The Netherlands has been told by Brussels it will have to take extra measures to bring its budget deficit below 3% in 2014 because current austerity measures are not sufficient.
In total, the Netherlands will need to shave €6bn off spending to meet the target. This includes the €4.3bn austerity package put on hold last month in an agreement with unions and employers.
European commissioner Olli Rehn published a range of recommendations for countries across the EU on Wednesday, describing the Dutch measures needed as ‘considerable challenges’.
In particular ‘imbalances and rigidities in the housing market are having a negative effect on the Dutch economy’ the statement said.
It called on the government to reform the generous Dutch mortgage tax relief system which currently ‘leaves households with high levels of mortgage debt and vulnerable to fluctuations in house prices’.
Pensions and long-term care services also need reform while more should be done to remove ‘disincentives to work in the tax system’ and to overhaul employment protection legislation.
The report is based on the economic update sent by the Dutch government to Brussels at the end of April. The commission has given the Netherlands until October 1 to come up with an extra package of cuts to meet the eurozone target.
On Tuesday, finance minister Jeroen Dijsselbloem warned there is a ‘serious chance’ the government will have to cut spending still further.