# EUR-Lex - 52013DC0369 - EN

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# 52013DC0369

**Recommendation for a COUNCIL RECOMMENDATION on the Netherlands’ 2013 national reform programme and delivering a Council opinion on the Netherlands’ stability programme for 2012-2017 /* COM/2013/0369 final */**

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Recommendation for a

COUNCIL RECOMMENDATION

on the Netherlands’ 2013 national reform
programme
and delivering a Council opinion on the Netherlands’ stability programme for
2012-2017

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Articles 121(2) and 148(4)
thereof,

Having regard to Council Regulation (EC) No
1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary
positions and the surveillance and coordination of economic policies[1], and in particular Article 5(2)
thereof,

Having regard to Regulation (EU) No
1176/2011 of the European Parliament and of the Council of 16 November 2011 on
the prevention and correction of macroeconomic imbalances[2], and in particular Article 6(1)
thereof,

Having regard to the recommendation of the
European Commission[3],

Having regard to the resolutions of the
European Parliament[4],

Having regard to the conclusions of the
European Council,

Having regard to the opinion of the Employment
Committee,

After consulting the Economic and Financial
Committee,

Whereas:

(1)       On 26 March 2010, the
European Council agreed to the Commission’s proposal to launch a new strategy
for growth and jobs, Europe 2020, based on enhanced coordination of economic
policies, which will focus on the key areas where action is needed to boost Europe’s potential for sustainable growth and competitiveness.

(2)       On 13 July 2010, on the
basis of the Commission's proposals, the Council adopted a recommendation on
the broad guidelines for the economic policies of the Member States and the
Union (2010 to 2014) and, on 21 October 2010, adopted a decision on guidelines
for the employment policies of the Member States[5],
which together form the ‘integrated guidelines’. Member States were invited to
take the integrated guidelines into account in their national economic and
employment policies.

(3)       On 29 June 2012, Heads of
State or Government decided on a Compact for Growth and Jobs, providing a
coherent framework for action at national, EU and euro area levels using all
possible levers, instruments and policies. They decided on action to be taken
at the level of the Member States, in particular expressing full commitment to
achieving the objectives of the Europe 2020 Strategy and to implementing the
country-specific recommendations.

(4)       On 6 July 2012, the
Council adopted a recommendation on the Netherlands’ national reform programme
for 2012 and delivered its opinion on the Netherlands’ updated stability
programme for 2011-2015.

(5)       On 28 November 2012, the
Commission adopted the Annual Growth Survey[6],
marking the start of the 2013 European Semester for economic policy
coordination. Also on 28 November 2012, the Commission, on the basis of
Regulation (EU) No 1176/2011 on the prevention and correction of macroeconomic
imbalances, adopted the Alert Mechanism Report[7],
in which it identified the Netherlands as one of the Member States for which an
in-depth review would be carried out.

(6)       On 14 March 2013, the
European Council endorsed the priorities for ensuring financial stability,
fiscal consolidation and action to foster growth. It underscored the need to
pursue differentiated, growth-friendly fiscal consolidation, to restore normal
lending conditions to the economy, to promote growth and competitiveness, to
tackle unemployment and the social consequences of the crisis, and to modernise
public administration.

(7)       On 10 April 2013, the
Commission published the results of its in-depth review[8] for the Netherlands, under Article 5 of Regulation (EU) No 1176/2011. The Commission’s analysis
leads it to conclude that the Netherlands is experiencing macroeconomic
imbalances, although these are not excessive.

(8)       On 29 April 2013, the Netherlands submitted its 2013 stability programme covering the period 2012-2017 and its
2013 national reform programme. In order to take account of their
interlinkages, the two programmes have been assessed at the same time.

