Bron: Mainly Macro
Auteur: Simon Wren-Lewis
While all the current focus is on the challenge to austerity thrown up by the French and Greek elections, it may be salutary to look at an equally recent challenge that failed. Towards the end of April the Dutch conservative coalition government collapsed, when the far right party refused to discuss further budget cuts. The Prime Minister resigned. And yet a few days later other parties rallied round to give their support to a similar package of austerity measures, which now have majority support in parliament.
This austerity was not required by the bond markets. The government can borrow at very low interest rates: 2.3% on 10-year bonds. (Predictably a ratings agency made noises about the country losing its triple AAA after the government collapsed, although not the same one that infamously downgraded US debt last year.) It is definitely not required by the state of the Dutch economy: GDP is expected by the IMF to fall by 0.5% this year (that’s a -0.5% growth rate), with unemployment rising from 4.5% to 5.5%. So what could have led a government to try and cut spending and raise taxes at such a time to the extent that it brings the government down? The answer is the ‘Excessive Debt Deficit Procedure’ (EDF) of the EU’s Stability and Growth Pact. The budget deficit as a percentage of GDP was 4.7% in 2011, down from 5.6% in 2009. Without these measures it would probably have stabilised at around 4.5% of GDP, and the objective of these additional cuts is to bring it down to 3% by 2013.
This is worse than trying to balance the budget in a recession – it is trying to reduce the budget deficit in a recession. (A small caveat – part of the package is an increase in VAT, which if delayed and phased could stimulate demand in the short run.) Now these measures, like raising the retirement age, may be perfectly sensible from a longer term perspective. But, VAT aside, they should not be introduced in a recession. What is really depressing from a Eurozone perspective is why the package appears to have been implemented now at such great political cost. The timing is all about the EU’s deficit limits, and a belief that Netherlands has to show the rest of Europe an example. The finance minister said the plan would send Europe “a signal of solid government finances”.
>Lees het hele stuk (Budget Madness in the Netherlands ) op mainly macro