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Moody's boost Dutch hopes of retaining AAA credit rating

One of the three main credit ratings agencies has given a boost to the Netherlands’ hopes of retaining its cherished AAA rating in the wake of last week’s improvised budget deal.

Moody’s reacted positively to finance minister Jan Kees de Jager’s success in securing a working coalition to drive through €14 billion of public sector savings.

The agency predicted that the Dutch economy would continue to struggle in the short term, shrinking by 0.6 per cent this year before returning to growth in 2013.

Last week another ratings agency, Fitch, maintained its AAA rating for the Netherlands, but warned that this could change if the country failed to bring its deficit under control.

After Freedom Party (PVV) leader Geert Wilders withdrew his support for the centre-right minority coalition government 10 days ago, financial analysts questioned whether the Netherlands could hold on to the top credit rating.

The Dutch have used their status as one of the three eurozone nations with a AAA mark, together with Germany and Finland, to lead the calls for tight financial discipline rules for nations that run up large budget deficits.

But that status was jeopardised when the government’s own economic analysts predicted that the Netherlands’ deficit would reach 4.6 per cent of GDP in 2013 unless further drastic cuts were made.

Under European rules countries face sanctions from Brussels if their deficits exceed 3 per cent of domestic product.

The outcome was a deal that will see purchase taxes increase, public sector pay frozen and people asked to contribute more to the cost of their own healthcare.

There will also be a one-off tax on high earners, which is expected to net €600 million. However, some of the government’s original cuts were scrapped in areas such as the arts and special education.

The withdrawal of Wilders’s party from the government has also seen an end to several policies which the PVV insisted on, including restrictions on dual nationality and the widely derided plan to appoint 500 ‘animal cops’.

Source: Het Financieele Dagblad: Moody's houdt vast aan tripleA voor Nederland

Photo by 24oranges.nl

Read previous story: Higher taxes, wage freezes and an extra year until retirement: the cost of saving the Dutch economy