Recommendation for a COUNCIL RECOMMENDATION on the Netherlands’ 2012 national reform programme and delivering a Council opinion on the Netherlands’ stability programme for 2012-2015
Date: 2012-05-30
Institutions: European Commission
Subjects: Netherlands, budget deficit, budgetary equilibrium, innovation, labour market, property market, research and development, retirement conditions

EUROPEAN COMMISSION 

Brussels, 30.5.2012  
COM(2012) 322 final 

Recommendation for a 

COUNCIL RECOMMENDATION 

on the Netherlands’ 2012 national reform programme  

and delivering a Council opinion on the Netherlands’ stability programme for 2012-2015

{SWD(2012) 322 final} 

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Recommendation for a 

COUNCIL RECOMMENDATION 

on the Netherlands’ 2012 national reform programme  

and delivering a Council opinion on the Netherlands’ stability programme for 2012-2015 

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 
policies1, and in particular Article 5(2) thereof, 

Having regard to the recommendation of the European Commission2, 

Having regard to the resolutions of the European Parliament3, 

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) 

(2) 

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

is  needed 

On 13 July 2010, 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 States4, which together form the ‘integrated guidelines’. Member States were 
invited  to  take  the  integrated  guidelines  into  account  in  their  national  economic  and 
employment policies. 

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OJ L 209, 02.08.1997, p. 1 
COM(2012)322 final 
P7_TA(2012)0048 and P7_TA(2012)0047 
Council Decision 2012/238/EU of 26 April 2012 

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(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

On 12 July 2011, the Council adopted a recommendation on the Netherlands’ national 
reform  programme  for  2011  and  delivered  its  opinion  on  the  Netherlands’  updated 
stability programme for 2011-2014. 

On 23 November 2011, the Commission adopted the second Annual Growth Survey, 
marking  the  start  of  the  second  European  Semester  of  ex-ante  and  integrated  policy 
coordination,  which  is  anchored  in  the  Europe  2020  strategy.  On  14  February  2012, 
the  Commission,  on  the  basis  of  Regulation  (EU)  1176/2011,  adopted  the  Alert 
Mechanism Report5, in which it did not identify the Netherlands as one of the Member 
States for which an in-depth review would be carried out. 

On 2 March 2012, 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. 

On 2 March 2012, the European Council also invited the Member States participating 
in  the  Euro  Plus  Pact  to  present  their  commitments  in  time  for  inclusion  in  their 
stability or convergence programmes and their national reform programmes. 

On  27  April  2012,  the  Netherlands  submitted  its  stability  programme  covering  the 
period 2012-2015 and its 2012 national reform programme. In order to take account of 
their interlinkages, the two programmes have been assessed at the same time. 

Based  on  the  assessment  of  the  2012  stability  programme  pursuant  to  Council 
Regulation  (EC)  No  1466/97,  the  Council  is  of  the  opinion  that  the  macroeconomic 
scenario  underpinning  the  budgetary  projections  in  the  programme  is  optimistic.  For 
2013, the stability programme projects economic growth of 1¼% without taking into 
account  the  negative  impact  of  the  additional  consolidation  measures  on  growth, 
whilst, on the basis of the same no-policy change scenario, the Commission's forecast 
a  lower  growth  rate  of  0.7%.  The  stated  objective  of  the  programme  is  to  meet  the 
Council  recommendations  on  correcting  the  excessive  deficit  and  to  strive  to  further 
improve the budgetary position towards the medium-term budgetary objective (MTO) 
by  targeting  a  structural  effort  of  at  least  0.5%  per  year.  The  programme  targets  a 
headline general government deficit of 3% of GDP in 2013 and confirms the previous 
MTO  of  a  structural  deficit  of  0.5%  of  GDP,  which  adequately  reflects  the 
requirements  of  the  Stability  and  Growth  Pact.  The  average  annual  fiscal  effort  of 
0.75%  of  GDP  over  the  period  2010-2013,  based  on  the  (recalculated)  structural 
budget balance6, is in line with the structural effort of ¾% of GDP recommended by 
the Council. As the programme does not provide budgetary targets beyond 2013, the 
sustainability  of  the  budgetary  correction  in  2013  and  progress  towards  the  MTO  in 
the outer years, including compliance with the expenditure benchmark of the Stability 
and Growth Pact, cannot be assessed. The budgetary projections over the programme 
period are subject to implementation risks. These are not solely restricted to the newly 

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COM(2012) 68 final. 
Cyclically  adjusted  balance  net  of  one-off  and  temporary  measures,  recalculated  by  the  Commission 
services  on  the  basis  of  the  information  provided  in  the  programme,  using  the  commonly  agreed 
methodology. 

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announced  consolidation  measures,  but  also  to  the  implementation  of  some  of  the 
measures  agreed  upon  earlier  by  the  outgoing  government.  Moreover,  the  additional 
measures  proposed  by  the  government  in  April  2012  and  their  budgetary  impact  are 
not sufficiently specified and quantified. Budgetary adjustment has so far relied mostly 
on  expenditure  cuts,  which  also  affect  growth-enhancing  expenditure.  According  to 
the  2012  stability  programme,  the  debt-to-GDP  ratio  is  expected  to  further  rise 
relatively  markedly  in  2012,  to  70.2%  of  GDP  and  to  increase  slightly  further  to 
70.7% of GDP in 2013, taking into account the impact of the additional consolidation 
measures.  The  debt  ratio  is  thus  projected  to  remain  well  above  the  60%  reference 
value. For 2014 and 2015, the programme does not specify debt targets and therefore 
an assessment of compliance with the debt reduction benchmark of the Stability and 
Growth Pact beyond 2013 cannot be given.  

