinion, the slightest drawback could easily spur the next leg of the economic crisis in the US.

The economic situation in the south of Europe: well, what should I say about that, which you don’t know. The situation is still desperate and will remain so for a prolonged period of time, especially as firm political decisions stay away.

The growth of (Dutch exports to) the BRIC’s (Brazil, Russia, India and China) is nowhere near sufficient, to compensate the difficult situation in the south of Europe for The Netherlands.

Undercapitalized banks

Although the large Dutch banks indisputably made progress with the improvement of their capitalization and equity-to-debt ratio, it is still nowhere near the thresholds that have been set by Basel III.

‘Dead corpses’ floating around at the banks are the large commercial and residential real estate portfolios. These portfolios still have excess book-values, in comparison with the marked-to-market value. 

When CRE and RRE at the banks would be appraised correctly, the financial situation of the banks would be far worse, is my firm opinion. Dutch politicians and supervisors still seem to think: ‘see no evil. Hear no evil’. That thought cannot be maintained until eternity. At sometime, something's got to give.

Housing market

The Dutch housing market is still a drama with an 8% price drop in February y-o-y for existing housing. As I stated in the aforementioned table, over a million houses are underwater (source: CBS). Starters are still intimidated by the high prices of housing and, on top of that, they often don’t get the necessary financing from the banks to buy even a starter's house.

As a matter of fact, there is also still a big discrepancy between available housing and housing required by the market.

The chances for quick recovery of the housing market are that of a snowball in hell. 

Bullet 3

The only driver for jobs that I can think of, currently, is the fact that the baby-boomer generation is starting to retire now. This could cause a slight increase in the number of available jobs in the coming years.

However, many companies in many different industries are still rather getting rid of excess jobs, than that they are looking for more personnel. As we have been in a situation of general over-production for a prolonged period of time, this makes sense.

At best, retiring personnel is replaced by younger workers, but this is nowhere near the driver for new jobs that it should be to spur serious unemployment reduction.

Summarizing, don’t expect the Dutch unemployment to drop soon. It just won’t happen!

Wednesday, 20 March 2013

BNR Newsroom: Professor Hans de Jonge of Technical University Delft speaks on Commercial Real Estate. A must-read interview!

Last Monday, 18 March 2013, I was present again at BNR Newsroom, the weekly program of the Dutch business radio station BNR, hosted by Paul van Liempt.

Presenter of BNR Newsroom, Paul van Liempt
Picture copyright of: Ernst Labruyère
Click to enlarge
This week’s topic was the Dutch Commercial Real Estate (CRE) market. Regular readers of my blog know that the Dutch CRE market is still in very big trouble, with a vacancy rate of 16% at the end of 2012.

The first guest of the evening was Professor Hans de Jonge of the Technical University Delft.

De Jonge has been chairman of the so-called ‘Offices Summit’, a thinktank for the Dutch CRE market, whose goal it was to find out how the problem of (structural) vacancy could be solved.

In his role as chairman, professor De Jonge has been strongly involved in the creation of a general covenant for the CRE market, which purpose has been to reduce vacancy of Commercial Real Estate to 6% from the current 16% within ten years. Paul van Liempt asked him what went wrong with this covenant, after signing it.

In spite of the fact that I wasn’t able to ask questions on behalf of Ernst’s Economy for You, I consider this a must-read interview, as it supplies valuable insights in the disturbed Dutch CRE market. Therefore I print an (almost) integral transcript of this interview:

Paul van Liempt: How is the image of Dutch Commercial Real Estate abroad?

Hans de Jonge: Historically, Dutch CRE had a good reputation: stable, with a quite transparent market and with generally fine yields. A few years ago, this reputation deteriorated. Mainly due to overproduction on the offices market and at the same time a dropping need for office space. This situation led to the infamous vacancy in The Netherlands. This vacancy made investors nervous. On top of that, a rookie supervisor of the DNB - on his third day in action - stated in an interview with Het Financieele Dagblad ( that the third crisis in The Netherlands would be 'commercial real estate'. This interview has been quoted in the Frankfurter Allgemeine and the New York Times. Since that moment, the foreign investors have been wondering if investing in Dutch real estate would be a sensible thing to do.

Paul: Is the core problem overcapacity?

Hans: Sure.

Hans de Jonge, TU Delft
Picture copyright of: Ernst Labruyère
Click to enlarge
Paul: You are also chairman of the "Offices Summit" (a thinktank for the Dutch CRE market). Last year a covenant has been drawn in The Netherlands on how to fight the (structural) vacancy of CRE. What has happened until now?

Hans: Not much. The covenant was based upon four pillars:
  • 1.  Making regional agreements on demand and supply, in order to prevent that more buildings will be added to place that already have overcapacity.
    For example: at this moment we have still twice as much capacity in planning for development than there is demand for CRE
  • 2. Knowing better how much supply there is. We still know very little about the existing supply of CRE
  • 3. Transparency in The CRE market. At this moment, the registered rents and contracts don't give a just image of the market.
  • 4. A compensation-for-demolition fund in order to make demolation possible for CRE without a future. 

Paul: Now you state that very little happened. Could you call the covenant a failure until now?

Hans: No, I don't agree with that. The covenant has been signed. That is not a failure. What went wrong in this particular situation, is that not all  stakeholders stuck to the agreements in this covenant. Some parties respected the agreements in the covenant and others didn't.

Paul: Which parties didn't stick to this agreement?

