Home Dutch News Dutch face rebuke for budget deficit

Dutch face rebuke for budget deficit

Published on 07/04/2004

7 April 2004

AMSTERDAM — The European Commission has launched legal proceedings against the Netherlands because its budget deficit exceeded the EU-imposed limit last year. The Dutch government is also in danger of breaching it again this year and in 2005.

The budget deficit hit 3.2 percent of Gross Domestic Product (GDP) last year, breaching the stability pact underpinning the euro. The pact stipulates that EU member states must not run budget deficits above 3 percent.

The EC confirmed on Wednesday it will launch legal proceedings against the Netherlands, but such a decision is almost an automatic response. The government will be required to draw up a report outlining steps it plans to take to reduce the deficit.

New economising measures are therefore necessary to avoid being fined at least EUR 1 billion. The Dutch government agreed last week to ensure that the deficit does not breach the stability pact this year, newspaper De Volkskrant reported.

But without extra savings, the EC warned the Netherlands on Wednesday that its budget deficit could also breach the 3 percent limit this year and next.

The Netherlands is therefore caught in a bind. Having already announced record budget cuts between now and 2007, it is confronted with the need to reduce the budget even further. But the Cabinet has also been warned that extra cuts could harm the fragile economic recovery.

Finance Minister Gerrit Zalm sharply criticised both Germany and France for its continued budgetary deficit breaches, but failed to win EU support to impose fines. Nevertheless, it is embarrassing that the Netherlands has also ran afoul of the stability pact.

Meanwhile, the EC will also launch legal action against Britain for running a deficit of 3.2 percent of GDP last year. It has also issued a warning to Italy for failing to reduce its extremely high public debt last year.

[Copyright Expatica News 2004]

Subject: Dutch news