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Dutch govt plans 4.3bn extra cuts in 2014

duchAMSTERDAM: The Dutch government plans to save an additional 4.3 billion euros ($5.6 billion) in 2014 through austerity measures to reduce the budget deficit, Dutch Prime Minister Mark Rutte said Friday.

The cuts come on top of an already painful 16 billion euros in cuts to be implemented over four years, which were agreed on by parties in the country's coalition government when they took office last autumn.

They were announced a day after the Dutch government conceded it would miss the EU's three percent budget deficit target this year, given its weak economy and public opposition to continued austerity.

In a statement, the government said the poor economic and financial outlook meant it would have to implement further painful measures in order to bring its spending under control.

The measures, detailed in a letter from Finance Minister Jeroen Dijsselbloem to parliament, include a freeze on tax bands and tax exemptions - effectively a tax hike. By not adjusting tax bands for inflation in 2014, the government expects an extra 1.1 billion euros in tax revenues in 2014.

Extending a levy on companies' contributions for employees on higher incomes will bring in another 500 million euros.

Dijsselbloem wrote that the government hoped to agree a voluntary freeze in healthcare spending with employment organisations that would save a billion euros in 2014.

He also said there would be no pay increases for civil servants and teachers, which would save another billion euros in 2014.

The government promised to counterbalance these measures with 800 million euros in extra spending.

This would be composed of a 300 million euro allocation to protect those on the lowest incomes from the impact of the cuts and a 500 million euro investment fund designed to stimulate the economy.

The government said the measures would mean the country's budget deficit would fall back below the EU's three percent budget deficit target in 2014.

It's still uncertain if the coalition government, which has a majority in the lower house but not the upper house of parliament, will be able to cobble together enough political support to push ahead with more unpopular spending cuts.

"I am sure that together with employee and employer organisations and the political parties, there is the will to help our country out of this crisis," Rutte told reporters.

New forecasts from the leading economic policy board CPB on Thursday showed the Dutch deficit would hit 3.3 percent of gross domestic product this year and 3.4 percent in 2014, increasing the risk of a cut in one of the euro zone's few remaining triple-A sovereign credit ratings.

Copyright Reuters, 2013


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