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New figures deal fresh blow to hopes of quick recovery

The outlook for the Dutch economy is worsening. The predicted shortfall for the current year has been revised downwards to 0.75 per cent, amid warnings that the Netherlands could fall foul of EU rules over its budget deficit.

The latest figures from the Netherlands Bureau for Economic Policy Analysis (Centraal Planbureau/CPB) also raise the prospect of the Dutch government breaching the European austerity measures that it lobbied so hard to put in place last year.

Under the new, tighter regulations, European countries can start to expect sanctions if their annual GDP deficit rises above 3 per cent. The CPB predicts the deficit will reach 4.5 per cent in 2013 and stay above 3 per cent for at least another two years.

Countries can gain special exemption from the rules, but this requires the approval of two-thirds of member states, and the Dutch can expect few concessions from Brussels over rules that they were instrumental in drawing up.

The cabinet will need to come up with a further €9 billion in budget savings if it is to prevent the budget deficit from booming.

Last December the CPB forecast negative growth of 0.5 per cent in 2012, while more recently European analysts predicted a 0.9 per cent downturn.

Unemployment is expected to hit 6 per cent in 2013, while the rate of inflation is anticipated to be 1.75 per cent.

The CPB believes that the economy will start to grow again in 2013, at a rate of 1.25 per cent, rising to 1.5 per cent for 2014 and 2015.

However, those figures are conditional on the GDP deficit remaining above 3 per cent for the whole three-year span - a prospect that could meet with a sharp response at European level.

Source: De Volkskrant: Tekort volgend jaar: 28 miljoen euro

Photo by minister-president (official photo)

See previous story: Recession will be worse than you think, Europe warns Netherlands