A €4 billion package of additional austerity measures aimed at enabling the Netherlands to hit EU deficit targets in 2014 has set up a bitter clash with trade unions, after the largest labour federation attacked the cuts as "stupid and ill-advised" and the government pleaded for negotiations.
The clash marks a further weakening of the four-month-old Dutch centrist coalition, which took office with a mandate for deep reforms but has faltered owing to round after round of austerity measures and worsening economic news. The government of Mark Rutte, prime minister, proposed the wage freezes and tax rises at the end of last week after official estimates showed the Netherlands’ budget deficit would come to 3.3 per cent of gross domestic product in 2013 and 3.4 per cent in 2014. The government expects Brussels to give it a waiver on the 2013 limits, but wants to bring the budget back below the 3 per cent limit the following year.
The government hopes to conclude negotiations over its budget plans with labour federations and business groups over the next two weeks to create a broad majority for a deal. Such negotiations are a traditional part of the Dutch “polder model” of consensual governance including social stakeholders.
The new package includes pay freezes for civil servants and for the government-subsidised healthcare sector. The government also proposes to raise taxes by dropping the inflation indexation of tax brackets for one year.
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