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ZNR UUUUU ZZH
R 171709Z SEP 09 ZDK
FM AMEMBASSY THE HAGUE
TO RUEHC/SECSTATE WASHDC 3271
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
INFO RUEHAT/AMCONSUL AMSTERDAM 4256
RUCNMEM/EU MEMBER STATES COLLECTIVE

UNCLAS SECTION 01 OF 04 THE HAGUE 000565 
 
SIPDIS 
 
STATE FOR EEB/OMA - AWHITTINGTON, EUR/ERA - JKESSLER 
NSC FOR JOHN HENNESSEY-NILAND, TOBY BRADLEY 
TREASURY FOR IMI - VATUKORALA 
USDOC FOR 4212/USFCS/MAC/EURA/OWE/DCALVERT 
STATE PASS FEDERAL RESERVE BOARD - INTERNATIONAL DIVISION 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV PREL NL
SUBJECT: NETHERLANDS: DUTCH POSITIONS IN ADVANCE OF G20 SUMMIT 
 
THE HAGUE 00000565  001.2 OF 004 
 
 
¶1. Summary:  At the Pittsburgh G20 summit, the Dutch will: 
 
- highlight their new Banking Code (which includes a cap on bank 
directors' bonuses of one year's salary) as an example of improved 
corporate governance and risk management; 
 
- strongly support the German Charter for Sustainable Economic 
Activity; 
 
- support a plan for international financing to help developing 
countries meet aggressive climate change targets; and 
 
- encourage G20 leaders in Pittsburgh to draw up a road map to 
conclude the Doha Round in 2010.  End summary. 
 
¶2. In Pittsburgh, Prime Minister Balkenende and Finance Minister 
Wouter Bos will represent the Netherlands.  The following Dutch 
officials will accompany the principals to the summit: 
 
- Richard van Zwol, G20 and G8 Sherpa, Office of the Prime Minister 
 
- Marjan Schippers, Senior Policy Advisor to Richard van Zwol, 
Office of the Prime Minister 
 
- Rene van Hell, Deputy Director, Office of Trade Policy and 
Globalization, Ministry of Economic Affairs 
 
- Geert Beekhuis, Senior Policy Advisor on the G20, Ministry of 
Foreign Affairs 
 
- Taco Stoppels, Head of the Financial and Economic Cluster, 
Department of European Integration, Ministry of Foreign Affairs 
 
¶3. The Dutch agree with us that Pittsburgh should not be another 
pledging summit; the Dutch public and parliament have little 
appetite for additional spending in the wake of the USD 14.07 
billion that the Netherlands pledged in London.  In recent 
statements to parliament, however, Finance Minister Bos did not rule 
out the possibility that future contributions to the work of the G20 
and the international financial institutions would be necessary. 
Bos quipped that the Netherlands' ticket to the Pittsburgh summit 
had cost them over USD 18.2 billion, including their G20 pledge in 
London and other financial guarantees provided to the IMF. 
 
---------------- 
FINANCIAL SECTOR 
---------------- 
 
¶4. Having the G20 push for an internationally coordinated effort to 
improve risk management and corporate governance in the financial 
sector is one of the Netherlands' key goals for the Pittsburgh 
summit.  At both the EU heads of state meeting on September 17 and 
the Pittsburgh summit, the Dutch will highlight their new Banking 
Code (see below) as an example of what G20 members could do.  They 
will encourage other countries to adopt similar measures; if no 
international consensus can be reached, the Dutch will implement 
their code unilaterally. 
 
¶5. On September 9, the Netherlands Bankers Association announced a 
new Banking Code that all Dutch banks headquartered in the 
Netherlands - regardless of their presence in other countries - will 
voluntarily adopt by January 1, 2010.  Finance Minister Bos is also 
considering whether to implement the Code as binding legislation. 
This announcement is the result of months of public pressure on the 
banks to rein in risky practices and, especially, to limit the hefty 
bonuses paid to bank executives.  The Code sets rules on risk 
management and remuneration, including: 
 
- "variable remuneration" (i.e., annual bonuses) for executive board 
members not to exceed one year's salary; 
 
- banks to develop a "meticulous, restrained" remuneration policy 
for all other bank employees (including traders and investors); 
Qfor all other bank employees (including traders and investors); 
 
 
- all executive board members to sign a "moral and ethical conduct 
declaration"; 
 
