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Recession will be worse than you think, Europe warns Netherlands

European experts believe the Dutch economy will shrink by 0.9 per cent in 2012 – nearly double the rate forecast by domestic analysts.

The Netherlands is one of a clutch of countries expected to go into reverse this year. The list, headed by Greece and Portugal, also includes Spain, Italy, Belgium, Slovenia and Cyprus.

The figures, which predict an overall downturn across the eurozone of 0.3 per cent, are far more pessimistic than last November, when the forecast was for a modest growth of 0.5 per cent.

Ulli Rehn, European vice-president for Economy and Finance, announced the latest forecasts on Thursday.

The most recent prediction by the Netherlands Bureau for Economic Policy Analysis (Centraal Planbureau/CPB) is for the Dutch economy to fall back by 0.5 per cent this year.

The announcement prompted a fresh round of calls to reform the mortgage tax system, with economists blaming the debt mountain built up by Dutch homeowners for holding back growth.

The issue is sensitive because Freedom Party (PVV) leader Geert Wilders, on whose support the minority coalition government depends, is opposed to any reduction in mortgage tax relief.

A group of 22 leading economists have put forward a six-point plan for reforming the housing market, including limiting the maximum mortgage debt to 90 per cent of the value of the property. Currently the figure is 106 per cent.

Another recently exposed loophole allows couples to write off their mortgage debts by separating.

If one partner moves out of the house and neither is able to keep up the mortgage on their own, the outstanding debt is covered by the National Mortgage Guarantee.

The proprtion of claims made against the guarantee on grounds of separation has risen from 20 per cent in 2006 to 50 per cent in 2011.

Source: NRC: ‘Nederlandse economie krimpt sterker’ – aanpak hypotheekrenteaftrek bepleit

Photo by Amsterdam Herald