Under the new Fiscal Compact rules the every euro zone country is signing up to, even the Dutch won’t be able to meet the target next year. According to the CPB Bureau for Economic Analysis who are usually spot on, apart from not reaching the budget deficit, the debt/GDP will also be well over the 60% limit by 2015. Oh how embarassing 😉 Cheeky bastards were lecturing the Greeks recently.

The CPB, accustomed to delivering inarguable verdicts on fiscal and budgetary policy, said the Netherlands was in flagrant breach of the new eurozone rulebook and fiscal pact it has been highly instrumental in drafting.

“The government has the intention of living up to the rules, but it’s embarrassed that it can’t meet the targets now,” says Coen Teulings, director of the CPB.

On current policy, a mild recession would leave the country nursing a budget deficit of 4.5% of gross domestic product next year, 2 points higher than previously projected and 50% above the eurozone ceiling of 3%, – risking the wrath of Brussels and the imposition of automatic penalties the Dutch had been keen to devise for others.

What’s more, without a new round of austerity, the Dutch would still be above the eurozone deficit limit by 2015. National debt levels are also running in the wrong direction, from 65.4% of GDP last year to 75.8% in 2015, well above the 60% eurozone threshold.

So now the government find themselves in a bit of a jam on this one. Its the last thing it needs right now. Any austerity to try and meet the fiscal compact rules could push it over the edge.

The government’s in a fix,” says Paul Nieuwenburg, a political scientist at Leiden University. “It’s a problem of image. Having such a big mouth on Greece and seizing the moral high ground, they are now morally obliged to stick by the rules. Things have become very complicated. That’s why Rutte has withdrawn into splendid isolation and they won’t talk to the media.”

In order to meet its pledge of complying with the 3% deficit next year, it now needs to save a further €9bn in a year. That’s a very tall order. Teulings calculates that for every €3 in deficit reduction, you need to generate €5, meaning €15bn euros worth of spending cuts and tax increases are needed by next year.

“That’s so outrageous and it’s not really required by the economics,” he said. “Structurally we have to get spending down and revenue up to sustainable levels. Doing that too hastily means tax increases which are bad for the economy. Raising taxes in the middle of a recession is a bad thing. Structural reforms like raising the retirement age are preferable.”

A depressed housing market, with prices falling 8% since 2008 and likely to fall further, reduced consumption, shrinking pension funds and spending cuts which have seen disposable income curbed by 2% this year all underpin Holland’s budgetary dilemmas.

In a euro sceptic country, the sentiment is further shifting away from europe.

If the Netherlands has traditionally been a europhile country, that has changed sharply since it voted down the European constitution in 2005. Wilders’ strength on the right is currently mirrored on the hard left by the Socialist party which is riding high in the polls and is fiercely hostile to the EU. Between the two of them – Wilders’ Freedom party and the socialists – the anti-European stream musters 55% in the opinion polls.

Wilders sought to exploit the crisis by demanding a referendum on a return to the guilder, but this was dismissed by the political mainstream. An opinion poll showed 56% of the Dutch were against a referendum, but 39% were in favour. A sizeable minority, around one third, of supporters of the two governing parties wanted a vote. And while 61% were against bringing back the guilder, two thirds believed there should have been a referendum in the 1990s on joining the euro – 54% would have voted against.

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The euro crisis could yet bring down another eurozone government – even in a country as prosperous and successful as the Netherlands.

And whats the solution to failing to meet the fiscal compact, yeah you guessed it AUSTERITY!!!!!!!!

Source: The Guardian

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