The Netherlands is voting the guilder away

Shortly after the introduction of the euro, about half of the population would have liked to stick to the guilder. A few years later, that was still a third, while the election results indicate that now only a quarter of the Dutch want to exchange the euro for the guilder.

Do you remember when you paid with guilders instead of euros? If it is up to about a quarter of the House of Representatives, that will be possible again in the future. The PVV, SP, Forum for Democracy and JA21 would like to see the European currency disappear very quickly. There is little chance that one of these parties will play a role in the formation of the cabinet. And if that happens at all, it is a hopeless mission to convince the government partners to turn their backs on Europe.

Most major parties such as the VVD, D66, CDA, PvdA and Groen Links are outspoken in favor of EU membership. The pan-European newcomer Volt even took 3 seats out of the blue. But it is of course interesting to see how the Netherlands would stand if we had stuck to the guilder after all.

Argument of guilder adherents
An important argument of guilder supporters is that the Netherlands can also chart its own economic course with its own currency. In reality, nothing really came of this for the euro. From an economic point of view, the Netherlands is actually a province of Germany. Our neighboring country is by far our most important trading partner and the guilder had been practically riveted to the Deutsche Mark since the 70s. In this respect, the euro is even a small improvement. The Netherlands has a small influence on the decision-making of the ECB, while Germany's monetary policy used to be an exclusive matter for the Bundesbank.

Danish krone is less free than it seems
Nor do we need to have many illusions about the guilder's own exchange rate. Denmark, for example, chose to stick to the crown when the euro was founded. Although the Danes settle and get paid with it in everyday life, the currency plays no role in global currency trading. The krone was pegged to the euro at a ratio of 7,4 krone. Since then, the price has fluctuated between 7,4 and 7,5 - with only the very occasional short spike up or down. Since the value of the krona is tied to that of the euro, Denmark cannot avoid following the ECB's course.

It can also be different
Incidentally, Switzerland and Norway prove that you can indeed have a currency in Europe with its own rate. But that is mainly due to Norway's oil exports, while Switzerland's economy is much less dependent on international trade than that of the Netherlands due to the large banking sector. Nevertheless, the chance that the guilder will ever return should not be erased. History shows that the vast majority of currency unions ultimately do not survive. In any case, it would be nice for the Dutch economy if a return to the guilder did not come, or if it were to take as long as possible. The large trade benefits carry much more weight for the Dutch economy than our relatively high expenditure on the EU.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

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