A fish out of water

Date: 06/02/1997

GERRIT Zalm is not a politician, or so he would have you believe.

The man who will chair meetings of EU finance ministers between now and June's summit in Amsterdam likes playing the part of fish-out-of-water - a sort of Mister Smith Goes to The Hague.

Plucked from academic obscurity less than three years ago to become finance minister in the Netherlands' first-ever coalition of free-market Liberals, centrists and Social Democrats, the gaunt north-Hollander has been swift to pick up the tools of the trade.

He can play 'the man in the street' with the skill of a Helmut Kohl or a John Major after their decades of experience on the greasy political pole. When Dutch ministers began their own fitness club to work out before Friday cabinet meetings, Zalm produced his own sick note: “I get all the exercise I need from smoking,” he quipped.

A recent interview with feminist magazine Opzij (Get out of my way) revealed Zalm, the sensitive family man keen to make his second marriage work, and Zalm, the ordinary Joe so suspicious of using cashpoint machines that he withdraws his money from inside the bank.

Cisca Dresselhuis, the journalist who conducted the interview, was won over and placed Zalm among her top ten men. “Every time she comes back from seeing someone, he is always the new favourite, but this time it did seem more serious,” says a colleague.

The 44-year-old professional economist and civil servant seems to have taken to political cut and thrust like a duck to water.

“He has the technical expertise for the job - everyone knew that - but he has also surprised people by being an astute political operator,” says an ally in the free-market Liberal VVD Party.

Zalm's deft political touch has only been found wanting on the European stage. He irritated some finance ministers at December's Dublin summit by preaching Germany's 'stability' gospel with even greater fervour than Bonn's representatives. He overstepped the mark with an attack on the Maastricht Treaty which, according to those present, earned him a reproach from Luxembourg's Prime Minister Jean-Claude Juncker.

Within a week of assuming the mantle as president of the finance ministers' council, the Dutch minister again put his foot in his mouth.

Surrounded by a throng of Mediterranean journalists, Zalm decided to speak his mind. It was essential, he said, that the economic and monetary union which would begin on 1 January 1999 should be made up of those countries with a long 'hard currency' history. If other member states waited until the euro banknotes and coins hit the streets in 2002, he argued, it would not matter that much.

Unfortunately, the governments of Spain, Portugal and Italy thought it did. All of them have their sights set on one thing alone: getting into the first wave of EMU qualifiers in 1999.

Zalm ate his words. Three days later, he sent a formal letter to Italian Treasury Minister Carlo Azeglio Ciampi aimed at clearing up the “misinterpretation” of his views.

“It was explicitly not my intention to make a pre-selection of countries that will or will not participate in the euro-area,” he wrote, his tail firmly tucked between his legs.

Those lapses apart, Zalm's short political life to date has been extraordinarily charmed. Finance ministers are usually the most hated members of any government - both among their colleagues and by the electorate - but Zalm ranks only behind Prime Minister Wim Kok in the political popularity stakes in the Netherlands.

The reason? The Dutch economy.

Fifteen years of economic reform, budgetary cut-backs and a rock-solid currency have finally started to pay big dividends. Kok's 'purple coalition' has presided over the arrival of a virtuous cycle of a fast-disappearing budget deficit combined with low inflation and an increase in the number of jobs.

“Obviously, Zalm has been lucky in that he took over just as the economy was going into an upswing,” says Gijs de Vries, VVD MEP and leader of the European Parliament's Liberal Group. “But, having said that, there are those in politics who drift on the waves and others who make good use of the better climate; he has done this.”

In this respect, Zalm's obscurity helped him. Instead of parachuting into the finance ministry from the political world, he hit the ground running. When he took office in August 1994, he could already look back over nearly 20 years at the heart of Dutch economic policy-making.

After studying economics at Amsterdam Free University and, incidentally, involving himself in left-wing politics, Zalm joined the finance ministry in 1975 and spent the next eight years working on the technical preparation of government budgets.

His apprenticeship not yet complete, Zalm crossed the road and joined the ministry of economic affairs in 1983. Five years later, he became chief of the Netherlands' independent economic watchdog, the Central Planning Bureau.

His reputation had preceded him. “Some people viewed him with suspicion when he arrived because of his political background,” says a former colleague. “In fact, he turned out to be a good academic economist who could find the weak points in detailed research. You always had to be on your toes.”

It was in this job that Zalm attracted the attention of the Netherlands' political power-brokers. During the lengthy negotiations which led to the formation of

Kok's purple cabinet, Zalm and his team met regularly with VVD, PvdA and D'66 leaders to brief them on the economic impact of their programmes.

When they came to carve up the government's portfolios and higher profile politicians turned down the poisoned chalice of the finance ministry, the party fixers turned to Zalm, who accepted it.

“He knew the problems and the pitfalls and, above all, he knew what had gone wrong in the past,” says De Vries. “The biggest headache for previous governments was getting a bad surprise - followed by the acrimonious debate this always led to within the cabinet.”

Zalm was determined to bring an end to this. As a civil servant, he had urged ministers to make two simple but - as it has turned out - crucially important reforms.

First, he argued, instead of targeting reductions in the budget deficit, governments should aim to cap public spending. Secondly, fiscal targets should be based on realistic economic growth forecasts on the principle that the pessimist is never disappointed.

The minister kept to his word. Within weeks of taking office, Zalm had produced a budget in which he promised to reduce government spending - once inflation had been taken into account - by 0.5&percent; every year until 1998, amounting to a 9-billion-ecu cut in spending over four years.

Moreover, since he assumed that the economy would only grow by 2&percent; per annum over that same period, the only surprises have been good ones. Growth has surpassed estimates, meaning that the deficit is already heading for 2&percent; of national income, and tax windfalls have been diverted into infrastructural spending as well as public debt reduction.

“If anything, his problem is that he has too much money to spend and has to deal with competing voices calling for it to be spent on their pet projects,” says a colleague. “But that is a healthy position that any other finance minister would envy.”

The same could certainly not be said of the man himself. He smokes like a chimney, a habit which increases when he gets nervous. Last summer, he spent a month in hospital after doctors found what turned out to be a benign tumour and removed 30 centimetres of his intestines. But his powers of recovery are strong and he was on his feet presenting yet another successful budget speech in September.

Ironically, it has been Zalm the non-politician who has become one of the key players holding the right-left cabinet together.

“His loyalty is first and foremost to the cabinet,” says a colleague from the VVD. “He has strong opinions about the need for sound public finance, but he is not dogmatic and he is appreciated by government colleagues in all the different parties.”