Economic growth may be slowing down elsewhere in Europe, but consumers and producers in the Netherlands are still going strong. By Johan Huizinga.

The new forecasts published 21 February in Brussels confirm this picture of a robust Dutch economy and they follow surprisingly good statistics out last week, which showed 3.5 percent growth last year.

Michiel Vergeer, top economist with Statistics Netherlands, puts the Dutch success down to two things: the modest increase in wages and the flexible labour market. The Netherlands still tops the European league table when it comes to temporary and part-time work. This helps employers hire people quickly without having to worry about complicated dismissal procedures.

A bit odd

It also explains why France still has much higher unemployment figures, says Joost Beaumont, an economist with Fortis Bank. The very strict legislation that protects employees against dismissal scares employers off. In that respect, the recent political debate in the Netherlands about relaxing the law governing dismissal seems a bit odd.

Wim Boonstra, economist and market researcher with Rabobank, says there is a problem for small companies in this respect but that largely the debate about dismissal is indeed a little irrelevant. The fact is that the Dutch economy has to contend with a shortage of manpower. The Netherlands has, together with Denmark, the lowest unemployment rate in Europe. At the moment, the country has about 260,000 vacancies, which comes down to 3 in every 100 jobs, says Michiel Vergeer of Statistics Netherlands.

Competition

According to Wim Boonstra, the low unemployment rate will turn out to be a much more structural problem in the years to come. He's worried the issue can't be solved by just announcing we have to work harder and longer. He argues employers need to make longer working more attractive. "Employers who succeed in doing so, will win the real competition in the years ahead," says Mr Boonstra.

When it comes to keeping a lid on pay raises though the economist feels that the Dutch sometimes go overboard and he says because of this some people have lost spending power in the last few years. Overall though, the question of how productive employees are is at least as important as keeping wages down. Or, in other words, the quality of labour. At present, in that respect the Netherlands is doing well according to Mr Boonstra.

More flexible

The Netherlands is also doing well as the country has taken more advantage of the new globalised economy than rivals like Germany and France. For example, it gave up branches of industry like the textile and shipbuilding industry at an early stage, because it realised it couldn't compete with Asia any longer.

"We don't protect our market, but we are reaping the fruits of that strategy now," says Mr Vergeer. We import cheap textiles from China, which also helps keep prices down. The Dutch inflation rate, at 1.6 percent, is much lower than the 2.1 percent elsewhere in Europe. And if it's up to Dutch producers there'll be nothing to worry about in the next few years, their confidence in the economy and their own order books is at the highest level for over 20 years.

Carefree

Dutch consumers are also hanging in there. Their view of the world economy may be pessimistic, but closer to home they seem to be carefree. With the mortgage crisis in the US and the downturn on the stock exchanges many European consumers kept their wallets closed at the end of last year. But the Dutch keep on buying like they did before, especially durable commodities like cars and fridges. Apparently, the Netherlands is up for it again.

That economic growth will fall this year is not in doubt but economists aren't really worried. Growth forecasts range from 2,1 to 2,5 percent or "maybe even" 3 percent. Which is still much higher than the average of the combined euro countries.

RNW translation (fd/ac)

 22 February 2008

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