Brussels welcomes Dutch budget deal

The European Commission in Brussels has welcomed the Dutch government decision to approve the Dutch stability program, well before the deadline of 30 April.

Olli Rehn, vice president of the European Commission, said “We welcome the budgetary agreement reached with broad consensus in The Netherlands. It sends a strong signal of commitment to keep Dutch public finances on a strong and sustainable footing with a view to securing the welfare of future generations.

The agreement confirms a long Dutch tradition of sound public finances, reflecting a deeply-rooted stability culture. It underlines the strength and credibility of domestic institutions in not shying away from difficult choices that inevitably have to be made.

Consequently, the Dutch authorities submitted the Stability Programme today, in respect of the agreed deadline. The Commission will assess the programme in May in the context of the European Semester, as it will for all EU Member States.

The rules of the Stability and Growth Pact put a strong emphasis on the structural sustainability of public finances and on structural reforms. The Commission will therefore assess the Dutch programme putting particular emphasis on the quality and sustainability of the adjustment measures in the medium-term.”

Minister of Finance De Jager today sent the Dutch stability program to the European Commission. The budget package, which was agreed with the Dutch parliament yesterday, reduces the budget deficit to 3% of GDP in 2013. Savings from the package are expected to reach 12 billion euros in 2013.

The budget agreement, in which opposition parties D66, GroenLinks, ChristenUnie and VVD and CDA played an important role, will strengthen economic growth and will improve the functioning of the labor and housing markets. Furthermore, the measures will contribute significantly to find growth-enhancing solutions for issues like climate and energy.

In general terms, the following has been agreed:

  • On the housing market, thorough structural reform will take place. Private sector debts will be limited, while confidence will be inspired by proposing a equitable, long-term package. The transaction tax will be lowered. Measures are also taken on the rental market.
  • Regarding the pension system, the statutory retirement age will be gradually increased, starting in 2013, reaching 66 by 2019 at the latest, and reaching 67 in 2024. The fiscal retirement age for the second-pillar (funded) pension system will be raised to 67 in 2014.
  • The tax system will be reformed. The general VAT-rate will be increased by 2 percentage points, while income taxes will be gradually lowered. Duties on tobacco and alcohol will be increased.
  • Employers are expected to pay unemployment benefits for the first six months. In return, steps are taken for a more flexible labor market, by lowering costs of dismissal, simplifying dismissal procedures, schooling programs and job-to-job assistance.
  • The government proposes a ‘green economy’ package. This package includes additional investments, for among other things, insulation of houses and durable construction. The use of fossil fuels will be discouraged.
  • Steps will be taken to limit health care expenditures. Among other things, copayments will be increased and the insurance coverage will be altered.
  • Government expenditures, including civil servant wages, will be frozen.

The Dutch media and public have applauded the deal as a sign of decisiveness.

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