More Austerity Would Block Dutch Growth in 2014, Rabobank Says

The Dutch economy will not grow in 2014 if the government keeps on focusing on meeting the European Union’s budget deficit target, Rabobank Groep said in its quarterly economic report today.

“Additional austerity measures will continue the negative spiral of low economic growth,” said Theo Smid and Tim Legierse, economists at Rabobank in Utrecht. It would be better if the government speeds up structural reforms, they said.

European Union Commissioner Olli Rehn told Dutch Finance Minster Jeroen Dijsselbloem in The Hague yesterday around 6 billion euro ($8 billion) of austerity is necessary in 2014 to get the budget deficit within the EU’s limit of 3 percent of gross domestic product.

Additional austerity would “take hostage” Dutch economic growth, trigger higher unemployment and cause an increased level of bankruptcies, Rabobank said. The Netherlands is going through its third recession in four years.

The coalition government of Prime Minister Mark Rutte is trying to narrow its budget gap with a four-year, 16 billion-euro austerity package on which agreement was reached in October. The Cabinet will decide in August on additional austerity measures.

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