(9)       Based on the assessment of
the 2013 stability programme pursuant to Council Regulation (EC) No 1466/97,
the Council is of the opinion that the Netherlands implemented sizeable consolidation
measures over 2011-2013, but that the fiscal effort is likely not to be sufficient
to correct the excessive deficit by 2013, mainly in light of worse than
expected economic developments. The macroeconomic scenario underpinning the
budgetary projections in the programme is broadly plausible. For 2013 and
2014, the Stability Programme projects real economic growth of -0.4% and 1.1%,
respectively, which is fairly close to the Commission's Spring 2013 forecast of
-0.8% and 0.9%. The stated objective of the programme is to reduce the headline
deficit to below 3% of GDP from 2014 in a sustainable manner. The programme
does not contain an explicit reference to the medium-term objective (MTO),
suggesting that the MTO of -0.5%, as communicated in last year's Stability
Programme, is confirmed. The MTO is in line with the requirements of the
Stability and Growth Pact. In addition, whilst in 2015 the programme plans a
reduction in the structural balance of 0.5% of GDP in structural terms, in line
with the minimum annual structural requirement, in 2016 the structural balance
is expected to deteriorate by 0.4% of GDP and to improve by 0.1% of GDP in
2017, thereby falling short from the appropriate adjustment path. Based on the
Commission Spring forecast, the average annual fiscal effort of around 0.7% of
GDP over the period 2010-2013 is in line with the structural effort of 3⁄4% of
GDP recommended by the Council. The budgetary adjustment in 2011 and 2012 was
predominantly geared to the expenditure side, yet in 2013 relied largely on
revenue measures. The planned headline deficit set by the Stability Programme
is consistent with a correction of the excessive deficit by 2014, one year
after the deadline set by the Council under the excessive deficit procedure in
late 2009. The Council considers that the fiscal effort envisaged by the
authorities is not compatible with an actual correction of the excessive
deficit by 2014. Possible additional consolidation measures specified in the
Stability Programme have been temporarily withdrawn and at any rate would not
be sufficient. The Netherlands needs to define additional measures to bring the
headline general government deficit below the 3% of GDP threshold in 2014 in a
sustainable manner. According to the 2013 Stability Programme, the debt-to-GDP
ratio is expected to rise further in 2013, to 74% of GDP and to increase
slightly further to 75% of GDP in 2014. The debt ratio is thus projected to
remain well above the 60% reference value. For 2015, the programme expects the
debt ratio to decline to 71.4% of GDP and to decline slightly thereafter,
reaching 70.8% in 2017. This decline in the debt ratio after 2014, however, is
insufficiently underpinned by policy measures.

(10)     In order to enhance the
future growth potential of the Netherlands, it is of paramount importance that
the required consolidation, to ensure a sustainable correction of the excessive
deficit and achieving the MTO in the short to medium-term, safeguards
growth-enhancing expenditure. In particular, efforts to promote innovation and
research, including fundamental research, education and training, will be key
to a balanced adjustment. This would not only help to support the economic
recovery, but could also help buttress innovation and human capital, improve competitiveness
and the medium- and long-term growth prospects.

(11)     A key challenge lies in the
housing market, where rigidities and distortive incentives have built up over
decades to shape house financing and sectoral savings patterns. The tendency of
households to leverage up gross mortgage debt against housing wealth to a large
extent reflects long-standing fiscal incentives, notably full mortgage interest
tax deductibility. Since April 2012, a series of measures have been partly
implemented. Some of these concern adjusting the fiscal treatment of housing
finance. The gradual move to limit mortgage interest tax deductibility and
increase the incentive to amortise is warranted, but the phasing-in of this
measure is too slow to significantly influence amortising behaviour. The rental
market is restrained by regulation and the presence of a very large social
housing sector that also has to cope with long waiting lists. The recent introduction
of some differentiation of rents in the social housing sector based on income
is a step in the right direction, but its impact is limited. Therefore, while
the measures proposed are steps in the right direction, the overall pace of reforms
is slow in addressing underlying problems and thus needs to be stepped up, whilst
at the same time continuing to ensure that social
housing is available to disadvantaged citizens, who are
unable to obtain housing at market conditions, including in high demand
locations.

(12)     The long-term
sustainability of the pension system has been strengthened through the gradual
increase in the statutory retirement age from 65 years in 2012 to 67 in 2023.
Hence, the Netherlands has fully addressed that part of the 2012 recommendation
on increasing the statutory retirement age and linking it to life expectancy,
for both the first and the second pension pillar. Remaining challenges include
an appropriate intra- and inter-generational division of costs and risks. Moreover,
an overhaul of the governance of the second-pillar pension funds is overdue in
order to help underpin resilience to ageing. Implementation of the plans to
reform long-term care would help curb the fast-rising costs of ageing and would
thus support the sustainability of public finances. In this regard, the quality
and accessibility of long-term care has to be maintained at an adequate level.

