The Netherlands is facing a more uncertain and risky future in terms of the economy and the cabinet should be better prepared for a downturn, the Council of State said in its comments on the government’s spring financial statement on Monday.
The cabinet, the council said, had not made any major political choices in the spring statement and with its “expansionary fiscal policy” is now “very close to the edge”.
“As a result, there are no buffers to absorb any financial setbacks and there is little fiscal space for the next cabinet period,” the government’s highest advisory body said.
One example of this is the billions of euros being set aside to pay the state’s ‘debt of honour’ to the people of Groningen following decades of earthquakes and uncertainty. The cabinet has opted to boost the budget deficit to cover the compensation, rather than make cuts in spending elsewhere.
The budget deficit is now set to rise to 3% next year, the maximum allowed under European budget rules.
The Council of State warns that the deficit will only remain within the EU norms because of the favourable state of the economy. “We know from recent crises that Dutch public finances are very sensitive to an economic shift,” the council said. “Things can change very quickly.”
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