The European Commission has told the Dutch government it needs to take steps to cut public spending or risk breaching agreed limits.

Latest projections indicate spending is set to increase by 7.3% this year, more than double the ceiling of 3.5% for 2025.

The Netherlands is also expected to exceed the limit for 2026 by raising its outgoings by 4.5%, while the maximum permitted by the EU is 3.3%.

The budget deficit is projected to increase from 1.9% this year to 2.7% in 2026, close to the 3% limit set by Brussels. EU member states that breach this limit are expected to raise taxes or cut spending to address the shortfall.

D66 and CDA, the two parties currently drawing up the framework for a coalition agreement, said on Wednesday they have limited budgetary room for more spending.

Nitrogen fund

Both parties are committed to investing more in defence and housing, while D66 also wants to make significant investments in education and technology. CDA want to restore the nitrogen transition fund, which would subsidise reforms in agriculture and other industries to bring down nitrogen compound emissions.

Pieter Hasekamp, director of the economic planning agency CPB, met the parties to advise them that “more of everything won’t work” and they would need to make tough choices.

“The Dutch economy can only take a certain increase in spending,” he said. “There comes a moment when income and expenditure are no longer in balance.”

D66 leader Rob Jetten said: “We’ve had a warning that there was a very strong emphasis in the last year on spending money here and now, while not enough thought has been given to investing in our future earning capacity.”