COMMISSION STAFF WORKING DOCUMENT In-depth review for the NETHERLANDS in accordance with Article 5 of Regulation (EU) No 1176/2011 on the prevention and correction of macroeconomic imbalances Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL AND TO THE EUROGROUP Results of in-depth reviews under Regulation (EU) No 1176/2011 on the prevention and correction of macroeconomic imbalances
Date: 2013-04-10
Institutions: European Commission
Subjects: Netherlands, competitiveness, economic growth, economic recession, economic reform, indebtedness, macroeconomics, property market, public debt, savings

EUROPEAN 
COMMISSION 

Brussels, 10.4.2013  
SWD(2013) 121 final 

COMMISSION STAFF WORKING DOCUMENT 

In-depth review for the NETHERLANDS 

in accordance with Article 5 of Regulation (EU) No 1176/2011 on the prevention and 
correction of macroeconomic imbalances 

Accompanying the document 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL AND TO THE EUROGROUP 

Results of in-depth reviews under Regulation (EU) No 1176/2011 on the prevention and 
correction of macroeconomic imbalances 

{COM(2013) 199 final} 
{SWD(2013) 113 final} 
{SWD(2013) 114 final} 
{SWD(2013) 115 final} 
{SWD(2013) 116 final} 
{SWD(2013) 117 final} 
{SWD(2013) 118 final} 
{SWD(2013) 119 final} 
{SWD(2013) 120 final} 
{SWD(2013) 122 final} 
{SWD(2013) 123 final} 
{SWD(2013) 124 final} 
{SWD(2013) 125 final}

EN 

   EN 

 
 
 
 
 
  
 
 
 
 
 
Contents 

EXECUTIVE SUMMARY AND CONCLUSIONS.............................................................. 3 

1. 

INTRODUCTION............................................................................................................ 7 

2.  MACROECONOMIC SITUATION AND POTENTIAL IMBALANCES................ 7 

2.1.  Macroeconomic scene setter ........................................................................................ 7 

2.2.  External position .......................................................................................................... 8 

2.3.  Market share............................................................................................................... 11 

2.4. 

Private sector indebtedness ....................................................................................... 12 

2.5.  House price developments ......................................................................................... 14 

3. 

IN-DEPTH ANALYSIS OF SELECTED TOPICS .................................................... 16 

3.1.  The current account surplus ..................................................................................... 16 
3.1.1.  Market share analysis ............................................................................................... 17 
3.1.2.  Cost, price and other competitiveness indicators ..................................................... 18 
3.1.3.  Sectoral contribution to the current account balance ............................................... 21 
3.1.4.  The net international investment position ................................................................ 25 

3.2.  Household indebtedness............................................................................................. 29 
3.2.1.  Factors underlying the build-up in household debt.................................................. 29 
3.2.2.  Risks related to high household indebtedness.......................................................... 34 

4.  POLICY CHALLENGES.............................................................................................. 43 

2 

 
 
 
 
The Netherlands is experiencing macroeconomic imbalances, which deserve monitoring and 
policy  action.  In  particular,  macroeconomic  developments  regarding  private  sector  debt  and 
deleveraging  pressures,  also  coupled  with  remaining  inefficiencies  in  the  housing  market 
deserve  attention.  Although  the  large  current  account  surplus  does  not  raise  risks  similar  to 
large deficits, the Commission will also continue monitoring the developments of the current 
account in the Netherlands.   

More  specifically,  rigidities  and  distortive  incentives  have  built  up  over  decades  to  shape 
house financing and sectorial savings patterns. Balance sheets of financial institutions became 
heavily geared towards housing finance, as households leveraged up against housing wealth 
reducing  the  pool  of  domestic  savings  not  earmarked  for  pension  savings.  In  parallel,  since 
the  mid-1990s  non-financial  corporations  moved  into  a  structural  savings  surplus.  This  has 
resulted in a substantial and persistent current account surplus going hand-in-hand with a high 
level  of  both  gross  household  debt  and  household  assets.  At  the  current  juncture,  feedbacks 
from the housing market to the real economy, notably through negative wealth and confidence 
effects, are weighing on economic activity. 

