Yesterday, Paul Krugman already did a quick comparison between Belgium and the Netherlands (link here in Mark Thoma’s blog). His conclusion was:
And in general, it’s hard to escape the impression that Belgium has been better served by political paralysis than the Netherlands has by its unified, effective determination to do exactly the wrong thing.
I am not sure if that is the only thing that is relevant (e.g. the Netherlands has thrown a lot more money around to save banks than Belgium, I think) but today a handful of new economic data has come out for the Netherlands, and it doesn’t look pretty. See also here.
First, GDP growth/decline: the Dutch economy has shrunk for four quarters; GDP is 1,8% less than last year in the same period. Investment has shrunk 9,4%, private consumption 2,3% and exports declined by 0,3%. Government consumption shrunk by 0,5%.
Second, jobs/unemployment: in one year’s time, 147.000 jobs have been lost (1,9% since last year and the biggest decline since 1995). Unemployment jumped from 6,5% last year to 8,7% this July. Unemployment has been rising rapidly since 2011. Also the number of job vacancies is at the lowest level in ten years. Currently, there are 694.000 unemployed. Youth unemployment stands at 17%.
Third, budget deficit: next year the budget deficit is estimated to be 3,9%, which according to the Dutch Bureau for Economic Policy Analysis (CPB) means that the goverment should cut the budget by an additional 9 billion euros to stick to the European norm of 3%. As noted earlier, the Netherlands got a bit of relief for this norm, because it isn’t going to achieve it for this year. The government agreed to cut the budget by 6 billion euros at most for 2014. According to the politics editor of the NRC/Handelsblad newspaper, Commissionar Olli Rehn has promised that this 6 billion is enough, but that it is in particular the Liberal party in government that wants to stick to the 3%-norm. According to the editor this is because the Netherlands have been so tough with other countries it should give the right example now.
This might be exactly the foolish Doing the Right Thing that Krugman mentions. It is going to be a very rough time in the Netherlands because since the 1990s the social security system has been made much, much leaner. Even though there is a new Social Pact, some representatives of Dutch labour relations feel that the budget cuts amounts to the end of the very same Social Pact the Dutch prime minister used so much political capital for – because part of the Social Pact was a postponement of budget cuts amounting to some 4,3 billion euros.