A day ahead of the publication of crucial economic forecasts, there is widespread speculation in political circles about what measures the government is likely to take to get the budget deficit under control and boost growth.

Earlier this week, Coen Teulings, head of the government’s macro-economic think-tank CPB, warned in an article in the Financial Times that cuts at times of crisis were not the best way to recovery.
However, according to Wednesday’s Financieele Dagblad, the cabinet will introduce new spending cuts, albeit it austerity measures which will not hamper economic growth. The paper bases its claims on ‘well informed sources’ in The Hague.
Key forecasts
Estimates of how much spending needs to be reduced range from an extra €5bn to €10bn, although the Nederlands Dagblad says up to €15bn may have to be found. The Dutch budget deficit is currently around 4%, well above the eurozone monetary union limit of 3%.
The CPB is due to publish key economic forecasts on Thursday, which will be used as the basis for next week’s negotiations between the minority government and its alliance partner, the anti-immigration PVV.
The FD says a civil service pay freeze for two more years, a two-year freeze in social benefits, an increase in value-added tax, an increase in healthcare contributions and a reduction in basic healthcare coverage are among the most likely measures because of their minimal effect on economic growth.
Cuts in development aid – seen as essential by PVV leader Geert Wilders – an end to student grants and cuts in unemployment benefit are also on the cards.
Housing market
Despite pressure for reforming the generous Dutch system of mortgage tax relief, this is unlikely to be introduced now, given the difficulties in the housing market. Wilders has also said he will not accept changes to the home owners’ tax break.
However, the Christian Democrats, junior party in the current coalition, have said they will only accept more spending cuts in return for economic reforms.
Finance minister Jan Kees de Jager told RTL television on Tuesday he favoured a ‘healthy mix’ of savings and reform to both reduce the budget deficit and stimulate growth.