September 17, 2019 / 8:42 AM / 2 months ago

Dutch to present 2020 budget, loosen purse-strings

* King to address combined houses of parliament

* Dutch are running budget surpluses, national debt 50% of GDP

* Plans for a national investment fund may not be complete

* ECB’s Draghi advised Netherlands, Germany to spend more

By Toby Sterling and Bart H. Meijer

AMSTERDAM, Sept 17 (Reuters) - Dutch Prime Minister Mark Rutte’s frugal government looks set to loosen up in its 2020 budget, possibly including a national investment fund to take advantage of its ability to borrow at negative interest rates.

The decision to relax fiscal discipline — details will be released later on Tuesday — would come just a week after European Central Bank President Mario Draghi urged Germany and the Netherlands to spend more to avoid a downturn in the euro zone.

But higher spending would be driven more by domestic concern than international pressure. Increasing healthcare and housing costs, rising inflation and especially impending pension cuts worry Dutch voters the most.

Much of the political class — including parliament and Central Bank President Klaas Knot — resent the ECB’s policy of easy money and blame it for some of the Netherlands’ woes.

Dutch gross domestic product growth is forecast to slow to 1.8% this year and 1.4% in 2020, as U.S. trade policies and Brexit hit exports, according to August forecasts by the economic policy office CPB.

After years of austerity following the global financial crisis, the Dutch government now runs a 1.2% budget surplus and national debt is due to fall to 49.3% of GDP, compared with the 60% required by European Union budget rules.

“There is no reason to bring the national debt to zero,” Economic Affairs Minister Eric Wiebes said in an interview with the AD Newspaper Monday.

“I have never before pleaded that the government should spend more money,” but the country needs fundamental investment, he said.

“It does have to be clear that an investment contributes to increasing the size of the pie” rather than redistributing wealth, the minister from Rutte’s pro-business VVD party said.

Earlier this week, plans for an investment fund of up to 50 billion euros leaked in major newspapers. Details of when and how that might be achieved — possibly outside the regular budget of around 300 billion euros — were not disclosed. (Reporting by Toby Sterling)

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