Wednesday

25th Apr 2018

EU commission: Dutch crisis no reason to dodge rules

  • PM Mark Rutte offered his resignation to the Dutch queen on Monday (Photo: Minister-president Rutte)

The Netherlands must keep its commitments to reduce its budget deficit in line with rules it co-authored in 1997 during the Dutch EU presidency, irrespective of the political crisis in the country, the EU commission said Monday (23 April).

Dutch Prime Minister Mark Rutte resigned on Monday after his coalition failed to gain support from the far-right Freedom Party for budget-cutting measures aimed at bringing the deficit down to three percent of GDP by next year, as required under the eurozone rules his country championed.

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Freedom Party leader Geert Wilders blamed "Brussels-imposed" rules for the crisis, while the Socialist opposition said the government should negotiate a longer time frame for solving the problem.

For their part, EU commission spokespeople retorted by saying the rules were not invented in their institution, but instead agreed among EU governments in meetings chaired by no other than the Dutch authorities.

"The three-percent target comes from the Stability and Growth Pact agreed in Amsterdam in June 1997, under the Dutch EU presidency. It is perhaps good to remind everyone the history of the deficit target," commission spokesman Olivier Bailly said during a press conference.

His colleague in charge of economic affairs, Amadeu Altafaj Tardio, warned: "It would be the end of the EU if commitments were not respected."

"We trust they will find budgetary solutions, not because they will be more popular, not because 'Brussels' says so, but because it is good for the Dutch economy and for the Dutch citizens," he added.

Dutch finance minister Jan Kees De Jager said it is still "feasible" to reach the three-percent target next year, down from a 4.7 percent of GDP deficit in 2011, as reported by Eurostat on Monday.

"I hope that the chamber will ask the [caretaker] government to continue taking measures in preparation of the 2013 budget, to make sure things do not escalate," he told the CNBC news channel.

The Dutch parliament will hold a debate on Tuesday with the caretaker laeders. But getting a majority in favour of the three-percent target is uncertain.

All 23 EU states currently facing an "excessive deficit procedure" - a group which includes the Netherlands - are required to submit to the EU commission by 30 April their plan on how they intend to bring the deficit down. Most of them have a 2013 deadline, but the EU commission can still recommend 'preventive' sanctions of fines worth 0.2 percent of GDP for eurozone countries if the plan lacks credibility.

Meanwhile, Peter De Keyzer, the chief economist at BNP Paribas Fortis told this website that the Netherlands is in a bigger mess than expected, not just politically, but also in terms of its economy. "Their housing market is going down, which is hurting consumer confidence. With over 100 percent private sector debt in the housing market only, plus a weaker economic growth and more austerity, the anti-EU sentiment is now at around 20 percent," he said.

De Keyzer doubts that the Netherlands, one of the last four EU countries to keep a top credit rating from all the big ratings agencies, will be able to keep that score in the long run. "The political crisis won't help. Already today we've seen interest rate spreads going up," he noted.

In terms of the bigger picture, the Belgian economist added: "We all thought that only the [eruozone] periphery is showing cracks - Greece, Portugal, Spain, Italy. But now the Netherlands are wobbling too, while Italy in fact is holding on quite well."

Macron and Merkel pledge euro reform

France and Germany have pledged to forge a joint position on euro reform by June, despite German reluctance on deeper monetary union.

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