Dutch central bank warns we face a ‘lost decade’ of low growth

There is a risk of a ‘lost decade’ of low economic growth in Europe, during which the Netherlands will be particularly vulnerable because of its enormous mortgage debt, the Netherlands Bank (DNB) said in a report on Thursday.

The bank says European leaders must continue with austerity measures in order to get their finances in order. Only then will confidence in the economy return.
They must also undertake structural measures to improve the growth and competitive opportunities of EU countries, says the bank.
Because the Dutch mortgage debt is so high, the bank is pleased with the plan by the five-party coalition to only give mortgage tax relief where the actual loan is repaid, rather than just the interest on the loan.
Negative equity
‘Dutch households are vulnerable as a result of high mortgage debts, disappointing economic growth and falling house prices,’ the report states. ‘Young households, in particular, currently face negative equity on their homes, while their savings are low and a relatively large share of their income goes to interest payments.’
The banks says reforms are needed to ensure lower household mortgage debts and make it possible to reverse the ‘rising trend in nation-wide mortgage indebtedness and to make it compatible with a sustainable long-term funding model for banks’.
The Dutch central bank says banks will only win back confidence if they stop pushing their property losses under the carpet and raise their buffers.
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