This column was published earlier in Het Financieele Dagblad, Netherlands
Once it was called the ‘Dutch disease’, today this virus could probably be called the Greek flu.
In the past the Netherlands used gas revenues to bolster government coffers and, as a result, its competitiveness suffered. The income from gas prevented the Netherlands from innovating and reforming. The Dutch became lazy as they were able to delay facing up to their economic problems.
Throughout the Euro crisis, the European Commission and the Netherlands have rightly drawn attention to the irresponsible behaviour of countries financing their day to day expenditure through cheap loans. Too little was done in the good times to invest in new sources of growth. Instead we consumed more. I use “we” because no one is without sin.
The recent “successful” mobile spectrum frequency auction in the Netherlands reminds me of this. The Ministry of Finance will probably have celebrated it as an unexpected Christmas present. Instead of €470 million, they received €3,8 billion. Four times more per capita than in Germany!
Was nothing learned from previous auctions for UMTS frequencies, when the share price of KPN dropped substantially and the ecosystem of small supply companies in the telecom sector was severely damaged? The government absorbed all the money before even a single Euro was earned by the new mobile phone and internet services.
It was “déjà vu” all over again. Telecom companies paid high prices. KPN saw a further decline in its credit rating. Prices for attracting money for infrastructure investments are expected to rise. The rollout of high-speed internet will slow down and the suppliers will be put out of business. This “Christmas gift” could be a huge burden for the sector, and for all other businesses, entrepreneurs and citizens who need super-fast mobile internet. Due to the fragmentation in Europe, spectrum is almost 4 times more expensive than in the U.S. This is a burden for European telecom companies.
The revenues are used to finance the budget deficit. It is neither reinvested in the sector, nor in much needed infrastructure. The Netherlands is following the example of other European countries where auctions have been held. This gives them time. Time to postpone the necessary reforms.
From an economic perspective there is little time to lose. If we do not invest now in the growth sectors of the future, the recession is likely to continue. The internet sector in Europe is growing by 12% and represents the size of the Belgian economy. Telecom companies are an essential lifeline of the economy. The sector is extremely innovative and is characterized by a large number of start-ups. Without fast broadband ground-breaking features such as ‘cloud computing, smart care, 3D printing, IP video services and smart energy are unlikely to develop.
At the same time, the Netherlands and other EU member states advocate cuts to the budget that would enable enterprises to borrow money at low interest rates for investments in fibre and LTE (4G mobile) infrastructure. Even though these loans would not cost taxpayers any money, unlike agricultural subsidies which are spared.
We still like to point the finger, in the meantime the Greek flu has turned again into a ‘Dutch disease’. The deficit might be reduced, but the problems have merely been postponed. Time is running out.