More background to the Dutch downgrade and a rebuff of S&P’s analysis

This post by Dutch Bas Jacobs on the downgrade by S&P’s yesterday is essential reading. As we say in Dutch, ‘Hij maakt er gehakt van.’ It touches on some issues I have mentioned in past posts (such as the private debt situation) but in much more detail. To quote the conclusion:

To conclude it’s highly unlikely that the Dutch government runs into any budgetary problems at any time soon. The following S&P statement is therefore nonsense: “Fiscal space is increasingly limited, however, with the government’s net debt expected to increase to 71% of GDP in 2014.”  Apart from the silly 3-percent deficit rule imposed by Brussels, there is absolutely no danger that the Dutch public finances spiral out of control if budget deficits were about to increase during the upcoming years. (Note also that S&P confuses gross and net public debt.)

But:

Sadly, I would not be surprised that Dutch policy makers would take an economically highly inconsistent credit-rating report to justify even more austerity, rather than take the S&P report as a wake-up call to relax austerity and help the private sector restore its balance sheets.

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