Dutch government announces budget cuts

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The Netherlands announced measures on Tuesday to cut government spending by 3.6 billion euros (4.7 billion dollars) in 2011 to halt rising public debt and aid long-term economic recovery.

"It is time to draw the purse strings and take the first steps to get the budget back in order," caretaker Finance Minister Jan Kees de Jager said as he presented the government budget for 2011 to parliament.

"Savings are unavoidable," the minister said, for the Netherlands to keep enjoying the trust of capital markets.

Savings would be found in wage "moderation," lower pay rises for civil servants, higher tobacco taxes, reduced medical benefits and less spending on immigrants, budget documents showed.

"It (the cuts) will hurt citizens and companies, certainly people already feeling the pinch of the crisis: people who lose their jobs and businesses ..." said De Jager.

Statistics in the budget foresee government debt growing to a record 66.2 percent of gross domestic product (GDP) or 406 billion euros in 2011 from 45.3 percent in 2007.

The rising debt was partly the result of government bailouts of banks in the global financial crisis of 2008.

The public deficit, projected at 3.9 percent of GDP or 24.3 billion euros in 2011, would exceed the European Union limit of three percent -- though lower than the 2010 figure of 5.8 percent.

Economic growth is expected to settle at 1.5 percent of GDP in 2011, lower than the 1.75 percent projected for 2010 after a near four percent decline in 2009.

This was the last budget presented by the government led by Jan Peter Balkenende's Christian Democratic Appeal, which lost power in June elections following the collapse of the cabinet in a dispute over military aid to Afghanistan.

The pro-business, centre-right VVD party that won the poll had campaigned to slash government spending by 20 billion euros.

Negotiations are still underway for a new coalition government that is likely to announce much stricter cuts than those envisaged in Tuesday's budget.

"For a long time to come, world-wide, the effects of the financial-economic crisis will be felt," Dutch Queen Beatrix said in her address from the throne, written by the government.

De Jager warned that Dutch citizens would feel the savings measures "in their pockets."

"The spending power of the average Dutch citizen will deteriorate," he said, adding that "the future remains uncertain."

There were some promising signs, however, with exports rising above 2008 levels for the first time in July, and the number of unemployed expected to remain stable at 450,000 people (5.5 percent) in 2010 and 2011.

"That (the unemployment figure) is less than five years ago and less than in the rest of Europe," said De Jager.

"This is good news: news that gives us new reason to hope for a prosperous future."

© 2010 AFP

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