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

Thursday 01 March 2012

Ministers will have to cut spending by an extra €9bn over the next two years 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.

Increased cuts

However, the Financieele Dagblad says the total cuts package may need to be as much as €16bn to make sure any knock-on effects on the economy are taken into account.

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.'

Despite hints that the coalition may consider deviating from the eurozone rules, a spokesman for the European Commission said on Thursday Brussels expected the Netherlands would meet targets.

The Netherlands is one of the strongest supporters of budgetary discipline, so will of course apply the rules to itself, the spokesman said.


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.

According to the Volkskrant, six main areas for reform and spending cuts will be up for discussion at next week's talks: development aid, housing market, the jobs market, energy, defence spending and healthcare.

© DutchNews.nl


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