Next cabinet must slash spending by €29bn

Tuesday 16 March 2010

The next government will have to make structural savings of €29bn between now and 2015 in order to get the country's finances back under control, the CPB economic policy unit said on Tuesday.

Although the economy will grow 1.5% this year and 2% in 2011, the effects of the economic crisis will be long-lasting unless the new government makes a major efforts to slash spending, the CPB advisory body says in a report.

The necessary cuts are the equivalent of €1,750 for man, woman and child in the Netherlands.

Serious

'Today, the CPB has shown us how serious the problems facing the treasury are,' caretaker finance minister Jan Kees de Jager said. 'The balance between income and expenditure has been distorted. If we continue as we are, we will be spending much more than we are getting in.'

The CPB says the crisis has cost the Netherlands some 5% of GDP, which will not be recovered during the next five year cabinet period. And the sharp rise in healthcare and pension costs associated with the increase in life expectancy will also pressure the economy.

Elections

'The higher life expectancy causes a greater burden for the public finances,' the CPB said. 'With unchanged policies, budget deficits will soar and the government debt will become unsustainable. With a projected budget deficit of 2.9% of GDP in 2015, an improvement of the structural budget balance by 4.5% of GDP- or €29bn - is needed in order to make the public finances 'ageing-proof'.

The CPB's forecasts are timed to be incorporated into the party political programmes ahead of the June 9 general election.

Last year the cabinet asked 20 working groups of civil servants to come up with a total €35bn in savings and tax raising initiatives to get government spending back under control. The results of that exercise are due in two weeks time.

Action

'The Netherlands is looking for a cabinet of action,' said Alexander Pechtold, leader of the Liberal democratic party D66 in a reaction. 'Politicians have to wake up and do some straight talking about the huge task ahead of us.'

'There is no time to be lost. Difficult decisions have to be made,' said CDA economic affairs minister Maria van der Hoeven. 'But the strength of our economy should be paramount. That is why we must be very careful with tax increases.'

For a summary of the CPB report (in English), click here

© DutchNews.nl

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