Tables turned: Dutch under EU pressure to cut budget

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The tables turned on the Netherlands on Thursday as the nation, first in line to scold deficit sinners such as Greece, was told by EU authorities to clean up its own financial situation.

Dutch Prime Minister Mark Rutte, who has led a hardline movement to bring Athens to implement harsh savings in exchange for a financial bailout, vowed to reduce his country's own budget shortfall as he arrived in Brussels for a two-day European Union summit.

"The fact that I am attached to fiscal discipline comes from the fact that this is very important to me," Rutte told reporters.

The Netherlands has teamed up with Germany and Finland, who along with Luxembourg form an exclusive club of triple-A rated eurozone nations, to put pressure on other nations to keep their budgets under control.

But Dutch officials took the finger-wagging to another level, raising the possibility of letting Athens default and leave the eurozone unless it toed the line. Eurozone governments finally agreed to a new Greek rescue package worth 237-billion-euro ($310 billion) last week.

But the Dutch government was put in an embarrassing spot on Thursday as it admitted that the "provisional" public deficit for 2012 would rise from the previously expected 4.1 percent of gross domestic product to 4.5 percent.

The country's central planning bureau said the deficit would fall back to 4.1 percent in 2014 and 3.3 percent in 2015 unless there was a change in government strategy.

This means the centre-right prime minister would fail to fulfill his pledge to bring the country's deficit back under the EU limit of 3.0 percent next year.

"We think that the Netherlands is one country that has been very vocal when supporting the reinforcement of our fiscal surveillance rules," said European Commission economy spokesman Amadeu Altafaj.

"So it's absolutely normal to believe that the Netherlands will apply this same approach to its own fiscal policies," he told a news conference.

Altafaj noted that the Dutch have an agreed target of 2013 to get back within the nominal EU ceiling for deficits, otherwise they could be docked monies under a new system of eurozone sanctions the Dutch fought hard to toughen up.

"We trust that the Netherlands will do the necessary to comply," said the spokesman for EU economic affairs commissioner Olli Rehn.

Rutte declared that his government would undertake budget cuts because it was important to do so, "not because Rehn wants it."

The Netherlands faces tougher economic conditions, with the entire 17-nation eurozone expected to slip into recession this year.

The Dutch central planning bureau forecast an economic contraction of 0.75 percent in 2012, worse than an estimate of 0.5 percent in December.

Rutte pointed to the fiscal discipline of the Dutch government in the 1980s, which gave the government room to invest and reform the economy.

Such austerity, he said, will give a "chance to create jobs and grow the economy."

Rutte, a liberal, leads a coalition government with the Christian Democrats, but they rely on the support of the far-right PVV party of Geert Wilders to pass legislation in the parliament.

The coalition and the PVV will meet next week to discuss corrective measures to reduce the deficit, said Rutte's finance minister, Jan Kees de Jager.

De Jager indicated he expected a degree of leniency from the EU.

"European rules leave some room to manoeuvre, but it is not very big," de Jager said on arrival for a meeting of eurozone finance ministers in Brussels at which he kept up pressure on Greece.

"The budget rules are strict, but they do not stipulate precise figures in every case," he said, admitting that "the deficit is really too high."

© 2012 AFP

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