3 

 
 
 
 
 
EXECUTIVE SUMMARY AND CONCLUSIONS  

This In-Depth Review (IDR) takes a broad view of the Dutch economy in line with the scope 
of  the  surveillance  under  the  Macroeconomic  Imbalance  Procedure  (MIP).  The  main 
observations and findings of this analysis are:  

• 
The Netherlands' current account has been persistently in surplus for over three 
decades.  Rigidities  and  policy  incentives  have  built  up  over  time  to  shape  house  financing 
and  sectoral  savings  patterns.  Households  leveraged  up  against  housing  wealth  and  reduced 
the  pool  of  domestic  savings  not  earmarked  for  pension  savings.  In  parallel,  from  the  mid-
1990s, nonfinancial corporations moved into a structural savings surplus. This has contributed 
to the emergence  of  a  substantial and persistent current  account surplus going hand  in hand 
with a high level of both gross household debt and gross household assets.  

• 
Although  it  increased  rapidly  after  the  turn  of  the  century,  the  Dutch  current 
account  surplus  position  does  not  seem  to  point  to  emerging  risks.  It  reflects  rather  a 
combination  of  strong  competitiveness,  structural  determinants  of  savings-investment 
balances,  cyclical  factors,  and  possibly  some  statistical  discrepancies  related  to  the 
measurement  of  cross-border  flows.  Recently,  valuation  effects  in  the  wake  of  the  crisis 
helped improve the net international investment position. 

• 
The competitiveness and export performance of the Dutch economy appears to be 
benign overall. The loss of global market share for exports of goods and services is limited in 
comparison with most other mature Western European economies. The loss in market share 
does  not  appear  to  be  rooted  in  unfavourable  domestic  price  and  cost  developments,  as  the 
indicators for these have been growing broadly in line with the country's main trading partners 
and the real effective exchange rate has not shown any particular trend. 

• 
Structural funding patterns of Dutch assets and liabilities have made the Dutch 
economy  dependent  on  swings  in  international  capital  markets.  At  the  aggregate  level, 
financial flows show simultaneous capital outflows and net borrowing from abroad, with an 
uneven  distribution  across  sectors.  This  increases  the  sensitivity  of  balance  sheets  of  some 
sectors  of  the  economy  to  portfolio  shifts,  flight-to-quality,  and  write-downs  on  foreign 
investments.  

• 
Notwithstanding  mitigating  circumstances,  the  high  level  of  private-sector  debt, 
in  particular  household  indebtedness,  warrants  attention.  Long-standing  tax  incentives 
and financial sector developments have encouraged households to become highly indebted in 
mortgage debt, even allowing for the different composition of balance sheets, and also had a 
particularly stark impact on housing prices. The increase in gross household debt is a source 
of vulnerability, though mitigated by broadly commensurate increases in net household assets. 
Substantial financial buffers with corporations provide further cushion.  

• 
The  leveraging  of  household  balance  sheets  implies  risks  for  both  mortgage 
borrowers  and  lenders.  Financing  trends  have  heightened  the  sensitivity  of  the  Dutch 
economy, and especially of leveraged households, to negative shocks, such as a fall in house 
prices,  weak  economic  growth  or  a  real  interest  rate  shock.  Financial  institutions  are  still 
readjusting to altered market conditions and changes in regulations; the global economic and 
financial crisis hampered the ability of Dutch banks to borrow in  wholesale markets. Given 
the  importance  of  securitised  funding,  this  pushed  up  domestic  lending  rates  especially  for 

4 

 
 
housing finance. Basel III banking regulations underscore the importance of larger buffers to 
absorb losses and to restore confidence and secure market access.  

• 
In  addition,  current  housing  policies  have  implications  for  public  finances, 
notably  in  terms  of  foregone  tax  revenues  and  of  the  implicit  liabilities  stemming  from 
housing-related guarantees.  

