New cabinet faced with surprise deficit (UPDATE)

The government’s budget deficit is several times higher than originally thought which means the new cabinet is short of several billion euros when it comes to implementing its new policies, it emerged on Wednesday.

The new government is now faced with the ‘very tricky job’ of keep the budget deficit below 1% of gross domestic product (GDP) while its spending plans are based on a far smaller shortfall, a finance ministry spokesman told news agency ANP.
The ministerial budgets have been based on a national deficit of 0.2% but this is now expected to be much higher.
Finance minister Wouter Bos will give exact details of the shortfall and how he plans to reduce it when he makes his spring statement next month. The cabinet agreement states that the budget deficit should be turned into a surplus of 1% by the end of this cabinet period in 2010.
According to the finance ministry spokesman, the higher deficit is due to lower income from gas sales, a €1bn overspend on heath care and extra costs stemming from the coalition accord. ‘Skeletons’ left by the previous cabinet are a contributing factor, but not the main one, he added.
Frans de Nerée, MP for the ruling Christian Democratic party, said the government must stick to its target of producing a budget surplus within four years. Labour finance spokesman Ferd Crone said the cabinet has several options. It could make cuts, increase taxes or abandon its budget surplus commitment.

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