The Dutch central bank, De Nederlandsche Bank, expects the government’s budget deficit to break a European Union rule this year by exceeding the 3 per cent limit. This marks the first time the deficit has breached the EU threshold since the coronavirus pandemic in 2020, and only the second time since 2012. The financial gap is wider than experts originally predicted because the war in the Middle East is slowing down economic growth and lowering tax revenues. At the same time, the government is spending heavily on healthcare and welfare benefits, alongside a massive, one-off payment of around 8 billion euros to reform military pensions, pushing this year’s deficit to 3.3 per cent of the country’s total economy.
Although the central bank expects the deficit to drop back below the EU limit to 2.6 per cent next year and 2.3 per cent by 2028, it is still urging the government to be incredibly careful. Officials warn that the country is remaining uncomfortably close to the danger zone and needs to maintain a safe financial cushion to survive future global emergencies and economic shocks. The bank believes that further emergency cuts can be avoided, but only if the current coalition government successfully delivers the financial plans it has already agreed on.
Putting those plans into action is proving difficult, as the government aims to save billions of euros by reducing unemployment and disability benefits. This has angered trade unions, who are now planning strikes in protest. While the central bank is refusing to take sides in the dispute, it hopes the government and unions can use the country’s traditional consensus-based negotiation model to reach an agreement, noting that any compromise that helps people move into work and boosts productivity will benefit everyone. As an alternative way to raise money, the bank suggested the government look into reducing existing tax discounts for homeowners and self-employed workers.
@anp | NEWS BRAINPORT