The  IDR  also  discusses  the  policy  challenges  stemming  from  these  developments  and  what 
could be possible ways forward. A number of elements can be considered:  

• 
The  imminent  policy  challenge  will  be  to  contain  balance  sheet  adjustments, 
restore confidence, and harness growth while simultaneously stabilising public finances. 
Profitable  segments  of  the  economy  with  a  strong  competitive  edge  can  help  to  underpin 
domestic  purchasing  power.  Aggregate  profitability  of  firms  has  remained  high,  albeit  with 
marked  differences  across  firms  and  industries.  Exploiting  the  space  in  the  institutional 
framework for pursuing wage differentiation and lower pension contributions, particularly in 
the  second  pillar,  may  help  vulnerable  households  restore  their  balance  sheets,  while  also 
cushioning domestic demand.  

• 
Recent  sluggish  productivity  increases  and  the  low  value  added  of  re-exports 
underline  the  importance  of  focusing  on  fostering  innovation  and  competitiveness. 
Sufficient public spending on fundamental research, knowledge and education is important to 
support  the  long-term  growth  potential  of  the  Dutch  economy.  Cyclical  effects,  finance 
bottlenecks,  unusually  high  uncertainty  and  the  impact  of  (expected)  balance  sheet 
adjustments all seem to play a role in the relatively low domestic rate of capital formation, yet 
there may also be a structural element at play. For firms, rethinking the balance between home 
and  foreign  investments  seems  advisable.  A  balanced  adjustment  should  have  a  beneficial 
effect on the domestic investment climate, hence, on economic prospects in the long term.  

• 
As regards private debt, comprehensive and appropriately timed and sequenced 
reforms  in  the  housing  market  would  reduce  vulnerabilities  of  households,  financial 
institutions and the government. Such reforms would also improve the allocation of capital, 
thus  supporting  the  long-term  growth  potential  of  the  Dutch  economy.  With  respect  to 
housing,  initiatives  that  eliminate  fiscal  incentives  for  taking  on  debt  and/or  encourage 
mortgage  loan  repayments  are  warranted.  Long-run  gains  could  even  be  larger  if,  after 
successful  fiscal  stabilisation,  a  part  of  budgetary  savings  were  channeled  back  into  the 
economy.  Recently  announced  measures  by  the  government  in  this  area  appear  to  go  in  the 
right  direction,  but  will  need  to  be  assessed  in  detail.  In  the  current  situation,  smaller  asset 
buffers on the part of households also amplify the feedbacks from the housing market to the 
real economy, through negative wealth and confidence effects. Moreover, loan conditions in 
the  financial  sector  have  tightened  in  the  wake  of  the  crisis,  furthering  adjustment.  This 
implies any measures would have to be phased in gradually and predictably over a prolonged 
but not too extended time horizon. In this way, both households and lenders will have time to 
adapt  and  substantial  and  abrupt  adjustments  in  the  housing  market  and  in  finance  can  be 
avoided.  

• 
Moreover,  measures  are  required  to  correct  rigidities  in  the  housing  market, 
including  those  that  have  prevented  the  emergence  of  a  functioning  private  rental 
market  of  appropriate  size.  Measures  to  advance  the  operation  of  the  housing  market  by 
improving  the  functioning  of  the  private  rental  market  and  reducing  the  inefficiencies  and 

5 

 
 
dead-weight losses associated with the operations of social housing corporations may help to 
get the market afloat. However, this will take time and should be done while duly protecting 
the segment of dwellers in need of social housing. Any measures taken in this area will also 
have to be assessed in detail. 

6 

 
 
1. 

INTRODUCTION 

On  28  November  2012,  the  European  Commission  presented  its  second  Alert  Mechanism 
Report (AMR), prepared in accordance with Article 3 of Regulation (EU) No. 1176/2011 on 
the  prevention  and  correction  of  macroeconomic  imbalances.  The  AMR  serves  as  an  initial 
screening device, which helps to identify Member States that warrant further in depth analysis 
to determine whether imbalances exist or risk emerging. According to Article 5 of Regulation 
No. 1176/2011, these country-specific “in-depth reviews” (IDR) should examine the nature, 
origin and severity of macroeconomic developments in the Member State concerned, which 
constitute,  or  could  lead  to,  imbalances.  On  the  basis  of  this  analysis,  the  Commission  will 
establish  whether  it  considers  that  an  imbalance  exists  and  what  type  of  follow-up  it  will 
recommend to the Council. 

