The Netherlands, going through its third recession in four years, should get next year’s budget deficit down to 2.8 percent of gross domestic product and be given more time only if the economy worsens and reforms are implemented, European Union Commissioner Olli Rehn said.
“It is my experience that it’s better to have a safety margin by targeting 2.8 percent than only 3 percent,” Rehn, the economic and monetary affairs commissioner, told a news conference in The Hague today. About 6 billion euros ($8 billion) in austerity measures will be needed to get the deficit within the EU’s 3 percent limit, he said.
Rehn’s comments come a day after the Dutch central bank forecast the 2014 deficit will widen to as much as 3.9 percent while the government may need to cut spending by as much as 8 billion euros to get the deficit below 3 percent. The Netherlands has exceeded that ceiling since 2009.
The coalition government is trying to narrow its budget gap with a four-year, 16 billion-euro austerity package on which agreement was reached in October. Prime Minister Mark Rutte’s Cabinet will decide in August on additional austerity measures needed to meet the 3 percent target in 2014.
The commission already extended the country’s deadline to get the deficit under 3 percent by one year, extending it to 2014 on May 29.
“If economic growth deteriorates, then according to the pact it is possible to consider an extension of the deadline on the condition structural reform has been made and a further growth deterioration is expected,” Rehn said.
The European Commission sees GDP in the Netherlands, the fifth-largest economy in the euro area, declining 0.8 percent in 2013.
“Domestic demand is forecast to remain depressed into 2013, as budget consolidation and negative-wealth effects, chiefly emanating from the housing market, continue to pose a drag on the Dutch economy,” the commission said in a report on May 3. It forecasts economic growth of 0.9 percent next year.
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