- chairman of the executive board to be responsible for bank's 
overall risk policy; 
 
- banks to implement a Product Approval Process in which complex new 
products will be assessed by risk managers before their market 
 
THE HAGUE 00000565  002.2 OF 004 
 
 
release; and 
 
- banks that do not implement these standards must explain why they 
did not do so in their annual report 
 
¶6. The Dutch will also recommend that G20 governments require a 
capital add-on if a bank's remuneration policy is deemed to promote 
imprudent behavior.  Regarding bank failure, the Dutch believe that 
financial institutions should be allowed to fail if doing so poses 
no risk to the stability of the financial system.  For institutions 
too big to fail, the G20 should promote consistent "entry 
mechanisms" that provide financial authorities with clear guidance 
on when and how to intervene.  The IMF and the Financial Stability 
Board could develop the principles to define these entry mechanisms. 
 The Dutch also favor private sector solutions such as attracting 
new capital, sales of activities, or mergers as important first 
steps to prevent bank failures, before turning to government 
bailouts. 
 
-------------- 
MACROECONOMICS 
-------------- 
 
¶7. To help ensure the fragile economic recovery continues, the Dutch 
believe the G20 should focus in the short term on financial 
stability and safeguarding the functioning of credit channels, 
including by ensuring sufficient capitalization of banks and dealing 
with impaired assets on their balance sheets as necessary.  In the 
medium term, governments should develop plans to return to 
sustainable debt ratios - something with which the Netherlands is 
struggling as its deficit climbs to an expected 4.6 percent of GDP 
this year - including withdrawing financial sector support where 
appropriate.  The Dutch believe coordinated planning by central 
banks is crucial to the successful drawdown of this support. 
 
¶8. Regarding the process of peer reviews in which countries review 
each other's economic and financial policies and performance, the 
Dutch support an expanded role for the IMF's International Monetary 
and Financial Committee (IMFC).  The IMFC could initiate a broader 
peer review process for all IMF members. 
 
----------------------------------------- 
CHARTER FOR SUSTAINABLE ECONOMIC ACTIVITY 
----------------------------------------- 
 
¶9. As they expressed at the London summit, the Dutch strongly 
support the German charter; they view it as a useful "shell" to help 
countries develop common principles of economic activity and address 
shortcomings in the regulation of financial markets.  They recognize 
that it will be difficult to persuade China and India in particular 
to agree to strong language on labor and environmental standards, 
and that concerns remain about the charter replicating work already 
taking place in the OECD. 
 
-------------- 
CLIMATE CHANGE 
-------------- 
 
¶10. The Dutch view progress in the G20 and other international fora 
on climate financing as a crucial step to success in Copenhagen. 
They want G20 leaders to endorse a plan for international financing 
to help developing countries meet aggressive climate change targets. 
 The Dutch noted that debate continues within the EU about how much 
it should pledge toward this international fund, with 
recommendations ranging from 2 billion to 15 billion euro in annual 
contributions to the fund by 2020.  Since this issue will be 
discussed at the October meeting of the European Council, the Dutch 
Qdiscussed at the October meeting of the European Council, the Dutch 
said EU members will not discuss a specific pledge amount at the 
Pittsburgh summit. 
 
¶11. The Dutch emphasize that all countries except the least 
developed should contribute to the international fund, and that it 
should be a new instrument so as not to detract from pledges already 
made to achieve the climate-related Millennium Development Goals. 
Developing countries should institute low-carbon growth plans that 
fund members could evaluate when considering how much financing to 
provide.  The Dutch want all countries to move toward a global 
emissions cap-and-trade system; to that end, they want the G20 to 
take measures to ensure sufficient demand for international carbon 
offsets. 
 
------------------------------------ 
INTERNATIONAL FINANCIAL INSTITUTIONS 
 
THE HAGUE 00000565  003.2 OF 004 
 
 
------------------------------------ 
 
¶12. The Dutch believe that the Pittsburgh summit could be 
instrumental in building consensus on governance reform of the IFIs. 
 However, they caution that the G20 process must be linked to 
similar discussions underway at the IMF and World Bank to enable all 
IFI member countries to participate in the decision-making.  The 
Dutch favor a larger voice for developing countries in IMF/World 
Bank governance - although not at the expense of the Netherlands' 
seat on the IMF Board of Governors.  Rather than replacing existing 
board members (like the Netherlands), the board should be expanded 
to include more developing countries.  To offset the expansion, the 
IMF could reduce board members' threshold for voting by qualified 
majority from 85 percent to 70 or 75 percent. 
 
