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Dutch Plan Extra Austerity Measures to Ease 2014 Deficit

March 1 (Bloomberg) -- The Dutch government plans additional austerity measures totaling 4.3 billion euros ($5.6 billion) next year in a bid to narrow the budget deficit to within European Union limits, Prime Minister Mark Rutte said.

“We need the additional measures in 2014 to get the government finances in order,” Rutte told a news conference today in The Hague. The budget cuts would come on top of a 16 billion-euro austerity package over the next four years. “I’m optimistic; the end goal is to tackle the problems we have in the Netherlands,” Rutte said.

The government plans to freeze salaries for one year for civil servants and health-care workers, saving 2 billion euros, the Ministry of Finance said today in a statement. A tax break worth 640 million euros for companies will be scrapped, and the Cabinet also plans to save 700 million euros by abstaining from inflation correction on price-sensitive government spending.

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. The government’s measures should cut the deficit by 0.4 percentage point, bringing it within EU limits in 2014, the Finance Ministry said.

The government package includes plans to invest around 500 million euros to boost the economy in 2014. It is also reserving 300 million euros per year to compensate for the loss of purchasing power for those on low incomes.

The deficit will hit 3.3 percent of GDP in 2013 and would climb to 3.4 percent the following year without the additional budget measures, the government’s planning agency, CPB, said yesterday. The European Commission is more pessimistic, predicting a deficit of 3.6 percent on Feb. 22.

“We think it’s important to get this done quickly,” Rutte said. “I’m doing this because I love the nation and the European Union’s budget-deficit rules are in this case of secondary importance.”

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

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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