Dutch public deficit reduced to 4.2 percent

By the end of June this year, the public deficit of the Netherlands was 4.2 percent of the gross domestic product (GDP), i.e. 25 billion euro on an annual basis.

The current deficit is marginally below the level of 4.5 percent at the end of 2011 according to Statistics Netherlands. Public debt increased to 68.2 percent of the GDP. As yet, public deficit and public debt do not meet the European budget standards.

On an annual basis, the public deficit was reduced as government revenues rose more rapidly than government expenditure. Government revenues increased marginally. Revenues from income tax and social contributions have risen noticeably over the past six months. The government also received more dividends from the Nederlandsche Bank (Dutch Central Bank) and from natural gas revenues. Public revenues are currently back at the 2008 level, when the financial crisis started.

Public expenses have been stable at 300 billion euro since early 2010, but this is an increase by 25 billion euro relative to the beginning of the crisis. Social benefits in cash and spending on (health) care continued to grow during the first half of 2012. Higher expenses were offset by lower investments and wage costs. Investments have dropped dramatically since 2010; wage costs have dropped gradually since last year. Childcare allowances were cut, which also helped to curb public expenditure. The government had a deficit of more than 8 eurocents for every euro spent in the first six months of 2012.

The central government accounted for two thirds of the public deficit, social funds (e.g. unemployment funds) for one quarter and the local government level accounted for one tenth. Social funds are financed from compulsory contributions (approximately 85 percent) and contributions made by the central government (15 percent). Without financial contributions by the central government from tax revenues, the social funds would account for the entire public deficit of 25 billion euro. The income transfers from the central government to the social funds grew by 20 percent during the first six months of 2012.

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