Budget deficit to hit 4.5% next year, spending cuts should total €9bn

Ministers will have to cut spending by an extra €9bn if the budget deficit is to be reduced to below 3%, in line with monetary union rules, according to new economic forecasts from the government’s CPB think-tank.


The budget deficit is set to hit 4.5% next year, well above the 3% monetary union limit, the macro-economic policy unit said in a statement on Thursday.
This means the government will have to reduce spending or find savings totalling €9bn to meet EU rules and the agreement made when the coalition was formed in 2010.
However, the CPB is less negative on economic growth, predicting an increase of 1.25% in 2013, although unemployment may rise to 6%.
Talks
The two coalition parties (VVD and CDA) together with alliance partner, the anti-Islam PVV, are due to start talks on a new round of cuts on Monday. The CDA has said it will not accept new cuts without economic reform. The PVV wants drastic cuts in development aid.
PVV leader Geert Wilders said after the publication of the CPB forecasts that he did not think it was necessary to cut spending by €9bn. ‘We are not figure fetishists,’ he said. ‘We have to do what is good for the economy and good for the Dutchman.’
VVD parliamentary party leader Stef Blok also said the 3% norm ‘is not sacrosanct’. ‘But we will have to reduce the deficit. The VVD is the party that wants reforms and cost-cutting.’
Opposition MPs described the new forecasts as ‘dramatic’. And Bernard Wientjes, head of the employers organisation VNO-NCW, urged the cabinet to make long-term reforms, not to make savings that will hurt economic growth.

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