The new Dutch cabinet must continue to cut spending because there is a risk of the economy overheating if government outgoings continue to rise, says economic think tank OECD in its new report on the Netherlands. In particular, the Paris-based organisation calls for the scrapping of mortgage tax relief.
The OECD says that since its last report two years ago the Netherlands has moved to the forefront of European economic growth. Growth will reach over 3% for the next two years, far above the EU average. Inflation will remain below the European average, the OECD says.
However, the organisation warns that there is a risk of overheating. Wages are set to rise more quickly from 2008, which will have a knock-on effect on inflation, it says.
The new government should therefore focus on bulding up a budget surplus. Limits on mortgage tax relief – the Dutch system is among the most generous in Europe – would fit in well with this, the OECD said.
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