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Praise for Dutch economy during crisis talks

Banking

17/03/2009Praise for Dutch economy during crisis talks

Surprisingly, for a country in full-blown recession, the Netherlands is receiving praise for its economic performance. Are we already on the way out of the crisis, or are we just getting an encouraging pat on the back?

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In the EU's ranking of countries meeting the so-called Lisbon targets, the Netherlands jumped from sixth to third place, just below Poland and list leader Finland, Bloomberg reported on Monday.

The Lisbon ranking is based on indicators such as economic and productivity growth, employment, investment and public finances.

In 2000, the EU member states agreed in Lisbon to try and become the most competitive knowledge economy in the world by 2010.

Generosity
The Netherlands is also third on a different list, drawn up by the International Money Fund, writes Dutch daily De Pers. This shows the Netherlands ranked as the third most generous country, having provided government guarantees for bank loans and deposits which amount to 33 percent of its Gross National Product (i.e. more than 200 billion euros). Ireland and Sweden are ranked one and two, respectively. However, the IMF says this generosity could potentially cost the Dutch a great deal in the years to come, hence - as De Pers notes - it's not without risk.

The cost of these guarantees can rise to over 100 billion euros - a substantial dent in the national budget. So far, Bos' daredevil measures appear not to have damaged the international creditworthiness of The Netherlands, since the capital market continues to loan the country vast amounts at normal interest rates. A sure sign of confidence, according to De Pers.

'Finest hour'
Photo: Prime Minister Balkenende and Finance Minister Bos

Photo: Prime Minister Balkenende and Finance Minister Bos

But it is by no means certain that good scores in such lists provide the Dutch with any guarantee of recovery. Global indicators still indicate that the world economy will show minimal growth, if at all, in 2009.

Economy Professor Jan Luiten van Zanden wrote in NRC Handelsblad last week that Finance Minister Bos and Prime Minister Jan Peter Balkenende may have had their "finest hour" when they saved the Netherlands' major banks. The entire country was behind them. Photo above right: Prime Minister Balkenende (l) and Finance Minister Bos (r) may have had their "finest hour".

This week though, ministers of the three-party coalition are engaged in difficult talks to weather the long-term fallout of the crisis. Judging by what the spokespersons say, opinions within the cabinet are divided.

It's either stimulating the economy by increasing investments (the Labour view), or making deep cuts to save on expenditure (favoured by the Christian Democrats), but whatever is decided, acting quickly and decisively matters most (the small Christian Union's point). It will at least be a week before any results become clear, observers say.

Rob Kievit
Radio Netherlands