UPDATE 2-Dutch FinMin says committed to EU budget rules

Thu Dec 20, 2012 8:34am EST

Related Topics

* Netherlands committed to 3 pct deficit target - FinMin

* Higher deficit possible due to economic setbacks - FinMin (Adds FinMin comment, background)

AMSTERDAM Dec 20 (Reuters) - The Netherlands is committed to meeting the European Union's 3 percent budget deficit rule, its finance minister told parliament on Thursday, after forecasts showed the country would miss the target next year.

Earlier this week the cabinet's economic forecaster, the CPB, warned that the Netherlands will miss its 3.0 percent budget deficit target in 2013 as the economy contracts for the second year running.

The CPB projections come close on the heels of an even gloomier outlook from the central bank, at a time when the Netherlands, one of the euro zone's few triple-A rated economies, is considered at risk of being downgraded.

"I've been asked what it means that European rules are leading. It means that the Netherlands commits to the actual deficit rule, meaning 3 percent, the structural deficit, and the reduction of debt," Finance Minister Jeroen Dijsselbloem told the Dutch Lower House during a debate on the budget.

Prime Minister Mark Rutte and Dijsselbloem have refrained from saying whether the deteriorating economic environment will force the Netherlands to come up with more austerity measures. The government has already agreed to roughly 30 billion euros of budget cuts this year which will be implemented up to 2017.

Dijsselbloem, considered a front-runner to chair the Eurogroup of euro zone finance ministers, said again that he would decide in February or March whether more budget cuts would be needed to meet the European Monetary Union (EMU) deficit target of 3 percent of gross domestic product.

Asked in parliament whether the Dutch budget deficit would exceed the 3 percent limit next year, he said that could not be ruled out.

"There could be very heavy weather or a very unexpected, big setback, it's all possible," he said, adding that the coalition government would aim to meet the target in 2013 and 2014.

Budget rules allow the European Commission to give a country more time to reduce its deficit if its economy is performing poorly. In July, the commission allowed Spain one extra year to meet its deficit target.

Dijsselbloem also told parliament on Thursday that the proceeds of the government's telecom spectrum auction, which raised a higher-than-expected 3.8 billion euros last week, would be used in next year's budget.

The economic outlook for the Netherlands remains gloomy, with official forecasters predicting output will contract this year and next, while consumer confidence remains fragile in the face of job cuts and tumbling house prices.

Unemployment hit 7 percent in November, the Central Statistics Bureau said earlier on Thursday, the highest level in at least 15 years.

Consumer spending contracted 2.4 percent in October from a year ago, the biggest fall in three years, as the Dutch cut back on big-ticket items such as durable goods and cars, particularly after the government increased value-added tax on October 1. (Reporting by Gilbert Kreijger; Editing by Catherine Evans)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.