Expatica news

EU orders Dutch to solve deficit breach by 2005

2 June 2004

AMSTERDAM — Having last year breached the Stability Pact which underpins the value of the euro, the European Union has warned the Dutch government it must bring its budget deficit under 3 percent of Gross Domestic Product (GDP) by 2005 or risk a large fine.

The decision by EU finance ministers on Tuesday does not come as a surprise because the European Commission (EC) — which governs daily EU affairs — had recently requested such a measure be taken against the Dutch government.

After deciding last year to cut EUR 17 billion from the budget by 2007, the Cabinet resolved in April to extend its massive austerity drive to reduce the deficit in 2004 under the 3 percent GDP maximum imposed by the euro stability pact.

Finance Minister Gerrit Zalm will announce more measures on Budget Day in September (Prinsjesdag) in regards the 2005 Budget, news agency ANP reported on Wednesday.

And if all of the extra economising measures that Zalm has proposed are carried out, the Netherlands will not need to do anything more to comply with the EU demand.

But if the measures do not appear to be sufficient come October this year, the Netherlands will be at risk of a EUR 1 billion fine. The fine is not automatic though and must be approved by EU ministers.

The European Court of Justice is currently hearing a legal challenge by the EC, which objected to a decision by EU ministers last year not to impose fines on Germany and France for running deficits breaching the stability pact.

The EC claims that ministers breached eurozone rules last November and should not be allowed to simply refuse to impose fines. A ruling in the court case — which started on 28 April — is expected to be handed down by the summer.

The court’s ruling is expected to have a major impact on the future of the stability pact, especially since both Paris and Berlin are still in breach of the rules, a German DPA report said. Besides the Netherlands, Italy and Britain are now also in the EC’s firing line.

[Copyright Expatica News 2004]

Subject: Dutch news