Zalm rejects Dutch EU budget challenge

16 January 2004

AMSTERDAM — In response to the European Commission confirmation earlier this week that it will challenge the French and German budgetary violations of the Stability Pact in the European Court, the Netherlands has ruled out joining the legal bid.

The EC announced the legal challenge against the EU after the Council of Ministers decided last year against imposing financial sanctions on Germany and France for regularly running budget deficits breaching the stability pact.

Having strongly argued for the imposition of fines, Finance Minister Gerrit Zalm and the Dutch government ended up with red faces in light of the EU decision.

The Netherlands is cutting a massive EUR 17 billion in the budget between now and 2007 to restrict its deficit and meet the strict guidelines of the stability pact. It has thus urged other EU member states to do the same.

The pact states that EU nations must not run a budget deficit of more than 3 percent of their Gross Domestic Product (GDP). The pact was pushed through, with the backing of France and Germany, in a bid to defend the euro and stave off high interest rates.

And following the EC’s decision to take its legal action in the European Court, it was not ruled out that the Netherlands could be the only EU nation to align itself with the court challenge, an NOS news report said.

Political sources had said on Thursday that Minister Zalm favoured symbolic legal action by the Dutch government, but this would have led to a conflict with new Foreign Affairs Minister Ben Bot. Former diplomat Bot is opposed to a hardening of relations with Paris and Berlin.

But Zalm has since said that the Netherlands should not take any solo actions and that the government has only offered moral support to the commission. There is only a small chance that it will officially link-up with the EC legal bid and only if other EU member states take legal action will the Netherlands reconsider its stance.

Meanwhile, in an interview with newspaper De Telegraaf, Minister Zalm expressed optimism on Friday about the Dutch economy, which pulled itself out of a nine-month recession when it recorded positive GDP growth in the third quarter of 2003.

Zalm said the economy had hit its low point and has now turned the corner. He said in recent times the government was continually adjusting its economic figures down, but the he did not expect the Cabinet would need to make additional savings this year.

The government has slashed EUR 5.7 billion from the 2004 Budget and after concerns were raised late last year by the government’s macroeconomic thinktank, the Central Planning Bureau (CPB), Zalm still remains confident that the budget deficit will remain below the crucial 3 percent limit, preventing further embarrassment for the Dutch government. He hopes to bring the deficit back to about 0.5 percent in 2007.

Meanwhile, with new CPB figures indicating that a maximum of 10,000 cheap East European labourers would flow into the country after the EU expands by 10 member states in May, the Liberal VVD minister said he no longer expected problems with a feared mass inflow of workers.

Subject: Dutch news