For the Netherlands, the AMR suggested a need to look more closely at whether the country is 
exhibiting macroeconomic imbalances of an external and internal nature. On the external side, 
the AMR highlighted a long series of large current account surpluses, which coincided with a 
loss in market shares in recent years. On the internal side, the high level of private debt was 
identified  as  a  potential  concern,  mainly  since  household  indebtedness  had  built  up  in  the 
context  of  past  increases  in  house  prices.  Recent  years  have  witnessed  falling  house  prices, 
with an impact on the real economy through negative wealth and confidence effects. Despite 
signs of stabilisation, household indebtedness remains very high. This IDR takes a broad view 
of  the  Dutch  economy  in  line  with  the  scope  of  surveillance  under  the  Macroeconomic 
Imbalance Procedure (MIP). 

Against this background, Section 2 of this in-depth review looks into developments covering 
the  external  and  internal  dimensions.  Section  3  focuses  specifically  on  the  current  account 
balance and on household debt developments. Section 4 discusses policy considerations. 

2. 

MACROECONOMIC SITUATION AND POTENTIAL IMBALANCES 

2.1.  Macroeconomic scene setter 

The  Dutch  economy  was  deeply  affected  by  the  global  financial  and  economic  crises, 
leading  to  a  severe  contraction  in  2009.  Since  then,  the  recovery  has  been  gradual  at 
best. Economic growth fell back sharply into negative territory at the end of 2011, reflecting a 
pronounced  weakening  of  both  internal  demand,  whilst  on  the  external  side  Dutch  exports 
were  adversely  affected  by  the  slowdown  in  global  trade.  Whilst  gross  domestic  product 
(GDP) in 2011 still grew by 1.2% over the year as a whole, in 2012 it is estimated to have 
shrunk by 0.9%, despite a short-lived recovery in the first half of the year. Looking forward, 
prospects for 2013 and 2014 remain uncertain and the recovery sluggish. 

Several factors account for the slow pace of the recovery. However, the most important 
factor is weak domestic demand. The weakness in household consumption has been driven 
by  negative  wealth  effects  arising  from  declining  house  prices  and  falling  share  prices;  the 
pro-cyclical  behaviour  of  pension  premiums;  a  deteriorating  labour  market  situation; 
confidence  indicators  near  historic  lows;  uncertainty  about  domestic  policy  plans  regarding 
fiscal consolidation and the housing market. While exports have fared better, they are being 
held back by the loss of momentum in relevant world trade. Despite overall low interest rates, 
domestic  investment  remains  weak  on  the  back  of  depressed  construction  activity  and  the 
uncertain outlook as regards the recovery and global demand prospects. 

7 

 
 
The general government deficit is expected to have improved from 4.5% of GDP in 2011 to 
4.1% in 2012, in light of consolidation measures that mainly increased revenues (notably a 2-
pp  increase  in  the  standard  VAT  as  of  October  2012).  Against  a  background  of  weak 
economic activity, the deficit is expected to improve only gradually to 3.6% of GDP in 2013 
despite substantial additional consolidation measures, once again mainly on the revenue side. 
The debt ratio is expected to increase steadily from 70.8% of GDP in 2012 to 73.8% in 2013. 
On  unchanged  policies,  the  situation  of  public  finances  in  the  Netherlands  in  the  years 
remains challenging.  

2.2. 

