eurozone: Netherlands faces ridicule

Netherlands risks eurozone ridicule

24th April 2012, Comments 0 comments

The Netherlands, a sharp critic of overspending by its eurozone peers, risks becoming a laughing-stock if it fails to approve austerity measures needed to meet EU rules, analysts said Tuesday.

The negotiations were supposed to ensure Europe's fifth-largest economy met eurozone deficit targets, but the crisis came to a head when Rutte's far-right parliamentary ally, Gert Wilders' Freedom Party, walked out of talks.

"It is clear that without a good plan, the Netherlands will be ridiculed, their position in Europe will be weakened and Germany would have lost an ally of choice on budgetary discipline," politics professor Arnold Heertje told AFP.

The Netherlands "has played a key leadership role with Germany to find solutions to Europe's economic crisis and has been an advocate of strict fiscal discipline," the Amsterdam-based Heertje said.

Conventional wisdom often separates the eurozone into two distinct camps.

In one camp are the profligate spenders of southern Europe: countries like Greece, Portugal, Italy and Spain that have wracked up unsustainable debts.

In the other are the supposedly more careful spenders of the north led by Germany and Scandinavian countries with which the Dutch had been associated.

Tough-talking Finance Minister Jan Kees de Jager caused consternation in Athens back in February when he suggested the European Union and IMF should take "permanent control" of Greece's beleaguered finances.

The Dutch dilemma is likely to be savoured in certain capitals.

"It's normal that some countries like Greece will be laughing at the Netherlands, which has been tough on others to show fiscal discipline," said economist Thomas Cool, formerly of the Dutch government's statistics office.

De Jager now has until Monday to send Brussels a draft budget for 2013 that would meet EU requirements.

Without support from Wilders's party, which had stood by the government's majority in parliament for the last 18 months, the outgoing cabinet has to seek support elsewhere to pass the austerity package.

Wilders, an arch eurosceptic known for campaigning against Islam, accused EU officials of "stealing money from the wallets of the poor and the elderly."

Among the most contested measures are a rise in VAT, a freeze on civil servants' pay and a cut in spending in both the health and development sectors.

"We will send a stability package" to EU officials before the April 30 deadline, an unnamed official at the Dutch finance ministry told AFP, "but what it will look like is up to parliament" which is currently debating a draft.

The stakes are high: the Dutch government now faces the daunting task of bringing its deficit below the EU limit of 3.0 percent of national output.

To do this, the government must cut 16 billion euros ($21 billion) from a budget which showed a deficit amounting to 4.7 percent of gross domestic product (GDP) in 2011.

Analysts predict that pro-European Dutch parties like the ecologist Green Left, centrist D66 and the Christian Union party will support the new budget.

Ratings agencies warned that the Netherlands risked losing its coveted triple A rating status as a result of the crisis.

"The collapse of the Dutch centre-right governing coalition and the failure to agree a package of austerity measures are credit-negative for the Netherlands," the international agency Moody's said in a statement Tuesday.

"If Moody's were to see a weakening in the Dutch institutional framework, most notably a weaker commitment to fiscal discipline, or a repeated abrogation of the country's self-imposed fiscal rules, this could also put downward pressure on the country's sovereign rating."

AFP/ Nicolas Delaunay/ Expatica



0 Comments To This Article