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Dutch King Announces Borrowing, Investments to Weather COVID-19

Unlike during the last economic crisis, the Dutch government is not cutting spending.

Willem-Alexander of the Netherlands
King Willem-Alexander of the Netherlands reads out his annual speech from the throne in the Grote Kerk in The Hague, September 15 (Rijksoverheid)

The Netherlands’ ruling center-right coalition unveiled an expansionary budget on Tuesday, when King Willem-Alexander read out his annual speech from the throne to set out the government’s priorities for the next fiscal year.

Whereas the Dutch government, then also led by Mark Rutte, raised taxes and cut public spending during the last economic crisis to keep its budget deficit under the EU’s 3-percent ceiling, it now argues against austerity and is borrowing the equivalent of 7.2 percent of GDP (down from an earlier estimate of 8.7 percent).

Rutte argues the savings made in previous years allow the government to avoid cuts this time.

The Dutch economy is projected to shrink 5 percent this year as a result of COVID-19 and grow 3.5 percent next year, when unemployment would reach 545,000, or almost 6 percent. Debt as a share of GDP is projected to rise from 49 to 61 percent.

Measures

The government is keeping defense, education and police spending stable. Planned investments in rail, roads and waterways are being pulled forward.

Additional measures include:

  • €20 billion in investments over five years in infrastructure, learning, research and development.
  • €6.7 billion in higher health spending due to coronavirus.
  • €2 billion in bonuses for health-care workers.
  • €1 billion in tax relief, including a reduction of the lowest income tax rate and an increase in tax credits.
  • Slower rollout of a new carbon tax.
  • Reduction in tax on business profits under €400,000.
  • Five-year pause in real-estate transfer tax.
  • Lower rent cap in public housing, which should benefit some 260,000 renters.

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