5th Dec 2023

Dutch top officials call for €17bn spending cuts

  • Debt levels dropped significantly during Dutch finance minister Sigrid Kaag's term despite higher spending (Photo: Wikimedia)
Listen to article

The new Dutch cabinet will need to make deep spending cuts by 2028 in order to bring its budget in line with EU fiscal rules, according to a government advisory body report published on Monday (11 September).

The 'Studiegroep Begrotingsruimte (SBR)' traditionally present a budget proposal before fresh elections, which are due in November this year, with former EU Green Deal chief, the socialist Frans Timmermans, seen as one of the frontrunners.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Whoever leads a new cabinet is advised to cut €17bn, or roughly 2 percent of GDP, to "ensure" debt sustainability from 2028," wrote the top officials who are not named in the report.

Despite having little time to prepare the report due to the sudden fall of the last government led by longtime prime minister Mark Rutte, the study group noted it had seen enough to draw strict conclusions and said the previous government had mishandled finances and needed a "course correction."

"During the past government term, insufficient strict choices were made, and the decision was made to resolve societal challenges mainly by using additional funds." the officials write.

They question the amounts earmarked for climate spending and dealing with the nitrogen crisis, which adds up to €60bn and suggest some subsidies could be replaced with "norms and taxes," lowering government expenditure.

According to the report, the country's budget deficit is set to reach 3.6 percent of GDP in 2028, exceeding the three percent limit set by the currently suspended EU fiscal rules, which are due to come back into force in 2024.

Austerity 2.0?

The call for fiscal consolidation comes even as the Dutch debt ratio fell to 49 percent of GDP at the end of 2022, three percentage points lower than at the start of the same year despite the Russian invasion of Ukraine and the ensuing energy crisis.

This puts the country among the least indebted countries in Europe and below the 60 percent debt ratio as outlined by EU fiscal rules.

The Dutch top officials "acknowledged the need for investments in the future" and called for "sensible reforms" that "take into account measurement and implementation."

But the called-for spending cuts are significant and comparable in absolute terms to the €16bn in cuts made during Rutte's second "austerity government" (2012-2016), which "resulted in the longest recession and largest impoverishment in post-war Dutch history," Dutch financial geographer Ewald Engelen recently wrote in the New Left Review.

These cuts were made following a similar call for fiscal consolidation by the study group, whose advice is traditionally followed by Dutch cabinets.

The International Monetary Fund at the time also concluded that strict austerity had delayed recovery in the country and called on the Dutch government to loosen spending restrictions.

More recently, the IMF questioned the efficacy of budget cuts as a way to bring down the debt and concluded that "a broad range of well-established methods in the empirical literature confirms that fiscal consolidation does not reduce debt ratios."

But increasing healthcare costs, pensions and climate change require the upcoming government to take steps while avoiding "unnecessary economic and societal damage in the short term and in the future," top officials conclude, adding that "the Dutch economic outlook is good given the circumstances, which is precisely why it is wise to make a course correction now."

The EU Commission recently revised down Dutch growth projections to 0.5 percent this year.

Looser EU fiscal rules agreed, with 'country-specific' flexibility

EU finance ministers agreed on new spending rules, copying much of previously existing rules. One worry is that only three countries — Sweden, Denmark and Luxembourg — could currently afford to meet green commitments while meeting debt and deficit rules.

EU agrees to cut spending for 2024, despite investment needs

Although final fiscal rules are uncertain and eventual budget cuts will likely be subject to negotiation between the commission and individual member states, Thursday's announcement points to a general tightening of the purse in Europe.


'Bestaanszekerheid' — the buzzword of the Dutch election

Despite its higher than average income, the Netherlands is no exception to the cost of living crisis, which is at the forefront of political parties' and trade unions' messages ahead of the 22 November election.

EU public procurement reform 'ineffective', find auditors

The EU Commission reformed procurement directives to make bids more attractive (and competitive), but the reform has failed, say auditors. Procedures now take longer, and the number of direct awards and individual tenders has increased over the past decade.


What are the big money debates at COP28 UN climate summit?

The most critical UN climate conference (COP28) ever will run from Thursday to mid-December — with talks on climate commitments and climate finance expected to determine the success of this year's summit.

Latest News

  1. EU nears deal to fingerprint six year-old asylum seekers
  2. Orbán's Ukraine-veto threat escalates ahead of EU summit
  3. Can Green Deal survive the 2024 European election?
  4. Protecting workers' rights throughout the AI revolution
  5. Russia, the West, and the geopolitical 'touch-move rule'
  6. Afghanistan is a 'forever emergency,' says UN head
  7. EU public procurement reform 'ineffective', find auditors
  8. COP28 warned over-relying on carbon capture costs €27 trillion

Stakeholders' Highlights

  1. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  2. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  3. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  4. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?
  5. Georgia Ministry of Foreign AffairsThis autumn Europalia arts festival is all about GEORGIA!
  6. UNOPSFostering health system resilience in fragile and conflict-affected countries

Stakeholders' Highlights

  1. European Citizen's InitiativeThe European Commission launches the ‘ImagineEU’ competition for secondary school students in the EU.
  2. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  3. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  4. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  5. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch
  6. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations

Join EUobserver

Support quality EU news

Join us