Fitch affirms Netherlands' top 'AAA' credit rating

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Fitch upheld on Tuesday the Netherlands' top 'AAA' credit rating, saying that despite the collapse of the government and fresh elections, the country has a credible deficit reduction plan in place.

Prime Minister Mark Rutte's outgoing minority coalition government and three opposition parties hammered together an agreement in April, shortly after his far-right ally walked out of talks, causing Rutte's government to fall.

The agreement "has eased concerns that there would be a prolonged period without a credible plan to ensure that the budget deficit is brought below 3 percent of GDP consistent with stabilising the government debt to GDP ratio," said Fitch, adding the rating had a stable outlook.

Rutte and his ministers quit when failing to agree with far-right ally Geert Wilders on a plan to slash the budget to steer the eurozone's fifth-largest economy back below the EU deficit ceiling of three percent, from last year's 4.7 percent.

"Fiscal measures to put the budget back on track were taken quite quickly," after the collapse, Fitch senior director Paul Rawkins told AFP, adding "that for us that is the point, there is a track record of fiscal discipline."

Rutte called new elections for September 12.

"When a new government is elected we will be waiting to see what their policies are, not only in the near term but also in relation to some challenges in the longer term," said Rawkins.

Fitch in its release added the stable rating outlook reflected its "assessment that the Netherlands 'AAA' status remains resilient to the eurozone crisis.

This was "despite the recent increase in policy risks, a weaker fiscal adjustment and the additional government debt incurred by the Dutch government's contribution to eurozone rescue funds and 'bail-out' programmes in 2011," Fitch said.

"The Netherlands' sovereign ratings are underpinned by its flexible, diversified, high-valued and competitive economy as well as current account surpluses and positive net international investment position," Fitch added.

It warned however that should the crisis in the eurozone worsen, it could have a severe impact on the Netherlands' "small, open economy and potentially bring downward pressure on the rating."

© 2012 AFP

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