Budget plans allow purchasing power to erode

THE HAGUE – The current worldwide economic downturn is leaving behind deep scars in the Dutch economy. As a result, the Dutch cabinet will have to make deep cuts to chip away at a significantly growing debt and much higher budget deficits. That is the assessment of Dutch Prime Minister Jan Pieter Balkenende, days before the tabling of the new budget for the 2010 budget year. The situation is so serious that the cabinet has done the unthinkable in Dutch politics, it no longer will try to maintain the purchasing power of Jan Modaal, the Dutch low income earner. The proposed measures do not take effect immediately, however. The multi-year plan will have to be carried out by the next coalition government, following the 2011 election. Among the coming measures is the proposed rise of the pensionable age from 65 to 67, one which will be phased in over a period of many years (top Dutch economists have warned that the proposal is insufficient to stem future shortfalls). The cabinet expects the number of unemployed workers to rise to 600,000 and the budget shortfall to reach 6,4 percent of the gross national product. Top bureaucrats have been directed to survey a number of areas for possible budget cuts, including health and housing. In the current budget year, Social Affairs and Defense will be expected to find savings to eliminate their departmental shortfall. Some AOW-pension benefits, including the so-called bonus for younger partners of pensioners who are not yet 65, will be phased out for those residing outside the country. New pensioners will only receive such bonuses if the younger partner is over 55. Development Aid will remain at 0,8 percent of the GNP but since that figure has also dropped, the department will still need to cut its budget.