Cabinet 'to blame' for slow economic recovery

17th September 2004, Comments 0 comments

17 September 2004 , AMSTERDAM — The Dutch Cabinet is partly to blame for the slow recovery of the economy because consumers and businesses are uncertain about the impact of the government's economising measures, the Central Planning Bureau (CPB) has claimed.

17 September 2004

AMSTERDAM — The Dutch Cabinet is partly to blame for the slow recovery of the economy because consumers and businesses are uncertain about the impact of the government's economising measures, the Central Planning Bureau (CPB) has claimed.

The government's economic advice institute said Dutch economic growth next year will not be high because consumers are unwilling to spend and investment by businesses is low, newspaper De Volkskrant reported on Friday.

"Uncertainty among citizens and businesses about the direct consequences of the various (cost cutting) measures appear to stand in the way of a clear recovery of confidence," the CPB said in its annual Macro Economic Study (MEV).
  
The MEV will be published next Tuesday when the Cabinet presents its 2005 Budget, which was largely leaked on Wednesday night. The document obtained by RTL Nieuws revealed the government intends to continue its cost-cutting drive. The cabinet has earmarked EUR 2.5 billion in savings for next year.

Economic growth will rise from 1.25 percent this year to 1.5 percent next year, due primarily to a rise in exports. But the growth rate trails the European average because the decline in Dutch competitiveness is hindering the economy from fully profiting from the global economic recovery.

The CPB said that the cabinet is choosing to reform and strengthen the economy despite the resulting negative, short-term impact. The aim is to create a better economic position in the long-term.

"But for the time being, the mood is more defined by the uncertainty over the consequences of various measures … an uncertainly that is partly fed by the tensions between the cabinet and the social partners (unions and employers)," it said.

Although the economy is slowly performing better, there has been little change in the labour market. The employment level will fall by 1.25 percent this year, the largest decline in 20 years.

The number of jobless workers will rise to 550,000 next year or 7 percent of the working population. That is more than double than 2001.  

The CPB said there were signs of an economic recovery. But it cautioned that wage moderation is still necessary despite the rising financial burdens and higher pension premiums employees face.

Workers' incomes and the benefits paid to social security recipients will therefore remain stable or increase only slightly. "A simultaneous decline in both incomes and benefits has in the past decade only occurred in 1991," the CPB said.

Consumption spending will decline and the CPB said the only time that consumption performed worse in the post-war period was in the 1980s.

[Copyright Expatica News 2004]

Subject: Dutch news

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