(13)     The labour market reforms
proposed by the government aim to increase labour market participation and
mobility. The Participation Act reform is ambitious and relevant to boost
labour market participation. However, the reforms are not yet enshrined in law
and the time span for implementation seems rather short. In addition, further
measures are needed to improve the employability of people at the margin of the
labour market, including women, people with a migrant background, people with a
disability and the elderly. The Netherlands has announced reforms to the
unemployment benefit scheme and its relatively strict employment protection
legislation. These reforms, in combination with a mobility tax credit (‘mobiliteitsbonus’)
for employers to hire social security beneficiaries aged 50 or above or people
with a labour disability, are well targeted at the lower participation end of
the labour market. However, while these measures point in the right direction,
they can only be fully assessed once adopted. Finally, accelerating the removal of remaining disincentives for second earners to increase the
number of hours worked would have the potential of further alleviating future
labour supply shortages.

(14)     Substantial progress has
been made on the 2012 recommendation on innovation and science/business links.
The enterprise policy ‘To the Top’, including its sectoral approach for
public-private partnerships in the area of research, innovation and education
(‘top sector’) is now in the implementation phase. Apart from sectoral
innovation policies, it is important to pursue horizontal research and
innovation policies and to preserve an adequate level of public funding for
not-earmarked fundamental research.

(15)     In the context of the
European Semester, the Commission has carried out a comprehensive analysis of
the Netherlands’ economic policy. It has assessed the stability programme and
national reform programme, and presented an in-depth review. It has taken into
account not only their relevance for sustainable fiscal and socio-economic
policy in the Netherlands but also their compliance with EU rules and guidance,
given the need to reinforce the overall economic governance of the European
Union by providing EU-level input into future national decisions. Its
recommendations under the European Semester are reflected in recommendations
(1) to (4) below.

(16)     In the light of this
assessment, the Council has examined the Netherlands’ stability programme, and
its opinion[9]
is reflected in particular in recommendation (1) below.

(17)     In the light of the
Commission’s in-depth review and this assessment, the Council has examined the Netherlands’ national reform programme and the stability programme. Its recommendations
under Article 6 of Regulation (EU) No 1176/2011 on the prevention and
correction of macroeconomic imbalances are reflected in recommendation (2)
below.

(18)     In the context of the
European Semester the Commission has also carried out an analysis of the
economic policy of the euro area as a whole. On this basis the Council has
issued specific recommendations addressed to the Member States whose currency
is the euro. The Netherlands also should ensure the full and timely
implementation of these recommendations,

HEREBY RECOMMENDS that the Netherlands should take action within the period 2013-2014 to:

1.           Reinforce and implement
the budgetary strategy, supported by sufficiently specified measures, for the
year 2014 and beyond to ensure a timely correction of the excessive deficit by
2014 in a sustainable manner and achieve the structural adjustment effort
specified in the Council recommendations under the EDP. Protect expenditure in
areas directly relevant for growth such as education, innovation and research.
After the correction of the excessive deficit, pursue the structural adjustment
effort that will enable the Netherlands reaching the medium-term objective by
2015.

2.           Step up efforts to
gradually reform the housing market by accelerating the planned reduction in
mortgage interest tax deductibility and by providing for a more market-oriented
pricing mechanism in the rental market, and by further relating rents to household
income in the social housing sector. Refocus social housing corporations to
support households most in need.

3.           Adjust the second pension
pillar, in consultation with social partners, to ensure an appropriate intra-
and inter-generational division of costs and risks. Underpin the gradual
increase of the statutory retirement age with measures to increase the
employability of older workers. Implement the planned reform of the long-term
care system to ensure its cost-effectiveness and complement it with further measures
to contain the increase in costs, with a view to ensure sustainability.

4.           Take
further measures to enhance participation in the labour market, particularly of
people at the margin of the labour market. Continue to reduce tax disincentives
on labour, including by a faster phasing-out of transferable tax credits for
second income earners. Foster labour market transitions and address labour
market rigidities, including by accelerating the reform of employment
protection legislation and the unemployment benefit system.

Done at Brussels,

For
the Council

The
President

[1]               OJ L 209, 2.8.1997, p. 1.

[2]               OJ L 306, 23.11.2011, p. 25.

[3]               COM(2013) 369 final .

[4]               P7_TA(2013)0052 and P7_TA(2013)0053.

[5]               Council Decision 2013/208/EU of 22 April 2013.

[6]               COM(2012) 750 final.

[7]               COM(2012) 751 final.

[8]               SWD(2013) 121 final.

[9]               Under Article 5(2) of Council Regulation (EC) No
1466/97.