The coup of Knot (president dutch central bank)

Dec 22nd De poets van Knot (via @mootzcom)
The coup of Knot (president dutch central bank)

Klas Knot the president of the (dutch central bank) Nederlandsche Bank delivered the cabinet a unpleasant Christmas surprise. De Nederlandsche Bank usually good for a vast transfer of profit to the treasury has decided not to give an interim-dividend to the state this year. Big bad luck for the governments finances: minister De Jager had to declare a bad news of 575 million € less close to the years ending.

The profit warning which was issued by DNB has to do with all the misery of the eurozone. DNB recons seriously with a lower profit or even a loss due to the crisis. DNB is part of the structure of European Central Banks and the ECB has put big risks on itself by purchasing sovereign bonds of the Euro area and by providing credit lines to struggling banks. Already a year ago the ECB warned European finance ministers that losses can be suffered by those actions. DNB chooses for not taking risks and does not transfer any dividend to its only shareholder the dutch state.

Bad luck for De Jager, not alone because of the effect on the budget deficit which is going to be higher than estimated. If DNB is definitely dismissing the dividend for 2011 De Jager cannot longer hold up the story that the dutch involvement in credit providing for problem countries in the Euro area is providing loads of money to the treasury.
And there is something else. De relationship between the former president of DNB, Nout Wellink, and minister De Jager has cooled off the last cuple of years. Nevertheless the dividends of the DNB under Wellink were steady „nice suprises“ for the treasury. Once Wellink held back a part of the profit: in 1998 in order to purchase the painting „Victory Boogie Woogie“ of Piet Mondriaan for the dutch public at the event of the farewell to the dutch guilder.

On Juli 1^st Klaas Knot took office as new president of DNB. Knot came „from outside“ the cabinet assured and he was supposedly enhancing the relationship between the central bank and the ministry. Knot would be closer to the ministry and in the press he was referred to as „trustee“ of De Jager.
If De Jager and Rutte counted on that: within half a year Knot has made clear twice that he is cut from the same cloth as every central banker. First he brought an unpleasant surprise to the cabinet by warning of the risks for banking stability connected with the huge mortgage debt in the Netherlands at the beginning of November. Knot has chosen intentionally for the hypersensitive subject of mortgage rate deduct ability (>from IRS obligations) to demonstrate his independence from politics.

Now De Jager has miscalculated a second time. Knot is following the line of Wellink and the ECB concerning the debt crisis of the Eurozone. The governments should not think that they can put the costs of it on the central banks. And if the dutch government won't provide more cash for the EFSF the DNB will send a profit warning to The Hague. Via a U-turn of a possible loss of the central bank the financial misery will finally arrive at the treasury.
Only relief for the cabinet: the expected dividend of the DNB is a technicality which will produce less fuzz than the announcement of direct support to Greece. But it still is 575 million Euro.