Dutch coalition approves austerity despite recession
The Dutch coalition government on Tuesday said it had agreed an additional six-billion-euro ($8 billion) budget cut next year in its battle to reduce its deficit despite a year long recession.
"The coalition government has agreed on a savings package worth six billion euros," Hendrieneke Bolhaar told AFP.
Eurogroup chief and Dutch Finance Minister Jeroen Dijsselbloem said he was glad an agreement had been reached.
"We have put together a savings package that in total will benefit the Netherlands," Dutch news agency ANP quoted him as saying.
But the Netherlands remains in recession, making any reduction in the deficit an even more of a difficult challenge. Earlier this month, the central bank said the Dutch economy shrank a further 0.2 percent in the second quarter of this year.
The contraction in the Dutch economy, the eurozone's fifth-biggest, was the fourth quarter in a row.
The government, which groups the Dutch Labour Party (PvdA) in a ruling coalition with the Liberals, had announced a 4.3 billion austerity package in March.
But faced with receding output just as recovery emerged elsewhere in the eurozone, the proposal was shelved in April with Prime Minister Mark Rutte's government hoping to stimulate growth while meeting its commitment to get the deficit below the EU's 3.0 percent target ceiling.
EU Economics Affairs Commissioner Olli Rehn in June said the Netherlands could reach a target of 2.8 percent in 2014, but that would imply major budget cuts.
The Dutch Central Planning Bureau (CPB) -- which advises government on policy -- meanwhile predicted that the deficit would jump to 3.9 percent next year.
The planned cuts include a freeze on civil servant wages and budget cuts for various government departments, Dutch media reported.
Dutch broadsheet De Telegraaf reported on Tuesday these measures would lead to a 1.0 percent loss in general purchasing power in 2014 by Dutch households.
The budget agreement between Rutte's Liberals and Labour does not yet involve opposition parties, many of whom are fervently against further austerity.
The government said details would be announced on "Prince's Day", the third Tuesday in September when the government budget is traditionally presented to parliament.
The Dutch government's deficit topped 4.1 percent of gross domestic product last year, exceeding the EU target for a fouth year.
The Dutch economy maintains a top Triple A rating and is mainly based on an exports.
© 2013 AFP