Dutch audit office warns of increase in financial guarantees
THE NATIONAL audit office in the Netherlands has warned the government that the total value of its financial guarantees – including those extended to euro zone countries in difficulty, such as Ireland – now amounts to an extraordinary 77 per cent of GDP, up from 42 per cent just five years ago.
In the latest in a barrage of bleak economic statistics, the audit office said guaranteed loans to Ireland, Portugal and Greece, support for ailing banks, export credit guarantees for businesses and the national mortgage guarantee scheme now amounted to €465 billion – the highest ever.
Potentially most damaging, however, just nine weeks from a general election, was the office’s blunt assessment that, given the perilous state of the euro zone, the Dutch parliament was not being given sufficiently regular summaries of the level of risk associated with those guarantees.
“This means, in effect, that MPs are not being kept up to date with the size of the country’s total financial exposure, how it is being managed and what exactly is being done to limit the changing risk,” it said.
The audit office report led to scathing criticism of caretaker prime minister Mark Rutte from former central bank executive Lex Hoogduin, who accused him of having “two faces” when dealing with the euro zone crisis.
“On the one hand, when he met Chancellor Merkel in Berlin on Wednesday he was enthusiastic and determined about working to save the euro, while here at home he lacks urgency and has not once appeared on television to explain to the Dutch people what he believes must happen.”
The difficulty for Mr Rutte is that the impact of the euro zone crisis on the Dutch economy is becoming more and more unpalatable to explain, with no economic growth forecast until 2014 at best, unemployment rising, house prices falling and consumer confidence at a 10-year low.
Worst of all, Mr Rutte was forced during the week to agree with the Bureau for Economic Policy Analysis that the new government taking office in September will have to make between €20 billion and €25 billion worth of additional cuts in public spending over the next four years.
These will be on top of the €18 billion in cuts agreed by the current coalition in 2010 – and the further €13 billion package which led to the collapse of the government in April but which was later salvaged by a coalition of five parties, including the two government parties.
So difficult has the economic climate become that two senior members of Mr Rutte’s Liberal Party have proposed slashing development aid from €4.4 billion to €1.4 billion next year – despite howls of protest some months ago when a €1 billion cut was proposed by Freedom Party leader Geert Wilders.