Protests over tough Dutch budget

The tough economic policy is bringing water to some Dutch eyes

Protestors gathered in the streets of The Hague, seat of the Dutch government, to denounce plans for tough economic austerity measures.

The Dutch government wants to keep the budget deficit below European Union limits of 3% of Gross Domestic Product.

It aims to turn fragile recovery into sustained economic growth and has rejected a short-term spending boost.

The plan includes 2.4 billion euros ($2.9bn) of previously announced spending cuts and income measures.

The plans were met with derision when about 2,000 people gathered in a central square in The Hague following protests by tens of thousands in the port of Rotterdam on Monday.

People are worried about reforms to retirement, unemployment and disability benefits.

Tough time

The protests have been partly provoked by tough financial belt-tightening over the past year when over 13 billion euros were shaved from spending plans.

The government, made up of a three-way coalition, was formed in May last year and was always expected to embark on a series of severe spending cuts, which would hit civil service jobs and welfare benefits.

But despite its efforts, the Dutch government faced embarrassment last year when it breached the EU deficit limit.

A callous policy is under construction Lodewijk de Waal, Chairman FNV Union

In particular, it was egg in the face for Finance Minister Gerrit Zalm who had criticised the French and German governments for allowing their own budgets to break the rules.

Response

This budget has not gone down well with the labour movement which has already made efforts to work with the government to keep employment costs down.

Unions tore up a wage moderation agreement which was first drawn up during 2003 when the economy was much weaker.

"A callous policy is under construction which assumes people are lazy and are only out to get benefits," said Lodewijk de Waal, Chairman of the biggest trade union FNV.

The minimum wage will remain the same, as will the wages for civil servants under the latest budget plans.

Boost

But, there was some positive news for businesses among the proposals.

In an effort to spark momentum amongst entrepreneurs, businesses will face lower taxes of 31.5% - compared to the previous 34.5%.

Financial experts were also less than impressed with the government's measures.

Economists at ABN Amro said the reforms are necessary and the cabinet has the guts to make them, but it criticised the Dutch government for not spelling out to the population the reasons why the reforms are required.

At Rabobank, economists were much more negative and said the measures will actually hurt economic growth over the short term.

The government is worried that while the rest of the world economy is growing the Netherlands is lagging behind.

However, despite the protests and criticism, there was some good news as new estimates for economic growth - conducted by a government forecaster - predict growth accelerating to 1.5% in 2005 from 1.25% this year.