-------------------- 
LOW INCOME COUNTRIES 
-------------------- 
 
¶13. Achievement of the Millennium Development Goals (MDGs) to halve 
world poverty by 2015 is a core principal of the Netherlands' 
substantial development assistance program (about USD 7.5 billion 
annually).  The Dutch are increasingly concerned that the economic 
crisis will derail low income countries' (LICs) progress toward 
their MDGs.  They therefore strongly support continued G20 attention 
to the LICs.  They want G20 members to follow through on their 
pledges at the London summit to support the LICs through financial 
contributions to the IMF and other IFIs.  They also want countries 
to follow through on their commitments to allocate 0.7 percent of 
their GDP to foreign development assistance.  (Note:  The 
Netherlands allocates 0.8 percent of GDP, including 0.7 percent for 
all forms of assistance and an extra 0.1 percent specifically for 
sustainable energy projects.  End note.)  The Dutch stress the need 
to remain vigilant about the IFIs' capital base, ensuring in 
particular that the multilateral development banks have sustainable 
income models that can ensure financing is available in times of 
need.  The Dutch have also expressed interest in helping the IMF 
raise up to USD 8 billion in additional concessional financing to 
LICs. 
 
¶14. The Dutch will encourage the G20 to remain focused on several 
specific activities to assist LICs.  These include support for the 
G8 initiative on food security - an area in which the Dutch are 
extremely active.  (Despite cuts to their development assistance 
necessitated by a rising budget deficit, they will invest about USD 
2 billion over the next three years in sustainable agriculture and 
rural development in Africa, amounting to about 10 percent of their 
total assistance budget.)  They also favor additional G20 support to 
cooperative banks with a strong base in LICs as a way to spur 
entrepreneurship among farmers.  They point to the example of the 
Netherlands' Rabobank (the world's largest cooperative bank, 
according to the Dutch) and its efforts to invest in local African 
banks.  The Dutch also highlight trade finance as another important 
means of supporting LICs, noting their recent USD 50 million 
contribution to the International Finance Corporation's Global Trade 
Liquidity Program. 
 
--------------- 
ENERGY SECURITY 
--------------- 
 
¶15. The Dutch believe that improving energy efficiency and diversity 
Q15. The Dutch believe that improving energy efficiency and diversity 
of supply in LICs is critical to achieving the MDGs.  A priority of 
their development assistance program is therefore promoting 
renewable energy in LICs.  They believe that the World Bank's 
"Scaling-Up Renewable Energy Program for Low Income Countries" 
(SREP) could catalyze renewable energy investment in LICs.  As one 
of the founders of the SREP, the Netherlands has given USD 80 
million to the SREP fund; they will call on G20 members to pledge 
additional financial support for the fund in Pittsburgh. 
 
----- 
TRADE 
----- 
 
¶16. The Dutch argue that, despite strong political signals from the 
U.S. and others, the Doha negotiations have made little progress 
since the G20 summit in Washington in November 2008.  Asserting that 
trade is essential to economic recovery, the Dutch will encourage 
G20 members in Pittsburgh to draw up a road map to conclude the Doha 
Round in 2010.  They will also stress the need for continued 
vigilance against anti-protectionist trade measures. 
 
 
THE HAGUE 00000565  004.2 OF 004 
 
 
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COMMENT 
------- 
 
¶17. Comment:  The Dutch are fully cognizant that, despite three 
successive summit invitations, they remain guests in the G20 
process.  They firmly believe that they can make substantive 
contributions and will present their recommendations at the summit - 
but in a quiet, reserved manner.  Our Dutch interlocutors have also 
noted some tension between EU members that are G20 participants and 
those that are not; the Belgians, for example, have expressed 
concern about a G20 "super group" within the EU that consults on the 
issues first before bringing the discussion to the larger EU 
community.  As guests in the G20, the Dutch are trying to walk a 
fine line between wanting to punch above their weight with the big 
EU economies in the G20 and foster their usual spirit of 
inclusiveness and consultation with all EU member states.  End 
comment. 
 
LEVIN