Dutch austerity package 'too vague'

Fri, May 4, 2012, 01:00

THE MULTIBILLION-euro package of austerity cuts that brought down the Dutch minority government, which was delivered to Brussels just ahead of deadline on Monday, has been described by the country’s economic planning agency as “too vague to assess”.

In an embarrassment for the caretaker coalition ahead of a September 12th general election, both the central planning bureau and economists at the ministry of finance have admitted they cannot say with certainty that the deal can meet the EU budget deficit requirement of 3 per cent of GDP.

Dutch finance minister Jan Kees de Jager, who brought together the parties that backed the cuts – the government parties the Liberals and Christian Democrats, along with GreenLeft, centre-left D66 and conservative Christian Unity – has put his personal reputation behind the package, pledging it will meet the target.

However, while the central planning bureau does not go as far as saying the proposals are inadequate, it does take the unusual step of distancing itself from them, saying it does not have enough detailed information to make an independent judgment – a situation unheard of with any other budget.

The bureau is uneasy about the lack of supporting data on a proposed cut of €1.6 billion in spending on healthcare, which is already shaping up to become one of the more contentious issues at the polls. It also says it needs details of a “general” but unspecified across-the-board cut of €875 million.

Clearly anticipating the argument that the €13 billion in cuts could hinder economic growth, it says it has not seen any government analysis of how proposed tax increases – including a rise in VAT from 19 to 21 per cent, aimed at generating €3.2 billion – will affect consumer spending or jobs.

Opposition Labour leader Diederik Samsom said he was unhappy in particular with plans to bring forward an increase in the pension age to 66, a public-sector pay freeze for teachers, police and civil servants, and an end to tax relief on home-to-work travel.

“However, this is about the whole package, all the details,” he said last night. “What we need to know is this: in the end, will the pain be shared fairly?”

The extent of the pain became clearer yesterday with a survey by ING Bank based on figures from the central planning bureau showing that the VAT increase alone would cost the average Dutch household €15 a month next year, rising to between €25 and €30 a month in 2014, while wages stagnate.

Police have already staged half-day strikes in recent weeks in Holland’s four main cities. Yesterday the three police unions issued a joint statement rejecting the pay freeze and warning of more large-scale action to come.