Ministers battle it out over budget cuts

2 April 2004

AMSTERDAM — Cabinet colleagues have reacted negatively to the proposed economising measures Finance Minister Gerrit Zalm hopes will prevent the Dutch budget deficit from breaching EU regulations for the second time in as many years.

Social Affairs Minister Art Jan de Geus and Economic Affairs Minister Laurens Jan Brinkhorst told Zalm on Thursday that he needed to devise other means to cut the budget deficit, news agency ANP reported.

But Zalm said there were no other solutions to prevent the deficit from climbing higher than the limit of 3 percent of Gross Domestic product (GDP) agreed under the euro Stability Pact.

The government has already announced plans to slash the budget deficit by EUR 17 billion to significantly reduce the deficit in coming years.

And political sources indicated that Zalm intends to cut an extra EUR 3 billion to bring the deficit under 3 percent this year, but De Geus and Brinkhorst believe the figure is too high.

They also said that the Liberal VVD minister’s plans to increase taxes were too harsh and would negatively impact purchasing power and the economic recovery. The economy slipped into a nine-month recession last year, but is showing signs of a weak recovery.

It is understood that Zalm intends to increase the level of income-based premiums for the AWBZ exceptional medical costs national health insurance scheme to counter budgetary shortfalls in the healthcare system.

He is also considering scrapping a subsidy paid to employers who take on low-educated workers and delaying the allocation of extra education funding — agreed on in the Christian Democrat CDA, VVD and Democrat D66 government accord last year — available to cover possible shortfalls.

Prime Minister Jan Peter Balkenende — who was also present at Thursday’s talks — reportedly maintained a neutral stance. Zalm had previously met with the CDA leader on Wednesday and government ministers were poised to make a decision over the funding later on Friday.

The Central Bureau of Statistics (CBS) has warned that the budget deficit could hit 4.4 percent of GDP this year and confirmed earlier this week that the deficit in 2003 reached 3.2 percent, opening the door to a possible reprimand from Brussels.

The EU Stability Pact that underpins the euro commits member states to keeping the annual deficit to a maximum 3 percent of GDP. Zalm has been a severe critic of France and Germany for ignoring the pact’s rules.

Subject: Dutch news