Council opinion of 27 November 2000 on the updated stability programme of the Netherlands for the period 1999-2004
Date: 2000-11-27
Institutions: Council of the European Union
Subjects: Netherlands, economic convergence, economic policy, economic stabilisation, gross domestic product

29.12.2000

EN

Official Journal of the European Communities

C 376/1

I

(Information)

COUNCIL

COUNCIL OPINION

of 27 November 2000

on the updated stability programme of the Netherlands for the period 1999-2004

(2000/C 376/01)

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 27 November 2000, the Council examined the Netherlands’
updated stability programme, which covers
the period
the
1999-2004. The Council welcomes the presentation of
update of the stability programme shortly after the presen-
tation of
the budget, as was recommended in the Council
Opinion of 31 January 2000 on the updated stability
programme of the Netherlands, 1999 to 2002 (2), so that it
reflects the most recent economic data and forecasts.

Macroeconomic developments proved significantly better in the
Netherlands than was expected in the 1999 updated stability
programme. As a result, the general government balance in
both 1999 and 2000 improved significantly to a surplus of
1 % of GDP in both years as against a deficit of 0,6 % of
GDP projected in the 1999 update. The general government
debt ratio to GDP is expected to fall to 56,6 % in 2000, below
the 60 % reference value. Real GDP growth will continue to be
dynamic in 2001, but, as a result of the fiscal reform to be
implemented in that year, the government surplus is estimated
to be reduced to 0,7 % of GDP; however, the government debt
ratio should be further reduced to 52,3 % of GDP. The Council
notes that the period 2002 to 2004 incorporates two years,
2003 and 2004, which are beyond the term of the present
government and that the estimates for the period 2002 to
2004 are technical projections, within two macroeconomic
scenarios, under the assumption of unchanged policies from
2002 onwards.

The Council considers that, taking into account current strong
economic prospects for the Dutch economy in the next two

(1) OJ L 209, 2.8.1997, p. 1.
(2) OJ C 60, 2.3.2000, p. 1.

years, the favourable scenario provides an appropriate basis for
the assessment of the budgetary position in the medium term.
the
The Council
requirements of the Stability and Growth Pact.

the programme

considers

fulfils

that

the stance of

The Council welcomes the fiscal reform which will be imple-
mented in 2001 and which aims at reducing the tax burden
and at fostering labour supply by reducing the replacement
rate. However, the structural deficit deteriorates in 2001. The
Council notes that inflationary pressures are emerging in the
present phase of strong economic growth;
it considers that
such pressures might strengthen next year and in 2002,
under the impact of reductions in personal income taxes and
of possible further tax alleviation in 2002. In view of these
risks, the Council encourages the Dutch Government to ensure
fiscal policy will be firmly oriented to
that
the
to this end,
limiting inflationary pressures;
government
due
to allocate budgetary margins
consideration of cyclical conditions,
in particular in 2002,
and to maintain strict control of government expenditure.
The Council recommends that
these considerations should
also prevail, taking account of macroeconomic developments,
when the Dutch Government shapes the budgetary policies in
increase in disposable
2003 and 2004. Given the buoyant
income in 2001,
that a moderate
the Council considers
outcome of the current wage negotiations will be crucial in
this respect.

it urges
taking

improvement
reorientation of government

The Council commends the emphasis given in the updated
in the
stability programme
to structural
economy by the
spending
term objectives in priority areas, such as
towards longer
education, healthcare and investments in infrastructures;
it
notes with satisfaction that such a shift in spending is imple-
mented without prejudice to the respect of the ceilings in real
terms imposed on expenditure. The Council welcomes the
consideration given in the updated stability programme to
the
long-term sustainability of public finances in view of
impact of
this
that
analysis would justify using much of
the margin likely to
become available from 2002 for accelerated debt reduction.
The Council considers that the 2000 update of the stability
programme is consistent with the broad economic policy
guidelines.

the ageing population.

It considers