External position 

The  Netherlands  has  persistently  recorded  current  account  surpluses  for  over  three 
decades and currently has one of the highest current account surpluses as a percentage 
of GDP in the euro area1. The surplus on the current account, which had averaged around 
5% of GDP during the 1990s, increased to some 6% of GDP during the 2000s, reaching 9.4% 
of  GDP  in  2006.  The  surplus  declined  thereafter  but  has  shown  a  renewed  upswing  in  the 
wake of the economic and financial crisis. In 2010, in line with growing trade volumes, the 
Dutch  current  account  balance  increased  to  EUR  45  billion  (7.7%  of  GDP)  and  reached  a 
record  in  2011  of  EUR  58  billion  or  9.7%  of  GDP  (Graph  1).  The  Commission  services 
Winter  2013  Forecast  indicates  a  broad  stabilisation  of  the  current  account  surplus  on  the 
basis of rising household savings and a continuously high savings balance of the non-financial 
corporate sector. Apart from a component stemming from natural gas (about 0.5 to 2%), the 
positive  current  account  balance  has  increasingly  mirrored  the  contribution  of  re-exports 
(currently  another  2%).  Moreover,  the  profit  and  pay-out  policy  of  Dutch  multinationals, 
although counterbalanced by pension funds receiving dividends, have created an upward bias 
on the current account2. 

1 According to the MIP Scoreboard Headline indicators, the 3 year average of current account balances over 2010 – 2012 was 
7.5% for both the Netherlands and Luxemburg and 6.9% for Sweden in 2011. 
2 De Nederlandsche Bank estimates the net effect of both directions at approximately 2% of GDP in the years 2006 to 2008, 
afterwards reversing to -0.5% of GDP. 

8 

 
 
                                                            
Graph 1: Current account decomposition 

Graph 2: Financial account decomposition 

14

12

10

8

6

4

2

0

-2

-4

-6

P
D
G

f

o
%

25

20

15

10

5

0

-5

-10

-15

P
D
G

f

o
%

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12*

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 1112*

Capital account (KA)
Current transfers
Income balance
  Trade balance - services
  Trade balance - goods
Trade balance
Current account balance (CAB)
Net lending/borrowing (CAB+KAB)

Note: * indicates estimated figure using quarterly data; Balance 
of Payments definitions. 
Source: Eurostat. 

Net errors and omissions
Official reserves (net)
Other investment (net)
Portfolio investment (net)
Direct investment (net)
Current account balance
Net lending/borrowing (CAB+KAB)

Note:  *  indicates  estimated  figure  using  quarterly  data; 
Balance of Payments definitions. 
Source: Eurostat. 

About  four-fifths  of  the  total  current  account  balance  is  accounted  for  by  the  trade 
balance,  in  particular  on  goods.  The  trade  surplus  of  natural  gas  averages  around  1%  of 
GDP,  although  this  is  only  the  lower  bound  of  the  overall  effect  of  natural  gas  provisions. 
Because  part  of  natural  gas  production  is  domestically  consumed,  domestic  gas  reserves 
reduce imports of energy products. The overall effect can be approximated with reference to 
the  value  added  of  natural  gas  production,  which  has  been  around  2.5%  of  GDP  in  recent 
years. This suggests that the trade surplus would be around 2.5 percentage-points lower when 
natural gas reserves are depleted, which is expected to happen in around 30 to 40 years. Since 
the  net  effect  of  the  gas  balance  captures  both  changes  in  production  and  consumption 
patterns, as well as changes in prices, energy prices (which have more than doubled over the 
last decade) have also played a role in pushing upwards the surplus on the goods balance.   

Apart  from  the  structural  component  stemming  from  the  country's  natural  gas 
resources, the positive goods balance is increasingly driven by re-exports3, i.e. goods that 
have been imported and leave the country again after no -or virtually no- further processing 
and hence with relatively low added value4. Re-exports now account for roughly one half of 
the Dutch goods balance compared to one third in 1995. This increase is a result of on-going 
globalisation, accentuated by the specific geographical position of the Netherlands (with the 
port of Rotterdam being the effective  trade gateway primarily to Germany but  also to other 
EU economies) and a competitive transport and logistics sector.    

3 According to the definition, to count as re-exports the goods in question also have to be owned by a Dutch resident at some 
point and subsequently by a foreign based person or company. If there is no transfer of ownership at any stage, the goods are 
deemed  to  be  in  transit.  Goods  are  counted  as  domestically-produced  exports  if  they  undergo  some  processing.  Other 
important re-exporting countries include Singapore, Belgium and Germany. 
4 8% versus 54% for domestic output produced. 

