Dutch deficit set to worsen in 2014

Dutch policy analysis office warns deficit set to worsen to 3.3 percent of GDP in 2014

Associated Press

AMSTERDAM (AP) -- The economic forecasting agency of the Netherlands government warned Monday that the country's deficit will worsen next year after further austerity measures are pushed through.

The CPB agency published its analysis of the 2014 budget a day ahead of schedule, after it was leaked.

The numbers show the deficit worsening to 3.3 percent of annual gross domestic product next year from 3.2 percent this year.

That's potentially embarrassing for the Dutch government, which has argued that a program of spending cuts and tax hikes would lower the deficit and promote growth. In June, it forecast a 2014 deficit of 3 percent, which would meet European rules.

The CPB also said Monday that the Dutch economy will grow 0.5 percent in 2014, instead of the 1 percent forecast earlier this year. Unemployment is expected to rise to 7.5 percent, from around 6 percent at the start of 2013.

When delivering the budget on Tuesday, the government is expected to defend its policies as prudent, and argue that a long housing slide in the Dutch housing market is coming to an end. Economic Affairs minister Henk Kemp has pointed to growth in neighboring Germany, France and Britain as likely to help the export-oriented Netherlands.

In an interview with De Volkskrant newspaper published Monday, Finance Minister Jeroen Dijsselbloem said reforms are unavoidable.

"Expenditures on health care keep rising, those for care of the elderly too," he said. "As long as these structural trends haven't changed, there's not much choice but to keep cutting costs."

Polling organization TNS-NIPO said Friday that confidence in the government has fallen to 12 percent, the lowest level on record since it began systematically measuring public opinion on that question in the 1990s.

"The people in our country have been confronted with too many austerity measures in too short a time," said Ton Heerts, head of the umbrella labor organization FNV on Monday. The employers' association is also opposed to new spending cuts, along with many economists who say they are doing more harm than good.

Because the centrist governing coalition lacks a majority in the upper house of parliament, it is not clear whether Tuesday's budget will be approved without concessions. Details of the latest spending cuts are still unknown.

Geert Wilders, whose far-right Freedom Party is the largest rival to the governing VVD and Labor parties, used his Twitter account to call for Prime Minister Mark Rutte to resign.

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