Netherlands exit from EU would be catastrophic: Rabobank

European Union
. Source: www.futureatlas.com

If the European Union falls apart, the Netherlands would face severe consequences, according to Rabobank. The Dutch economy will shrink by 10 to 15 percent, unemployment will double and welfare will remain structurally lower than when the Netherlands was part of the internal market. Should the EU stay together, but the Netherlands decides to step out, the consequences would be even more disastrous, the bank predicts, RTL Nieuws reports.

Rabobank sees four future scenarios for the EU: "muddling through", "disintegration", "deepening" and "two speed". In the "two speed" scenario, the Netherlands is expected to still be part of both the Schengen agreement as the eurozone - the "fast speed".

Scenario one, "muddling through" or continuing in the current situation, is not such a bad option for the Netherlands in the short term. But in the long term, persistent unrest and discontent without effective policies are not sustainable. If nothing changes, according to the bank, the EU will eventually end up in option two.

Which is disintegration. In this scenario first the eurozone and then the European Union as a whole fall apart. Rabobank describes the economic consequences of this scenario as "disastrous" for the Netherlands. "As one of the most open economies in Europe, the Netherlands is hit hard by the fragmentation of the European Union", the bank writes, according to RTL. Economic growth will drop sharply, unemployment will double, trade with other EU member states will plummet and capital losses on foreign currency will reduce the coverage of the pension funds. 

Should the Netherlands decide to exit the European Union, so-called "Nexit", the consequences will be even worse for the country, according to the bank. Wim Boonstra, chief economist at RaboResearch, warns against making the comparison with the current Brexit. As the UK was never a part of the eurozone, the Britons are suffering less for their decision to leave the EU than the Netherlands would.  He expects that the UK will feel the economic consequences of the Brexit in the long term. According to Boonstra, a Nexit is possible. But it will be very, very expensive.

In option 3, "deepening", the EU member states opt for more cooperation. According Rabobank, this option holds many economic benefits for the Netherlands. Economic growth will increase, unemployment will fall and even indexation of the pensions becomes a possibility. 

In the "two speeds" scenario the Netherlands is one of the core countries in the EU. The core countries will cooperate more closely and increase the distance to the countries on the edge of Europe. At first this will slow the Dutch economic growth, but it will eventually climb higher than option one and two would allow. The same goes for unemployment. 

Rabobank believes that option 3, more cooperation between EU member states, is the best idea for the Netherlands. The bank adds that all options have costs and benefits, but the differences are large. "Europe costs money", Boonstra said, according to RTL. "But how we deal with Europe, determines how much money it will cost."

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