The European Commission is critical of the five-party agreement on cutting the Dutch budget deficit, saying it may fail to reach eurozone targets and may even be scrapped after the general election, according to media reports on Wednesday afternoon.
Poor economic prospects and rising unemployment are creating ‘major challenges for the Netherlands’ in a ‘very complex political situation,’ Nos television quotes the report as saying.
The commission on Wednesday published its latest recommendations and economic forecasts for the 27 EU member states. The Dutch estimates are based on the initial five-party agreement drawn up within two days at the end of April rather than the more detailed accord published two weeks ago.
At the moment, the Dutch budget deficit is set to reach 4.6% next year. But taking the €12bn-worth of measures announced at the end of April into account, this is likely to be reduced to 3.2%, slightly above the 3% limit, the commission says.
While complimenting the Netherlands for showing determination to comply with monetary union rules, the commission goes on to say the agreement is too vague to be able to judge the effects accurately.
In addition, the September 12 general election brings ‘substantial risk’ that the measures will not be implemented. This not only applies to measures in the spring agreement but other plans put forward by the coalition government before it collapsed, the commission says.
The five party coalition does not currently have a majority in the opinion polls.
Furthermore, the 1.25% economic growth projection used for 2013’s figures is too optimistic, given the effect of the austerity measures on the economy, the Volkskrant quotes the report as saying.
As reported earlier, the commission is also recommending the Netherlands phase out its generous mortgage tax relief system and do more to ensure tenants pay fair rents.
It is also concerned about the low economic participation rates for women, older people and migrants and says the government’s focus on innovation as an economic motor may be at the expense of fundamental research.
Economic affairs minister Maxime Verhagen said in an initial reaction the recommendations are ‘support’ for the government’s position. ‘What the commission is really saying to the Netherlands is ‘we welcome the agreement, but you must make it work’,’ Verhagen said.
The commission’s recommendations first have to be approved by European leaders in June. If a country fails to follow the recommendations, it can face financial sanctions.