9 

 
 
 
 
 
 
 
 
 
                                                            
The  import  content  of  Dutch  exports  has  increased  over  time,  illustrating  the  growing 
importance  of  'global  production  chains'  in  which  the  Dutch  economy  is  closely 
integrated.  This  notwithstanding,  in  2009,  the  average  import  content  of  Dutch  exports 
(34.8%)  stood  only  somewhat  above  the  EU  average  of  32%,  indicating  a  relatively  high 
share of domestic value added, despite the country's strong intermediary function in trade.  

The  balance  on  services  had  been  negative  for  a  few  years  before  turning  positive  in 
2004, thus adding to the trade surplus. This positive trend can be attributed to the on-going 
growth of business service provision in some industries, notably in air and sea transportation, 
but also to a very attractive tax climate for multinational companies, which channel royalties 
and  license  fees  charged  by  parent  companies  to  their  foreign  affiliates  in  exchange  for 
intermediate services. Also, other business services were buoyant.5 Other services displaying 
strong  growth  dynamics  in  this  field  include  IT,  legal,  accountancy  and  intra-company 
services driven by an intensifying international division of labour by multinational companies. 

Graph 3: Income balance decomposition  
(% of GDP) 
6

Graph 4: Cumulative changes in income, 
services and current account balances since 
2004 (% of GDP) 

5

4

3

2

1

0

-1

-2

-3

-4

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

Income on other investment
Income on portfolio investment
Income on direct investment
Compensation of employees
Balance on income

Source: De Nederlandsche Bank. 

Services balance

Income balance

Balance on current account

4

3

2

1

0

-1

-2

-3

-4

04

05

06

07

08

09

10

11

12

Source: De Nederlandsche Bank. 

At the same time, investment income has become an increasingly important contributor 
to the current account surplus due to improved (though very volatile) profits repatriated by 
foreign subsidiaries of Dutch enterprises (increasing from 1.1% in  2004 to 4.7% of  GDP in 
2011)  (Graph  3).  A  large  share  of  total  cross-border  profits  are  earned  by  Dutch  listed 
multinational companies. Dividend payments by these companies to foreign investors, which 
reduce  the  balance  on  the  income  account,  have  remained  broadly  constant  since  2007 
(around 0.8% of GDP). Graph 4 shows that, since 2004, the income account balance, together 
with the services balance, to a very large extent have driven the current account balance. 

Current transfers show a stable negative balance reflecting the Netherlands' position as 
a  net  contributor  to  the  EU  budget  and  an  aid  donor  at  global  level.  The  Dutch  capital 

5  Including  "miscellaneous  services"  between  related  resident  and  not-resident  enterprises  that  cannot  be  specifically 
classified  as  services  elsewhere;  although  on  net  these  services  do  not  weigh  extremely  heavily,  they  accounted  for  about 
14% of total exports and 15% of total imports in 2010 (CBS: Statistics Netherlands).  

10 

 
 
 
 
                                                            
account typically records small outflows of about 0.1% of GDP and therefore does not have 
any significant impact on the external balance of the country.  

As a mirror image of the current account surplus, the financial account has recorded net 
outflows  since  1995.  The  analysis  of  the  financial  account  is  complicated  by  the  high 
volatility of gross cross-border flows. As Graph 2 shows, since 2005, financial flows from the 
Netherlands have typically been channelled through foreign direct investment, in the form of 
either direct acquisitions of companies abroad or lending to foreign subsidiaries.6 Owing to its 
geographical  location,  historical  ties  and  a  sound  and  credible  institutional  setting,  with  a 
favourable tax system, the Netherlands has become a hub for international capital flows. Via 
entities  in  the  Netherlands,  non-financial  corporations  (mostly  multinationals)  channel  FDI 
and "route" income flows between a company in one country and subsidiaries or affiliates in 
other countries. Portfolio investment has likewise expanded since the end of the 1990s. Apart 
from high private investments associated with the open nature of the Dutch economy, savings 
channelled through the mandatory second pillar occupational pension scheme account for this. 

