Tag Archives: The Netherlands

Well, whaddaya know: Dutch banking sector update – SNS Reaal

A few days ago I posted some links about the state of the Dutch banking and housing sectors, to show that contrary to what some believe, the Dutch economy isn’t that stable.

And now comes the news about the SNS Reaal banking/insurance company, which might need bailing out by the state. The article I linked to is in Dutch, but here is a rough translation:

The stock value of SNS Reaal decreases sharply. Yesterday it fell by about twelve percent, to 77 cents. After opening of the stock exchange this morning share fell sharply again. This time by nearly 8.5 percent to 71 cents. Confidence in the bank and insurance company has plummeted now a rescue operation by the government seems imminent.

De Telegraaf reported Wednesday based on anonymous sources that pressure is mounting to devise a rescue plan for the bank. The plan would be announced in the coming days. Nationalisation of SNS is a serious option,  the newspaper reported.

SNS received state aid in 2008, and is still in big trouble. It badly needed capital, causing the pressure  to intervene to increase. The bank can not repay state aid from 2008. The three other major Dutch banks, ING, ABN AMRO and Rabobank, are not allowed to take over SNS by the European Commission.

SNS is listed on the AMX since 2006. The offering price was seventeen euros.

So who says that the Eurocrisis’ problems are restricted to ‘Club Med’ countries? Well, not the writers I just linked to.

UPDATE: This graph shows on a very limited scale what is happening to the Netherlands (blue). Sorry about the smallish quality. It is the house price index since 2005, and as is quite clear, Dutch housing prices now follow a similar path to the Spanish ones (green). Finnish housing prices are indicated by the brown line.

Eurostat_Graph_tipsho30

In particular this graph is interesting compared to household indebtedned (gross debt-to-income ratio) below, for Spain, Finland and the Netherlands. It is quite well-known, that the Netherlands for many years had a banking system that was eager to loan money, and many people were encouraged to take as much mortgage as possible, given the believe (then) that housing prices will continue rising (given that the Netherlands is a small country, with little space etc. See the second link in the post on the Dutch economy). So the high level of household indebtedness together with a declining housing price is a very, very bad thing for the Dutch economy – many people will become ‘underwater’ with their mortgages; the whole negative equity drama. Of course, this is the gross debt-to-income ratio, so it does not take into account the possibility of tax deducting mortgage interests etc but still, the picture is quite clear I think.

Debt ratio

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VoxEU.org: ‘Eurozone crisis: It ain’t over yet’

This link relates to at least this, this and this post. Things are not at all well in the Eurozone. It is sad that the leading Finnish daily, Helsingin Sanomat, pretends (in its editorial!) that the worst is over.

UPDATE: The first link above is mentioned in the column of Ambrose Evans-Pritchard, which nominally reflects on David Cameron’s Europe-speech.

Something else: the Dutch economy and a possible housing bubble deflating?

As I am Dutch, i do follow the Dutch news to some extent. I found some news that kind of confirmed that things are not so well in one of the ‘core’ core eurozone countries:

The other Dutch disease Although this is already a month old it seems that the Dutch economy is hit harder by the eurocrisis than the German economy.

Dutch show how not to run housing policy And this is one of the reasons why. Now, since 2011 housing prices have dramatically declined, but thanks to the earlier problems of the Dutch financial sector, the banking sector is now simply stuck – banks don’t lend money, so people can’t buy, which means it is impossible to sell, which makes it a problem that people have expensive mortgages from the time of rising housing prices.

Also exports and imports through Rotterdam are not as big as previously, and as a whole, the Netherlands is quite sensitive to changes in the European economic tide. On top of that are issues like transport (traffic jams).

I don’t know if the Netherlands will lose its AAA-status but it nonetheless starts to feel uncomfortable for the current government that they aligned themselves with Merkel’s economic policy and wholly supported the new Fiscal Compact.