By Gilbert Kreijger and Anthony Deutsch
THE HAGUE, April 26 Dutch political parties
reached a deal on a 2013 budget on Thursday, averting crisis and
enabling a country that has championed euro fiscal discipline to
meet a European Union deadline set for Monday.
The Netherlands, which has been widely seen as an advocate
of fiscal discipline among euro zone members, rattled investors
and financial markets when it appeared to be on the brink of
failing to meet those targets itself.
Its government had resigned on Monday in a standoff over
budget-cutting plans, creating a political vacuum in one of the
euro zone's few remaining AAA-rated countries in the run-up to
elections in September.
Dutch politicians, some of whom have lectured Greece on
getting its finances in order, say Thursday's deal will cut the
deficit to the EU target ceiling of 3 percent.
The deal reduces the risk that the Netherlands will lose its
top-notch sovereign credit rating, but the country still faces
months of policy uncertainty ahead of the September poll.
Earlier on Thursday, its central bank president, Klaas Knot,
warned that the country faced enormous challenges. He reiterated
that the country must address structural reforms and said
Europe's sovereign debt crisis was not over yet.
The failure of a core euro zone member to come up with a
deal would have heightened the uncertainty, feeding angst in
financial markets about the sustainability of Spanish and other
euro zone debt.
"Austerity creates pain but we are doing this for the
Netherlands and we're doing it for our children," Christian
Democrat Lower House leader Sybrand van Haersma Buma told
parliament as the new deal was debated.
The Dutch budget plan for 2013 now has the backing of the
majority of members of the Dutch parliament after the opposition
GreenLeft party said it would support the plan.
A caretaker coalition government of the Christian Democrats
Party and the Liberals had already backed the plan, as did two
smaller opposition parties. Together with the GreenLeft, they
will have enough members to get the plan through parliament.
Under the deal, the deficit will be brought down to 3
percent next year through a combination of social service cuts
and higher taxes, the finance ministry said in a statement on
"At the EU level, the absolute priority is restoring the
stability of the euro zone," the finance ministry said.
"At national level, the task is to remain competitive in a
continuously changing world, to lower private and public debt
levels, and to prepare for increases to government spending on
healthcare and pensions as the population ages."
The government's macroeconomic forecaster CPB will need to
go through the proposals to ensure the forecasts are correct.
The budget plan includes a two-year pay freeze for civil
servants, which will save 2.3 billion euros by the end of 2013,
and a 2 percentage point increase in value added tax, which will
bring in extra income of 4 billion euros.
It also contains concessions to the environmental and
Christian parties backing the deal, such as extra taxes on
fossil fuels and higher "sin taxes" on alcohol and tobacco
products, as well as on soft drinks, generating an additional
600 million euros.
Tax deductions for employee travel between office and home
will be reduced, saving 1.2 billion euros, while cuts in
healthcare will save a further 1 billion euros.
"LESS IN THE WALLET"
Prime Minister Mark Rutte's government fell apart at the
weekend when its main ally, Geert Wilders' Freedom Party,
refused to agree to a deal that would have cut more than 14
billion euros ($18 billion) off the annual budget.
Some small opposition parties favour reducing the deficit to
3 percent but the largest opposition parties, including Labour
and Wilders' Freedom Party, had said 3.6 or 4 percent was good
enough and cutting more would hurt growth and jobs.
Wilders has promised to turn the election into a referendum
on the euro and the EU. He said the new budget would mean: "less
in the wallet and more unemployment. The only people who are
waving flags are the unelected eurocrats in Brussels and their
little friends in Greece."
Financial markets have been unsettled by the Netherlands'
inability to agree the sort of deficit-cutting it has demanded
from other governments.
The Netherlands, which has a relatively low level of state
debt of 65.2 percent of GDP, has been in recession since July,
and the budget deficit is expected to be 4.6 percent of GDP next
year without spending cuts.
As elsewhere in Europe, there is public discomfort with
A poll by Maurice de Hond showed 58 percent of those
surveyed agreed the Dutch deficit should be cut to 3.5 percent
at the most, while 44 percent thought it should be cut to 3
percent or lower.