Gerrit Zalm is the Dutch finance minister who still believes in the Stability and Growth Pact, he tells Karina Robinson.

“We agreed in the European constitution a declaration saying the good times should be used for consolidation and to gradually create surpluses” 

Confronting an array of vicious beasts and hostile armies is par for the course for Finance Minister Gerrit Zalm as Holland holds the six-month presidency of the European Union.

The bespectacled Mr Zalm moves his armies over land and sea, seeking natural resources and treasures to increase his wealth, but he will need to tear himself away from his computer game, Heroes of Might and Magic IV, and confront a thorny issue like the Stability and Growth Pact and Nicolas Sarkozy, his counterpart in France, who has stated that co-operation between France, Germany, England, Poland, Italy and Spain will lead the EU forward.

“He forgot the Netherlands,” says a laughing, 52-year-old Mr Zalm, before continuing in a more serious vein: “If that is the approach, I don’t think we will make much progress. Small countries are not willing to have the big countries run Europe.” In any case, qualified majority voting will largely keep the dominating tendencies of the big countries under control, he believes.

Meanwhile, nightmarish images and fiery explosions assail the hero. Yes, this economist and lifetime public sector employee is a computer game fanatic. After walking me over to his computer to show me his knight, he insists he turns it off before people walked into his office. But I would not put it past this jolly pinstriped figure with a ready wink to leave it on.

Wealth of experience

Mr Zalm has the confidence born of a long stint in office. Bar a few months, he has occupied the post of minister of finance for most of the last 10 years. This included the Netherlands’ last spell as holders of the EU presidency in 1997, when the Stability Pact took shape.

Surely, though, the Stability Pact is effectively finished when around 85% of the gross domestic product (GDP) of the eurozone is in violation of it?

“You have the obligation to correct it [an excessive deficit] the year after. So Holland in 2003 discovered [its budget deficit as a percentage of GDP] was 3.2%, 3% for 2004 and in 2005 it will have to be below. Germany and France did not follow this pattern – they took an extra year. The Italians – at some point one-offs are over – will have to do it,’’ he says, in a weak, meandering defence of the issue.

But he believes the future will be different. “My German and French colleagues want to be below 3% in 2005 and we agreed in the European constitution a declaration saying the good times should be used for consolidation and to gradually create surpluses. The difference is now you have government leaders [saying it],’’ he says, subsequently delivering a big wink and telling me that people and even governments are able to learn lessons.

Wink or no wink, Europe’s anaemic growth – averaging 1.7% since 2000 – makes the notion of creating surpluses appear unlikely, at best.

One of the Netherlands’ aims for its presidency is to increase the growth rate. Removing structural impediments in European Union economies, part of the Lisbon agenda aimed at improving their competitiveness, is a responsibility shared between national governments and the EU. The former are having major problems doing much of anything on this front. As soon as, say, the French or German government tries to reduce benefits or make the labour market more flexible, there is a voter backlash and they withdraw. “It is a bad habit in France,” agrees Mr Zalm, in his delightfully frank, Dutch way. “If we [in Europe] are not capable of getting more people into work then we will have enormous problems.”

He points out that it is true some Europeans are choosing leisure over work, that they have longer holidays and work fewer hours a week than the Americans, and that generous benefit schemes can be a disincentive for the low-skilled to work. “But not for me, the gap is too big!” he says, laughing. I am in awe of these sort of remarks; Mr Zalm would not last a week in British politics.

Where the EU can take responsibility – and this is the Netherlands’ aim – is in calculating the regulatory burden for enterprises and screening existing legislation for business costs with the aim of cutting some of it. He says in various countries, including the Netherlands, research on the total cost of the regulatory burden on businesses concluded it was equal to a substantial 3.5% of GDP, which probably means it is not dissimilar at an EU level.

Cutting regulation

“I don’t have a quantitative aim for [cutting] EU regulation. You can also be overambitious,” he warns. Yet with Luxembourg and the UK – the countries due to host the EU presidency one after the other in 2005 – committed to lightening the burden of regulation and European Commission President José Manuel Barroso vowing to put economic reform at the heart of his tenure, progress looks likely.

And Mr Zalm is not afraid of taking a swipe at his peers, indicating that his mission stands a good chance of success. “Often politicians think the Lisbon agenda is spending money on R&D. [Lessening regulation] is a bit of a tougher job but it will lead to substantial advantages for the cost base [of companies],’’ he says.

It is probably helped by the size of the Netherlands. Smaller countries are often more successful in the presidency role as they have “more freedom as we have less of a national agenda”, says Mr Zalm, lighting up a cigarette in his office in the ugly 30-year old ministry building, which is due for an overhaul.

He may find himself smoking heavily when he deals with the tricky issue of Turkey. Before the end of the year, the EU has to decide on a date to start accession talks with the Muslim state. “It is a political criteria, the Copenhagen criteria on human rights, democracy [that will decide it]. [Their being a majority Muslim country] is not a handicap,” he says, in a total denial of the facts. “I would prefer atheists but that is a sideline,” he says and laughs. It is unbelievable that he has spent 10 years in office with such a lack of political correctness.

Mr Zalm is sanguine about the record low turnout for the European elections earlier this year. It averaged 45.3% versus over 60% 20 years ago, including the accession states. “People don’t know what is happening, they are sceptical, it is far away. It is not Tony Blair or Gordon Brown who want to be in the European Parliament. It is not considered by national politicians as top of the bill, so people at the top of the lists in most countries are unknown,’’ he says.

He dismisses suggestions that the European Central Bank goal of tackling inflation is too narrow and that it should have as its aim job-creation as well, like the US Federal Reserve.

“If you have multiple goals most of the time you get frustrated. The ECB is willing and able and obliged – if not corrupting its central goal – to be helpful to economic development,’’ he says.

Nor does he want to see it coordinate policy more with the euro states, as he values its independence too much and notes that politicians appear incapable of calling for higher interest rates. “Even in the 1970s when we had double digit inflation, politicians did not say: ‘put interest rates up’,” he points out.

No illusions

He has no illusions about the new role of a president of the European Council making a difference to the EU’s divided foreign policy, while he casts doubt on the thesis that if the constitution is approved by less than the full 25 members of the EU, some would face expulsion. “That is a very unlikely scenario. The constitution is important but the world will not collapse [if it is not approved by all member states],’’ he says.

His chief press officer says he is better than his best staff, since he has been in public service and in the ministry for so long. “He is very loved in the ministry, as his management style means he talks not only to directors but to youngsters at the table when he has budget talks,” says Raymond Salet. Mr Zalm’s Northern Dutch straightforwardness, allied to an ebullient nature are superb weapons in his fight on the EU front. Hero IV moves forward.


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