Hans: I'm very disappointed with the municipalities. After the covenant had been drawn, the steering group was dismissed. Mission accomplished. The covenant was ready. After this event, this covenant became a case of the local governments, municipalities and other market parties. These stakeholders had to take care of the deployment of the covenant. This is when things started to falter.

Paul: What would have been a better solution for this steering problem?

Hans: When the central government would have been in the lead!

Paul: Will this ever happen?

Hans: Minister Schultz - Van Haegen (Minister of Infrastructure and Environment - EL) said about this: this is a problem that primarily should be fixed within the regions and municipalities. I don't see a large role for me in this process.

She was actually right about that. However, the same parties that should have been in the lead, are now calling for coordination by the central government. 
The covenant is not mandatory, you now. Some parties in the region did join forces. They are actually doing what we agreed in the covenant.

Paul: The covenant contained some fierce goals. The vacancy at the end of last year was 16%: offices that were for rent or for sale at the time. The ambition of the Offices Summit was to bring this vacancy rate back to 6% within 10 years. Are we going to make that?

Hans: No! Not if we go on, like we did last year.

Paul: How can we change the targets, in order to make those more realistic?

Hans: We should not change the targets. We should improve our efforts to meet those targets! Those targets are fine. What we should do is deploy the agreements in this covenant. This covenant has been agreed upon with all parties involved: central and local governments, private and institutional investors, project developers, building companies, the banks, the users of these buildings; everybody was at the table.

Insiders predicted that we would never reach an agreement, but we did! Against all odds. Even Germany called us to ask how we did it. They said that in Germany it would be impossible to get all parties at the table. We managed to do so!

The next question is, however, how can we deploy the agreements that we have agreed upon. If we would just do so, we would have a fair chance to meet the desired reduction in vacancy.

Paul: Still, a reduction to 6% vacancy in ten years. You said that we are not going to make that...

Hans: No, I said that we are not going to make that, if we remain on the same path as now. Currently, some people are just going through the motions. That is not enough!

Paul: Do you think that these people will ever start to put more effort in this covenant?!

Hans: Until now, when I looked around, I saw that too little effort and energy had been put in the deployment of the covenant.

Paul: If people continue with just going through the motions, what will happen then?

Hans: At one particular moment, the market will start to do its job. Then the blood will spatter on the walls six foot high. You must remember, we are in the middle of a market. At one moment the NMA (Dutch authority for competition) visited me. They said: what you are trying to do is controlling the market. Perhaps, you should let the free market do its job. My response: we could do that. We really could, but we shouldn't do so.

In other words: this is a bad idea. Please, understand me correctly: I am not against the free market. But if we leave the current policy unchanged, the vacancy rate will continue to soar in the coming years, until vacancy rates of 20% - 25% are reality. This might only take a few years. At that moment, the vacancy is not just a problem for institutional and private investors. Then it would have become a societal problem.

Martine Wolzak (reporter of Het Financieele Dagblad): what should the central government do? A special levy on building? A building stop?!

Hans: No, no, no. The only thing that the central government should do, according to the covenant, is enabling a levy on building. Without this levy, it is impossible to fill the demolition fund (see pillar four - EL). With this levy, people cannot act as freeloaders. That is all that the central government has to do.

At this moment, I and other parties state, that when local initiatives stay away like they do nowadays,  the central government should have a coordinating and facilitating role in this process. By the way, at this moment the central government is more and more willing to take this role after all.

Paul: With that 'going through the motions' policy of some stakeholders. Where will the vacancy rates go?!

Hans: I cannot tell you that. F.i. the Amsterdam region tried very hard to fight vacancy and they managed to keep the vacancy rate about equal, by transforming office buildings into other purposes.

Martine: Talking about Amsterdam. In this region all involved parties seriously tried to deploy the agreements in the covenant. In spite of their efforts, they didn't make it. Is it not the underlying problem of this covenant, that as soon as it was signed, everybody started to renegotiate matters into his own favour?

Hans: That is not how I see it. After the covenant had been signed, a number of incidents happened in the market. The disappointing offer on the Uni-invest portfolio. The outcome of the Eurocommerce sale. This is when market parties started to think: "we are trying to make agreements in order to change the imminent nose-dive from the CRE market into a successful emergency landing. At the same time, bargain-hunters are purchasing CRE from the lower end of the CRE portfolio, in order to sell it at bargain prices! That is not acceptable for us! We quit!". That is basically, what went wrong.

Paul: The building of CRE continues; these offices remain vacant and for sale / for rent. In the meantime, there are people advocating a building stop. Is it not time to deploy such a building stop?

Hans: This sounds like a typical 'parliamentary solution'. There have been several proposals by MP's: a building stop, a general building stop. A plan to withdraw two old square meters for every new square meter of office space, by demolition or restructuring of office buildings.

The problem is: there is not 'a' market. There are enormous differences between regions. And when f.i. a multinational company visits Amsterdam and states:  "We are looking for 45,000 square meter of office space. We have looked for this in the market, but we didn't find it. We would like to build such an office ourselves". At this moment, this designated law would hinder this initiative. That would be very peculiar. You should not lock up the market, but look at things sensibly.

First: All the empty space, on which municipalities already have planned how much they could earn from it, should be striken as building terrain. There is much more terrain registered as building space, than there is demand for in the market.

Second: Even the reserved space, on which already building permits have been supplied, could be striken when building is not desirable. This is a dangerous thing to do, as this could bring claims.

The last thing that should happen, is that somebody in a supervising role should negotiate with all of the aforementioned market parties in order to come to building areas that could expand, building areas that should shrink and building areas that can stay as is. As a matter of fact, this is what has been laid down in the covenant.