EU Gives the Netherlands an Extra Year to Meet Deficit Targets

A deadline for the Netherlands to meet a European Union budget-deficit target was extended by one year to 2014 as the country is mired in its third recession in five years.

“The immediate policy challenge for the Netherlands will be to contain balance-sheet adjustments, to restore confidence and harness growth while simultaneously stabilizing public finances,” the European Commission, the EU’s executive arm, wrote in a report released in Brussels today.

The Netherlands, which has exceeded the EU’s deficit ceiling of 3 percent of gross domestic product since 2009, is trying to trim its spending gap with a four-year, 16 billion-euro ($21 billion) austerity package agreed on by the coalition government in October. Prime Minister Mark Rutte’s Cabinet will decide in August on additional austerity measures to meet the target next year.

Finance Minister Jeroen Dijsselbloem said the commission’s findings were expected. After the commission’s recent economic forecast for the Netherlands, “it is not surprising the commission says we need more budget cuts,” he told Dutch press agency ANP in The Hague today.

The Dutch budget deficit will narrow to 3.6 percent of GDP this year and remain at that level in 2014, the commission forecast on May 3. The country’s economy will contract 0.8 percent this year, a second annual decline, before returning to growth in 2014, the commission said.

‘Whiz Kid’

Today the commission said the Netherlands, the fifth-largest economy in the euro area, should trim its deficit to 2.8 percent of GDP next year, under the EU ceiling.

“You don’t have to be a whiz kid to understand that, with the continuing deterioration of the economy, problems have rather increased than decreased in the last few months,” Dijsselbloem said in an interview on RTLZ television yesterday.

The commission said the Netherlands has considerable challenges when it comes to fiscal policy, the labor market, the housing market, investments in research and development, and education.

To contact the reporter on this story: Corina Ruhe in Amsterdam at cruhe@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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