Council Opinion of 31 January 2000 on the updated Stability Programme of the Netherlands, 1999 to 2002
Date: 2000-01-31
Institutions: Council of the European Union
Subjects: Netherlands, economic stabilisation, public finance

2.3.2000

EN

Official Journal of the European Communities

C 60/1

I

(Information)

COUNCIL

COUNCIL OPINION

of 31 January 2000

on the updated stability programme of the Netherlands, 1999 to 2002

(2000/C 60/01)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community,

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(3) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

On 31 January 2000 the Council examined the 1999 update of
the stability programme of the Netherlands which covers the
period 1999 to 2002. The Council notes with satisfaction that
the Dutch general Government deficit
for 1998 and that
estimated for 1999 are lower than those projected in the
the budgetary
initial 1998 stability programme;
outcome for 1999 is estimated to be in small surplus instead
of a planned deficit of 1,3 % of GDP. The general Government
debt ratio was also lower than projected in both 1998 and
1999. Economic growth in 1999 also exceeded the projection
the
the initial programme. The Council considers that
of
updated programme is consistent with the Broad Economic
Policy Guidelines.

in fact

the

cautious

programme

The 1999 update maintains the approach of the initial 1998
stability
three macroeconomic
identifiying
scenarios as a basis for the fiscal projections to 2002; the
update is based on actual forecasts for the year 2000 and
uses
framework of
assumptions for 2001 and 2002. Under this scenario annual
growth would be 2,0 % in 2001/2002 and the general
Government deficit would reach 1,1 % of GDP in 2002. The
1999 update also takes into account the fiscal reform to be
implemented in 2001 the budgetary cost of which is estimated
at about 0,6 % of GDP.

scenario as

the basic

As in tis opinion on the initial programme (2) the Council
acknowledges that the adoption of the cautious macroeconmic

(1) OJ L 209, 2.8.1997, p. 1.
(2) OJ C 3, 6.1.1999, p. 2.

recent

economic developments

scenario as basis for the fiscal strategy of the Government was
made on grounds of prudence; the Council notes, however,
that
render unlikely the
average GDP growth rates underlying the budgetary projections
of the cautious scenario. Moreover, recent economic forecasts
of GDP growth for the Netherlands, including the Commission
Autumn 1999 forecasts, point to real GDP growth rates for
2001 substantially higher than that assumed in the cautious
scenario.

The Council considers that the Dutch method of using cautious
growh assumptions and expenditure targeting and control has
been instrumental in achieving the good results registered until
now. However, this method also tends to make it more difficult
to assess whether the medium-term autcome of the deficit is
compatible with the requirements of the Stability and Growth
the Council
Pact. Based on the information now available,
considers that the middle and favourable scenarios provide a
range of more plausible macroeconomic assumptions and
therefore a more relevant framework in assessing the public
finance projections of the updated stability programme than
the cautious scenario. The underlying budgetary position of
the general government
in 2002 would broadly provide
adequate safety margin to prevent the deficit from breaching
the 3 % of GDP threshold in normal circumstances,
thus
fulfilling the Stability and Growth Pact requirements.

improvement

The Council notes that tax reductions in recent years have
to wage moderation and
contributed
in
employment;
in this context the Council welcomes the tax
reform planned to be implemented in 2001 which aims at
reducing the tax burden on earned income. Taking into
account the Government surplus already achieved in 1999,
current strong economic growth and possible inflationary
pressures, the Council recommends to the Dutch authorities
to strengthen the envisaged budgetary position in 2000 and
the following years, unless a significant deceleration in activity
materialises. Such strengthening of
the budgetary position
would be fully consistent with the recommendations of the
Broad Economic Policy Guidelines. The Council welcomes the
intention of the Dutch Government to submit future updates of
its stability programme shortly after the presentation of its
annual budget memorandum which will
the most
recent forecasts for the economy.

reflect