VZCZCXRO4305
PP RUEHAG RUEHDF RUEHIK RUEHLZ
DE RUEHTC #1004 1241513
ZNR UUUUU ZZH
P 041513Z MAY 06
FM AMEMBASSY THE HAGUE
TO RUEHC/SECSTATE WASHDC PRIORITY 5626
INFO RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHFT/AMCONSUL FRANKFURT 3387
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHAT/AMCONSUL AMSTERDAM 0786

UNCLAS THE HAGUE 001004 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EUR/UBI ERIC FALLS 
USDOC FOR 4212/USFCS/MAC/EURA/OWE/DCALVERT 
TREASURY FOR IMI/OASIA/VIMAL ATUKORALA 
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STATE PLEASE PASS FEDERAL RESERVE 
 
E.O. 12356: N/A 
TAGS: ECON EFIN EINV ELAB NL
SUBJECT: Dutch Opposition Leader Draws Flak for Economic 
Reform Ideas 
 
REF:  THE HAGUE 449 
 
¶1. Summary:  Opposition leader Wouter Bos used a May 1 
speech and an appearance before a major social welfare 
conference April 28 to outline his proposals for reforming 
the Dutch welfare state.  Social democrat Bos's ideas, which 
generally carry forward the structural reforms (increasing 
labor market flexibility, trimming early retirement 
incentives, etc.) initiated by the current center-right 
coalition, were nonetheless harshly criticized by the 
current coalition parties, as well as by union leaders and 
former PvdA VIPs.  Despite the political flak, the PvdA 
leader's ideas may help to further such reforms in a 
possible future coalition government.  End summary. 
 
2.(U) According to current opinion polls, the opposition 
Labor Party PvdA is likely to come out on top in the 
Netherlands' 2007 general elections.  Other parties 
invariably reproach PvdA's leader and possible future Prime 
Minister Wouter Bos for not saying where he stands.  Last 
week, Bos took the stage at a conference on the future of 
the European welfare state to present his views on a number 
of socio-economic issues.  Bos' proposals to cut distorting 
tax incentives essentially continue the present GONL's 
efforts to increase labor market participation through 
structural reforms.  But with national elections only a year 
away, members of the ruling coalition denounced his 
proposals as going too far. 
 
¶3. (U) Three leading Dutch think tanks brought together 
international experts, including 2000 Nobel Prize Winner 
James Heckman, to discuss the future of the European welfare 
state.  The conference addressed the challenges of aging, 
globalization, and migration, and framed the choice for 
Europe as one between a US-style limited welfare state, or a 
Scandinavian model of social cohesion.  Emboffs met with 
some of the key speakers at this conference earlier this 
year (reftel). 
 
¶4. (U) Arguing that the composition of public spending is 
more important to the sustainability of the welfare state 
than is the level of spending, Bos proposes more spending on 
education, research, and innovation.  More controversial 
measures include taxation of senior citizens to help fund 
the state pension, restricting mortgage interest 
deductibility, students paying back their grants according 
to income, and amending the life cycle savings plan that was 
introduced by the Balkenende government so that it is no 
longer "abused" for early retirement.  Bos would also lower 
the administrative barriers to firing workers. 
 
¶5. (U) COMMENT  Prime Minister Balkenende's ruling coalition 
government has spent the past two years implementing 
structural reforms to increase labor participation, 
especially among older workers, to trim eligibility for the 
Netherlands' much-abused disability system, and to reduce 
the maximum duration of unemployment benefits.  Bos's 
proposals can be seen as the next step in this direction, 
and could help pave the way for a future coalition alliance. 
But in the run-up to the next elections, government and 
opposition remain in different corners, as Balkenende 
demonstrated by criticizing Bos for taking away people's 
certainties while increasing government control.  Also, Bos' 
proposals do not go down well with PvdA's traditional labor 
union allies.  He will need to bargain worker friendly 
measures to accommodate their wishes.  Education is crucial 
to creating a more inclusive labor market, but labor laws 
are important too.  As keynote speaker James Heckman noted, 
the US system's basis in individual incentives makes it 
inclusive by nature, while Europe needs to address the 
plight of those outside the labor market. 
 
BLAKEMAN