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By Thomas Escritt and Harro Ten Wolde
AMSTERDAM, March 13 The Dutch economy is
positioned to take advantage of a "worldwide upswing" but
financing for the small and medium sized companies that drive
growth remains a concern, central bank governor Klaas Knot said
Unveiling the central bank's annual report, Knot said he
hoped alternative sources of financing would take a greater role
in funding the Dutch economy, easing firms' dependence on banks.
"A lack of demand for credit is one part of this (financing
shortage) ... but there is a need for more risk-bearing capital
for SMEs," said Knot.
The bank's annual report suggested both venture capital and
"crowd funding from the general public" could help finance small
businesses, as could the country's giant pension funds.
The Dutch economy has returned to growth after a prolonged
period of sluggishness following the global financial crisis,
exacerbated by budget cuts and falling house prices.
Last week, the government forecast an expansion of 0.75
percent this year and growth of 1.25 percent in 2015.
Knot said that, with the crisis receding, it was time for
the Netherlands to consider returning to a "trend-based"
budgetary policy focused on conservative estimates of future
income, known as the Zalm norm after a former finance minister.
The Netherlands was forced to abandon this approach, which
had governed its budgetary affairs since the mid-1990s, when its
budget deficit breached the European Union's 3 percent limit
following the crisis.
The governing coalition has taken political flak for
pursuing tight fiscal discipline in order to bring the deficit
below the EU ceiling.
The central bank was cautious about proposals to raise bank
capital ratios, warning that attempting to strengthen lenders by
raising capital ratios to 5 percent rather than the 4 percent
currently envisaged risked sucking billions out of the economy.
"Investors are not eager to invest in banks at the moment,"
director of banking supervision Jan Sijbrand said, adding that
raising the amount of capital banks must hold to cover potential
losses would almost certainly lead them to cut lending.
Knot, a member of the European Central Bank's governing
council, said he saw little need for further unconventional
monetary policy measures in the euro zone as stability returns
to the bloc, although he repeated that he would be in favour of
dropping interest rates to below zero if needed.
He saw deflation risks as limited, saying: "I don't think it
(deflation) will get out of hand."
"If that changed we would need to look again at whether we
should do anything on monetary stance, the interest rate, or
something about the monetary transmission process," Knot added.
"We have deployed instruments in both directions before."
In its report, the Dutch central bank said the biggest
challenge for euro zone members was to stick with structural
reforms, in particular freeing up labour markets, which would
raise trend growth rates.
The bank also said euro zone monetary authorities would need
to move away from existing unconventional monetary policies -
such as ultra-cheap funding for banks - while avoiding negative
side-effects from their withdrawal.
(Reporting by Thomas Escritt and Harro ten Wolde; Editing by