Dutch King Announces Borrowing, Investments to Weather COVID-19

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. Read more “Dutch King Announces Borrowing, Investments to Weather COVID-19”

What’s in France’s €100 Billion Stimulus

Emmanuel Macron
French president Emmanuel Macron answers a question from a reporter in Helsinki, Finland, August 30, 2018 (Office of the President of the Republic of Finland/Juhani Kandell)

France has unveiled a $100 billion stimulus program, worth 4 percent of GDP over two years, to help its economy recover from the effects of COVID-19.

The money is split almost equally between support for businesses, investments in the green economy, and health and social programs. It comes on top of the €460 billion France has spent on exemptions from social charges, furlough subsidies and soft loans to keep businesses afloat.

France is counting on the EU to provide 40 percent of the money from its €750 billion recovery fund. Read more “What’s in France’s €100 Billion Stimulus”

Dutch Extend COVID Aid for Businesses

The Hague Netherlands
Dutch government offices and parliament buildings in The Hague (iStock/Fotolupa)

The Dutch government has extended support for companies and self-employed workers struggling as a result of COVID-19 until July 2021, although some policies are becoming less generous.

The thinking, reports the national broadcaster NOS, is that firms shouldn’t be subsidized if they aren’t viable long term and workers in sectors with job losses should be coaxed into reskilling.

The measures will cost almost €39 billion this year. The Dutch economy is projected to shrink 6.4 percent. Read more “Dutch Extend COVID Aid for Businesses”

Singapore-on-Thames Is Unlikely

London England
The sun rises over London, England (Uncoated)

With the Brexit transition period ending in just four months, concern is rising that the United Kingdom might crash out of the EU’s common market and customs regime without a deal.

Not everyone is worried. Prime Minister Boris Johnson’s predecessor, Theresa May, argued it “wouldn’t be the end of the world” if Britain left without a deal. Right-wing economists are looking forward to setting “attractive tax rates” once the United Kingdom is free of the EU’s grasp. The UK, they believe, could become a “Singapore-on-Thames”, gain a “competitive advantage” over the EU and draw businesses and investment away from continental Europe.

That is unlikely. Read more “Singapore-on-Thames Is Unlikely”

Germany’s Surplus Obsession Hurts the Eurozone

Angela Merkel
German chancellor Angela Merkel attends the G7 summit in Biarritz, France, August 25, 2019 (Bundesregierung)

If the German economy does poorly, so will the eurozone’s. A mere .2 percent growth is projected for the first quarter of 2020. This should be a wakeup call to German policymakers.

There are the usual suspects: underdeveloped infrastructure, underinvestment in education, export dependency.

They all stem from Germany’s obsession with surpluses. Revenues generated by exports are not reinjected into the economy. Rather, they sit comfortably in savings accounts. This is the reason for negative interest rates.

Not spending money is one way to get rich. But to grow its economy, or prevent a slowdown, Germany must put its money to work: invest in education, infrastructure and public goods.

Its reluctance to do so affects everyone in the euro area. Germany accounts for nearly 30 percent of the eurozone’s GDP. If Germany spent more at home, it would reduce its current account surplus and increase demand for the products and services of other European nations. Read more “Germany’s Surplus Obsession Hurts the Eurozone”

Germany Under Pressure to Spend

Angela Merkel Mark Rutte
German chancellor Angela Merkel receives Dutch prime minister Mark Rutte in Berlin, May 16 (Bundesregierung)

In the face of weakening economic growth, outgoing European Central Bank president Mario Draghi has called on the fiscally conservative governments of Germany and the Netherlands to spend more.

The Dutch are heeding his advice with plans for a long-term economic investment fund. Will the Germans follow suit? Read more “Germany Under Pressure to Spend”

Italy Backs Down from Budget Fight with EU

Italian labor minister and Five Star Movement leader Luigi Di Maio eyes Prime Minister Giuseppe Conte during a news conference in Rome, July 3
Italian labor minister and Five Star Movement leader Luigi Di Maio eyes Prime Minister Giuseppe Conte during a news conference in Rome, July 3 (Governo Italiano)

The leaders of Italy’s ruling populist parties have backed down from a fight with the European Commission over their 2019 budget.

Luigi Di Maio, the labor minister and leader of the Five Star Movement, and Matteo Salvini, the interior minister and leader of the far-right League, said after a meeting on Sunday that they had given their blessing to Prime Minister Giuseppe Conte’s revised spending plan, which reduces next year’s shortfall from 2.4 to 2 percent of GDP. Read more “Italy Backs Down from Budget Fight with EU”

Eurozone Budget Could Take Years

French president Emmanuel Macron speaks with Dutch prime minister Mark Rutte during a European Council meeting in Brussels, June 24
French president Emmanuel Macron speaks with Dutch prime minister Mark Rutte during a European Council meeting in Brussels, June 24 (Elysée)

The Financial Times reports that Emmanuel Macron and Angela Merkel have made a “breakthrough” on eurozone reform: the French and German leaders agree the currency union should get its own budget.

The move is good news for the French president, who has long believed that giving the single currency area its own resources will make it more resilient to economic crises.

But it is unlikely to come into being any time soon. Read more “Eurozone Budget Could Take Years”

Italy’s Budget Standoff with the European Commission, Explained

Flags of the European Union outside the Berlaymont building in Brussels, July 22, 2016
Flags of the European Union outside the Berlaymont building in Brussels, July 22, 2016 (European Commission)

The European Commission has told Italy to revise its budget for 2019, accusing it of “openly and consciously” reneging on the commitments it has made.

This has been reported as the commission “rejecting” Italy’s budget proposal, but that is too strong a term. It has no such power.

Here is what’s really going on — and what is likely to happen next. Read more “Italy’s Budget Standoff with the European Commission, Explained”