Dutch parties avert crisis with 2013 budget deal | News | DW | 26.04.2012
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Dutch parties avert crisis with 2013 budget deal

Dutch political parties have reached an eleventh hour deal to rein in the country's budget deficit, averting a crisis of economic confidence in one of the eurozone's most prosperous member states.

Dutch political parties brokered a deal Thursday on a 2013 austerity budget, in an attempt to rein in the country's deficit. The eleventh hour agreement will bring the country into line with European Union targets and enable Holland to meet a Monday deadline to reduce the deficit.

Following two days of negotiations, Finance Minister Jan Kees de Jager reached a deal with opposition parties on a number of austerity measures. The slashes are expected to stand at 4.5 percent of gross domestic product (GDP) in 2013 – Dutch politicians, some of whom have spoken out about Greece's need to get its finances in order, say Thursday's deal will however cut the deficit to the EU by three percent.

The deal will see debt reduced next year, through cuts to social service and higher taxes, according to Dutch national broadcaster RTL.

Most notably an increase in the Valued Added Tax (VAT) on luxury goods by two percent to 21 percent and a hike in taxes on alcohol, soft drinks and tobacco will help raise much needed revenue, reported RTL.

Salaries for civil servants would be frozen and healthcare spending reduced by 1 billion euros ($1.3 billion). Employee travel tax write-offs would be slashed, but taxes on home purchases would be reduced, RTL said.

Party wrangling

A caretaker government made up of the Christian Democrat Party and the Liberals agreed late Thursday to the plan, as did two smaller opposition parties, reported Dutch public broadcaster NOS.

Smaller opposition parties favored reducing the deficit to three percent, but larger opposition parties, including Labor and Wilders' Freedom Party, said 3.6 percent or 4 percent was good enough and more cuts would damage growth and jobs.

Liberal parliamentary leader Stef Blok told NOS that the government's macroeconomic forecaster CPB would still need to calculate exactly what percentage the deficit would fall to. "If it turns out that some parts of the package have a different impact, we have the intention to come to a deal again. That applies to the three percent rule. It applies to economic and purchasing power effects," Blok told NOS.

Triple A nation

Failure to strike a deal would have placed Holland's sterling AAA credit rating in jeopardy, fuelling concerns among financial markets about the sustainability of debt in the broader eurozone. "I am very pleased that a number of parties have taken responsibility. It was necessary - to restore confidence with the people in the country, but also to tackle the crisis," Arie Slob, leader of the Christian Union told broadcaster RTL.

Prime Minister Mark Rutte's government disintegrated last weekend when Geert Wilders' Freedom Party, its main ally, wouldn't agree to measures that would have seen more than 14 billion euros ($18 billion) slashed from the annual budget. Rutte handed in his resignation to Queen Beatrix on Monday after seven weeks of negotiations - leaving a political hole in one of the eurozone's remaining AAA-rated economies.

Like many nations in Europe, public discontent with sharp austerity measures exists within the country.

A Maurice de Hond poll indicated 58 percent of those surveyed agreed Dutch deficit should be cut to 3.5 percent at most, while 44 percent thought it should be cut to three percent or lower.

jw/slk (dpa, Reuters)