Netherlands Postpones 2014 Budget Cuts, Cuts Deal With Unions

The Dutch government postponed 4.3 billion euros ($5.6 billion) in budget cuts for 2014 as it struck a deal with social partners, counting on economic growth to keep the budget deficit below the European ceiling next year.

“This is an historic agreement,” Prime Minister Mark Rutte said at a press conference late yesterday in The Hague. The government will assess later in the year whether the 4.3 billion euros in cuts it agreed to last month for 2014 are still needed as economic growth may pick up, Rutte said.

The government, unions and employers organization VNO-NCW agreed to limit severance pay and postponed plans for easier dismissals and lower unemployment benefits until 2016. The 600 million euros a year it costs the government annually are covered, Rutte said.

The budget cuts announced last month would have come on top of a four-year 16 billion-euro austerity package. The Netherlands, the euro region’s fifth-largest economy, has been in breach of the EU’s 3 percent of gross domestic product limit since 2009. Rutte said the deficit next year would drop below 3 percent.

The Dutch economy will expand 1 percent next year after contracting for a second year in 2013, according to the median of 17 forecasts compiled by Bloomberg.

To contact the reporter on this story: Fred Pals in Amsterdam at fpals@bloomberg.net

To contact the editor responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net

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