VZCZCXRO6483
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHTC #0221/01 0911430
ZNR UUUUU ZZH
R 011430Z APR 09
FM AMEMBASSY THE HAGUE
TO RUEHC/SECSTATE WASHDC 2721
INFO RUEHAT/AMCONSUL AMSTERDAM 4200
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 THE HAGUE 000221 
 
SIPDIS 
 
STATE PASS FEDERAL RESERVE BOARD - INTERNATIONAL DIVISION, TREASURY 
FOR IMI/OASIA.VATUKORALA, USDOC FOR 
4212/USFCS/MAC/EURA/OWE/DCALVERT 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV NL
SUBJECT: NETHERLANDS: MODEST THIRD STIMULUS AND SAVINGS PACKAGE 
 
Ref: (A) THE HAGUE 197, (B) THE HAGUE 62, (C) 08 THE HAGUE 981 
 
THE HAGUE 00000221  001.2 OF 002 
 
 
¶1. SUMMARY: On March 25, the government presented another stimulus 
and savings package to stimulate employment and sustainable economic 
growth in the short term, while ensuring stable government finances 
in the medium and long term.  The latest stimulus measures total 6.5 
billion euro.  Together with two earlier packages (refs A and B), 
the value of Dutch stimulus measures to date totals approximately 2 
percent of Dutch GDP.  END SUMMARY. 
 
--------------------------------------------- ---- 
Stimulus for 2009 and 2010, savings starting 2011 
--------------------------------------------- ---- 
 
¶2. In 2009 and 2010, the Government of the Netherlands (GONL) 
intends to invest 6.5 billion euro to stimulate the economy, with an 
additional 1.5 billion in supplemental spending by provincial and 
municipal governments.  The GONL is also counting its decision not 
to cut public spending on unemployment and other benefits as further 
stimulus worth another 9.4 billion euro.  The first stimulus package 
was worth approximately 6 billion euro, while the second consisted 
mainly of government guarantees to stimulate lending and exports. 
To date, the national government's new money for stimulus measures 
totals about 2 percent of GDP. 
 
¶3. The stimulus measures have four goals: (amounts in euro) 
-- investing in education, knowledge and employment, especially 
combating youth unemployment (709 million in 2009 and 1.05 billion 
in 2010); 
-- investing in a clean and innovative economy, including subsidies 
for insulating houses, 'scrap' subsidy for old vans, and off-shore 
wind energy projects (621 million in 2009 and 606 million in 2010); 
-- bringing forward investments in infrastructure and construction, 
including building and repairing schools, health care institutions, 
and roads as well as water management projects (724 million in 2009 
and 1.09 billion in 2010); 
-- increasing liquidity for businesses, including abolition of the 
aviation tax, but only if Schiphol airport also decreases its own 
costs (677 million in 2009 and 464 million in 2010) (Ref C). 
 
¶4. In announcing these most recent measures, Prime Minister 
Balkenende said that to counter the rapidly deteriorating budget 
(from 1 percent surplus in 2008 to 5.7 percent deficit in 2010), the 
government has proposed a law that would require national budget 
savings of at least 0.5 percent of GDP per year as of 2011.  The 
exact nature of these measures is still unclear, but they could 
include: 
-- raising the pension age to 67 years 
-- obtaining savings in health care sector (including lower health 
care subsidies) 
-- increasing property tax for houses worth more than 1 million 
euro 
 
¶5.  The package's most important and 'controversial' proposal is 
increasing the eligibility age for qualifying for the state pension 
system from 65 to 67 years.  Balkenende noted that the government 
had chosen this measure in order to advance greater labor 
participation and improve the long-term financial position of both 
the government and the pension funds.  The increase is expected to 
be implemented gradually.  Since the country's largest labor 
federation (FNV) strongly objects to the planned increase, the 
government agreed to give the tri-partite Social and Economic 
Council (SER) the opportunity to devise viable alternatives by 
QCouncil (SER) the opportunity to devise viable alternatives by 
October 1, provided they yield as much savings as the proposed 
measure.  Balkenende stated the SER would have a free hand in 
suggesting alternatives, which his cabinet would take under serious 
consideration.  In the end, however, the GONL will raise the 
retirement age if it believes it must be done, especially given the 
broad support the proposal has in the Dutch parliament. 
 
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COMMENT 
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¶6.  The fact that the three coalition parties after weeks of 
negotiations succeeded in agreeing on a crisis package has 
consolidated the cabinet's position.  The proposed package is 
probably as much as the Dutch government could be expected to do. 
By itself, there is little the Netherlands can do to change the 
crisis.  With its open economy, the Netherlands stands to gain far 
more from a recovery of world trade than from its own stimulus 
measures.  Preventing countries from resorting to protectionist 
measures is viewed as more important (and effective) for Dutch 
economic recovery than domestic stimulus.  With its latest package, 
the GONL has tried to maintain the general public's purchasing 
power, thereby encouraging the thrifty Dutch to spend.  End 
 
THE HAGUE 00000221  002.2 OF 002 
 
 
comment. 
 
 
GALLAGHER