Volkskrant: 10 misconceptions about the Dutch economy

Is the Netherlands the ‘sick man of Europe’ as some commentators have been saying? The Volkskrant this weekend carried a two page feature examining 10 misconceptions about the Dutch economy. Here’s a summary.

1. The Netherlands is the only country fanatically making cuts to bring its budget deficit below 3%.

All countries in Europe are working hard to meet their targets, including Greece and Spain. Unlike Belgium, the Netherlands has even been given an extra year to get its house in order, as has France.

2. People are more gloomy about the economy than in other EU countries.

Consumer confidence is much lower in countries in worse financial trouble, like Greece and Cyprus but the Austrians and French are among the more pessimistic countries as well. The Spanish and Belgiuans are more positive. But consumer confidence has fallen faster than in other eurozone countries.

3. The drop in house prices is the only cause of the crisis

House prices have fallen 13.5% in the Netherlands since the start of the crisis but in Ireland they have dropped 49% and in Spain 24%. However, the Dutch owe €670bn on their mortgages, which is 111% of the country’s gross domestic product and the highest percentage in the eurozone.

4. Pension payments are in danger in the Netherlands

Surveys still show the Netherlands has one of the best pension systems in the world. However, people are angry that they will not get the promised 70% of their last-earned salary.

5. Countries without the euro are doing better than us

The Netherlands likes to compare itself with Sweden, but there too, the economy is contracting (0.1%). Sweden has the highest youth unemployment rate of all the OECD countries (nearly 25%). Denmark’s currency is linked to the euro and so Denmark is also effectively a euro country.

Britain is doing better, but that has been fueled by a new housing boom and Bank of England policies.

6. The Netherlands is becoming increasingly uncompetitive, as compared with, say, Germany

The Netherlands is ranked five on the latest World Economic Forum’s list of the most competitive nations and is ahead of Germany. In addition, the workforce is becoming more flexible and wages have gone down 5.5% over the past few years. However, the Netherlands’ popularity as a location to do business is largely due to its tax policies and these have been called into question.

7. The Dutch education and healthcare systems are being dismantled at a faster rate than anywhere else.

The healthcare system in the Netherlands is three times as expensive as the German and twice as expensive as the French.  The Netherlands spends more on healthcare than any country bar the US, Norway and Switzerland, according to the OECD. According to research by the Pearson group, Dutch education is the seventh best in the world. Finland is the only eurozone country to do better.

8. Dutch companies have their backs to the wall and the bankruptcy rate is at a record high

Per head of the population, there are fewer bankruptcies in the Netherlands than in Belgium and France and about the same number as in Germany. In absolute terms, there were the highest number of bankruptcies ever in the Netherlands in the first six months of this year.

9. The cabinet is to blame and that is why it is so low in the polls

Rutte, Samsom, Merkel, Hollande and Obama are being blamed for the neo-liberalism of their forebearers: Balkenende, Zalm and Kok, Kohl, Thatcher, Blair, Chirac, Bush and Clinton. Their laissez-faire ‘sell the family silver’ attitudes and the expansion of the EU from 15 to 28 countries have saddled the current leaders with today’s problems.

However, the current Dutch government has seriously underestimated the consequences of not having majority control of the upper house of parliament, meaning issues like the housing market cannot be tackled quickly.

10. This crisis is similar to the position the Netherlands found itself in in the 1980s.

In 1981, the interest rate on government bonds was 12.75%. Now it is 2%. In 1980, the Netherlands had a current account deficit of 2%. It is now a surplus of 8%. In 1980, Dutch wage costs were the highest in Europe. They are now below France and Belgium.

However, unemployment rates are now approaching 1980 levels.

Summarised from the Volkskrant, August 17.

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