Dutch to Miss Deficit Target Despite More Austerity

More spending cuts and tax increases will more allow the Netherlands to keep its deficit under 3 percent.

Jeroen Dijsselbloem and Ioannis Stournaras, the finance ministers of the Netherlands and Greece, speak in Brussels, November 20, 2012
Jeroen Dijsselbloem and Ioannis Stournaras, the finance ministers of the Netherlands and Greece, speak in Brussels, November 20, 2012 (European Council)

Dutch Labor Party leaders on Tuesday said the country would deliberately miss Europe’s 3-percent deficit target next year while the government announced €6 billion more in spending reductions and tax increases.

Labor has been critical of the deficit limit that is enshrined in the eurozone’s fiscal treaty, but Prime Minister Mark Rutte’s liberals, who lead the coalition government, insist on deeper cuts to meet the goal — if not to prevent the national debt from rising further, then to preserve the country’s credibility in Europe.

Austerity

Among the new austerity measures are higher taxes on alcohol and diesel and a surtax on incomes above €150,000.

Most civil servants’ pay will remain frozen while department budgets will not be adjusted for inflation.

Defense spending will be cut another €350 million, although the Netherlands remained committed to replacing its fleet of aging F-16s with F-35 Joint Strike Fighter jets.

Poor performance

The Netherlands, otherwise one of economically most competitive and fiscally sound members of the euro, is now among the worst performers in the currency union.

Its economy contracted .2 percent in the most recent quarter while the eurozone’s as a whole grew .3 percent.

The Dutch Bureau for Economic Policy Analysis expects 1.25 percent negative growth this year and less than 1 percent growth in 2014.

Time for a change

With unemployment at 8.8 percent, more than double where it was before the crisis, and corporate bankruptcies rising, most opposition parties believe the government should change policy.

But whereas the far-left Socialists, Labor’s rivals, criticize welfare cuts, the Christian Democrats and nationalist Freedom Party, who are vying for the same right-wing voters as Rutte’s liberals, oppose tax increases.

Survey gives the ruling parties just thirty seats in the lower chamber of parliament where they currently hold 79.

The anti-EU Freedom Party would more than double its seats.

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