Tue, 00:59 27 Oct 2009 GMT17

 

Dutch govt warns of deep spending cuts ahead-reports
13 Sep 2009 00:27:48 GMT
Source: Reuters
* Budget documents leaked to Dutch media again

* Spending cuts aimed across 20 policy areas

* Finance minister says 'difficult choices unavoidable'

AMSTERDAM, Sept 13 (Reuters) - The Netherlands is on the brink of a period of deep government budget cuts as the government aims to cut up to 20 percent in spending in some areas to cope with the global recession, Dutch media reported.

The government will unveil its 2010 budget on Tuesday, but the major figures leaked out on Friday with media reports saying flat economic growth and a budget deficit of 6.3 percent of Gross Domestic Product (GDP) are expected in 2010. [ID:nLB275663]

The leaks continued on Saturday, when a newspaper and a TV station said they got their hands on the budget documents, revealing the government was looking at drastic cuts to improve its finances.

"We know one thing: after the crisis we will encounter stubborn problems, particularly the labour market and government finances. Doing nothing is no option, difficult choices will be unavoidable," Finance Minister Wouter Bos was quoted saying in the budget documents by commercial broadcaster RTL 4.

The Dutch cabinet believes 'fundamental political reconsiderations' are necessary and wants a broad social debate about how the Netherlands can emerge in 2020 "cleaner, smarter, stronger, more solid and with greater solidarity".

It has become almost an annual event for the budget to be leaked to the Dutch media prior to its official publication, with RTL especially successful in obtaining draft documents.

The Netherlands is the eurozone's fifth-largest economy and heavily reliant on trade, with exports equivalent to 70 percent of GDP. That has made the global recession's impact especially hard.

The economy has contracted for five straight quarters and the government pumped more than 31 billion euros into the system to either buy or shore up struggling banks and insurers in the past year.

To improve its finances, the government is mulling changes in social security, safety and government administration.

It plans to revamp the tax system, amend fiscal subsidies, rules and taxes in the housing market and cut back overseas development aid, foreign postings and peacekeeping missions, RTL 4 reported.

Changes also loom for healthcare spending, child allowances and subsidies for projects in non-sustainable energy.

The Dutch government is not expected to make budget cuts next year but will have to cut spending by a total 35 billion euros in later years, Dutch broadcaster NOS has reported.

Economists had expected no big cuts next year for fear of stalling what little recovery was underway. [ID:nL9549387]

De Volkskrant, which also said it had seen the budget documents, said gas revenues are expected to fall to 10.3 billion euros this year and 9.8 billion in 2010 from 14.7 billion in 2008. Gas has played an important role in supporting the government budget in recent years.

Inflation is seen stable at 1 percent in 2010. (Reporting by Aaron Gray-Block; Editing by Jerry Norton)
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