The cabinet is facing a €20bn shortfall and will have to make drastic cuts in spending to avoid pumping up the budget deficit above 2%, sources in The Hague told NOS tv.
The bill for unemployment benefit is set to rise by €3bn next year and tax income is well below forecasts, NOS said. Income from natural gas is also down sharply.
The Financieele Dagblad says the new shortfall, coming on top of the €12bn already calculated in, could boost the budget deficit to 5%. Last year there was a surplus of 1%.
The official forecasts are due to be presented next Tuesday and will form the basis of the cabinet’s spring talks on spending plans.
Senior ministers met on Thursday night to discuss measures to boost the economy. They also decided to freeze ministers’ salaries at their current level. A pay rise would send out the wrong signal, prime minister Jan Peter Balkenende said after the meeting.
Balkenende declined to comment on the new deficit forecast.
Commentators say that even if the government decides to let the budget deficit go above the 2% agreed in the coalition accord, ministers will still have to make cuts.
The cabinet has set up a committee of senior civil servants to make recommendations. The options include raising the retirement age, reducing mortgage tax relief, cuts to unemployment and child benefit and scrapping tax benefits for non-working parents with young families.
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