(9) 

Social  partners  and  the  Dutch  government  reached  a  comprehensive  agreement  on 
pension reform in September 2011 and the government presented plans to increase the 
statutory  retirement  age  to  66  in  2019  and  67  in  2024.  After  that  the  statutory 
retirement  age  will  be  coupled  to  life  expectancy.  Labour  market  measures  would 
support  a  corresponding  increase  in  the  effective  retirement  age.  In  line  with  the 
government  agreement,  the  pension  reform  aims  at  securing  an  appropriate  and 
sustainable intra- and intergenerational sharing of costs and risks in the second pillar. 
With  regard  to  long-term  care,  the  Dutch  government  has  provided  a  blueprint  for 
reform.  Further  concrete  measures  will  be  necessary  to  contribute  to  reducing  the 
financial burden of the ageing society in the Netherlands. 

(10)  Fiscal  disincentives  for  second-income  earners  have  been  reduced  but  not  yet 
sufficiently.  Removing  remaining  disincentives  would  further  contribute  to  raising 
labour  supply  and  make  human  capital  allocation  more  efficient.  The  labour  market 
integration of vulnerable groups should be improved. 

(11) 

In  the  field  of  enterprise  policy,  the  top  sector  agendas  have  been  endorsed  and 
sectoral ‘innovation contracts’ have been signed between the government and industry 
representatives. Support to private research is being increased through the introduction 
of  the  RDA+  tax  deduction  scheme  as  part  of  the  incentives  to  further  promote 
innovation, private R&D and closer science-business links. However, the focus on ‘top 
sectors’  should  not  come  at  the  cost  of  fundamental  research  nor  exclude  innovative 
firms that do not belong to one of the ‘top sectors’. 

(12)  Over  the  last  four  decades,  structural  distortions  have  built  up  in  the  Dutch  housing 
market. In the property market, fundamental supply restrictions and tax incentives for 
home  ownership  (notably  mortgage  interest  deductibility  favouring  higher-income 
households) have led to an inefficient allocation of capital. In the rental market, with 
its  very  large  social  housing  segment,  social  policies  and  caps  on  rent  levels  and  on 
rent  increases  have  led  to  a  very  inelastic  supply  of  rental  housing.  Modifying  the 
favourable  tax  treatment  of  home  ownership  would  contribute  to  reducing  the 
structural distortions on the Dutch housing market. 

(13)  The Netherlands has made a number of commitments under the Euro Plus Pact. These 
commitments, and the implementation of the commitments presented in 2011, relate to 
fostering employment, improving competitiveness, reinforcing financial stability, and 
enhancing  sustainability  of  public  finances.  The  Commission  has  assessed  the 

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implementation  of  the  Euro  Plus  Pact  commitments.  The  results  of  this  assessment 
have been taken into account in the recommendations. 

(14) 

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.  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 (5) below.  

(15) 

In  the  light  of  this  assessment,  the  Council  has  examined  the  Netherlands’  stability 
programme, and its opinion7 is reflected in particular in recommendation (1) below, 

HEREBY RECOMMENDS that the Netherlands should take action within the period 2012-
2013 to: 

1. 

2. 

3. 

4. 

Ensure  progress  towards  the  timely  and  durable  correction  of  the  excessive  deficit. 
To this end, fully implement the budgetary strategy for 2012 as envisaged. Specify 
the measures necessary to ensure implementation of the 2013 budget with a view to 
ensuring  the  structural  adjustment  effort  specified  in  the  Council  recommendations 
under  the  Excessive  Deficit  Procedure.  Thereafter,  ensure  an  adequate  structural 
adjustment  effort  to  make  sufficient  progress  towards  the  medium-term  budgetary 
objective  (MTO),  including  meeting  the  expenditure  benchmark,  and  ensure 
sufficient  progress  towards  compliance  with  the  debt  reduction  benchmark  whilst 
protecting  expenditure  in  areas  directly  relevant  for  growth  such  as  research  and 
innovation,  education  and  training.  To  this  end,  after  the  formation  of  a  new 
government,  submit  an  update  of  the  2012  stability  programme  with  substantiated 
targets and measures for the period beyond 2013.  

Take  measures  to  increase  the  statutory  retirement  age,  including  linking  it  to  life 
expectancy,  and  underpin  these  with  labour  market  measures,  whilst  improving  the 
long-term sustainability of public finances. Adjust the second pension pillar to mirror 
the increase in the statutory retirement age, while ensuring an appropriate intra- and 
inter-generational division of costs and risks. Implement the planned reform in long-
term care and complement it with further measures, in view of an ageing population.  

Enhance participation in the labour market, particularly of older people, women, and 
people with disabilities and migrants, including by further reducing tax disincentives 
for  second-income  earners,  fostering  labour  market  transitions,  and  addressing 
rigidities.  

Promote  innovation,  private  R&D  investment  and  closer  science-business  links,  as 
well as foster industrial renewal by providing suitable incentives in the context of the 
enterprise policy, while safeguarding accessibility beyond the strict definition of top 
sectors and preserving fundamental research. 

7 

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

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5. 

Take steps to gradually reform the housing market, including by:  (i) modifying the 
favourable  tax  treatment  of  home  ownership,  including  by  phasing  out  mortgage 
interest deductibility and/or through the system of imputed rents, (ii) providing for a 
more  market-oriented  pricing  mechanism  in  the  rental  market,  and  (iii)  for  social 
housing, aligning rents with household income.  

Done at Brussels, 

For the Council 
The President 

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