Dutch interest payment burden historically low

Dutch interest payment burden historically low

Public debt amounted to 383 billion euro in the second quarter of this year. Although much higher than in the pre-recession era in 2007, the Dutch interest burden declined on an annual basis and is relatively low compared to other eurozone countries.

In the first six months of 2011, the public debt of the Netherlands was approximately 120 billion euro higher than by the end of 2007, but on an annual basis, the total amount paid in interest was more than 1 billion euro lower in the same period. One of the reasons is an increased demand for Dutch government bonds. This enables the Dutch government to borrow at historically low interest rates. The interest burden diminished despite the fact that public debt mounted. The interest payment burden over the first six months of 2011 in fact reached the lowest level since 1983, according to Statistics Netherlands.

Expressed as a percentage of total public expenditure, the interest payment burden was also lower than in the period prior to the economic recession. Government debt interest payments over the second quarter of 2007 made up 4.5 percent of total public expenditure versus 3.8 percent in the second quarter of 2011, i.e. far below the average level (5.9 percent) across the other countries in the eurozone.

The interest rate pressure in periods of economic recession varies considerably across the eurozone countries. In Germany, Belgium, Finland and Austria, pressure was reduced; in Greece, Ireland and Portugal pressure soared.

With 15 percent of total government finances, Greece’s interest payment burden was by far the highest in the first quarter. Oddly enough, in the country where the pressure is highest after Greece, i.e. Italy, the interest payment burden expressed as a percentage of total public expenditure in fact declined.

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