A new round of spending cuts would aggravate the recession and instead European governments should undertake ‘credible reforms’ to get national budgets under control, Coen Teulings, director of the government’s macro-economic think-tank CPB says in an article in the Financial Times.

The opinion piece, written jointly with Jean Pisani-Ferry, director of European economic think-tank Bruegel, comes a week before the Dutch cabinet is due to start negotiations on new cuts in an effort to get the budget deficit under control.
However, more cuts would not only hurt in the short term, but research has shown they have a longer-lasting effect as well, Teulings and Pisani-Ferry write.
Credible reforms
‘A better path to sustainable public finances is to launch credible reforms today that ensure rebalancing of the government budget tomorrow,’ they said, suggesting an increase in the retirement age or social benefit reforms as good options.
‘However, it is hard for financial markets to monitor the implementation of such measures,’ the article’s authors say. ‘The Commission is right to ask for them, and it should have an important role in the surveillance of policy actions and the evaluation of their effects.’
The CPB is due to publish its new economic forecasts on Thursday, which will form the basis of a new round of spending cuts this year. Most recent forecasts put the Dutch budget deficit well above the 3% allowed under monetary union rules.