In the near to medium run several factors might lead to a further increase of the high 
Dutch  current  account  surplus.  Dynamics  initiated  in  the  wake  of  the  crisis,  such  as 
changes in risk attitudes, the on-going deleveraging in the global banking sector, the adoption 
of  more  careful  funding  strategies  by  non-financial  corporations,  and,  finally,  a  risk  of  a 
persistent  downward  shift  in  the  economy's  growth  path,  may  all  reinforce  accumulation  of 
corporate savings.7 As these developments coincide with sluggish productivity increases and 
given  the  low  value  added  of  re-exports,  current  efforts  at  fostering  innovation  and 
competitiveness seem to go in the right direction. Profitable segments of the economy with a 
strong  competitive  edge  can  still  help  to  underpin  domestic  purchasing  power,  but  with  the 
Netherlands going through what is likely to be a prolonged spell of balance sheet adjustments 
in the wake of the global crisis, economic dynamics is likely to be sluggish in years to come. 
All this suggests that a rapid decrease in the overall current account surplus is unlikely. On the 
other  hand,  as  the  Dutch  population  matures  and  the  baby-boom  generation  moves  into 
retirement, the country is expected to gradually move from saving to dissaving, pushing down 
the surplus in the longer run. 

2.3.  Market share 

The Netherlands is one of the most open economies in the euro area. Its trade openness 
(measured as the sum of imports and exports relative to GDP) increased steadily from 74% of 
GDP in 1980 to 161% in 2008 (compared to the euro-area average of 89% recorded in 2008).  

The overall share of Dutch exports of goods in world trade fell from about 3.9% in 1995 
to 3.1% in 2011 (Graph 5). The Dutch share of world exports of services fell more rapidly 
from 3.7% in 1995 to 2.5% in 2011, but remains relatively high. Losses occurred mainly in 
the share of transportation; by contrast, "other services" gained share (see above). On balance, 
the share of the Netherlands in global exports of both goods and services has fallen since 1995 
from  3.9%  to  around  3.0%  in  2011.  The  corresponding  five-year  average  indicator  in  the 
scoreboard  indicates  that  this  loss  occurred  over  the  2005-2010  period.  The  gradual  loss  in 
global  market  share  for  exports  of  goods  and  services  is  not  worse  than  for  the  majority  of 

6 Only in 2007 did the Netherlands record a net FDI inflow, which can be explained by the take-over of ABN-AMRO by a 
consortium  of  Spanish,  British  and  Belgian  banks.  Due  to  the  subsequent  nationalisation  in  2008,  the  total  net FDI  turned 
positive once again. 
7 Ruscher and Wolff, 2012. 

11 

 
 
                                                            
other mature western European economies and reflects mainly the integration of fast-growing 
export-oriented economies, notably in Asia, into the world economy.  

Graph 5: Export-market-share (EMS) 
growth (% yoy) 

Graph 6: Trade Balance contributions by 
Broad Economic Category (% of GDP) 

Total goods

Intermediate goods

Fuel

Consumer goods

Capital goods

Source: Eurostat. 

2.4. 

Private sector indebtedness 

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

Trade in goods, % GDP

2000-2001

2010-2011
Source: COMTRADE, Commission services. 

Gross  private  debt  levels  increased  appreciably  over  the  last  decade  (from  186.5%  to 
223.7%  of  GDP  between  2000  and  2011).    This  increase  is  entirely  accounted  for  by 
households (Error! Reference source not found.). The share of the non-financial corporate 
sector  in  total  gross  private  debt  fell  considerably  over  the  last  15  years.  To  complete  the 
picture, financial corporations also contribute significantly to the country's outstanding gross 
debt.  The  doubling  of  financial  corporate  debt  from  2002  onwards  was  matched  to  a  large 
extent  by  growing  assets,  reflecting  mainly  the  expansion  of  the  activities  of  Dutch  banks 
abroad8. 

8 Dutch public debt remained relatively constant over the years 2000 around 50% of GDP on average, until 2008, when, due 
to the crisis, gross public debt started increasing to 68.8% of GDP in 2012. This increase mainly reflects persistent deficits, 
bilateral loans to programme countries, EFSF and ESM disbursements and a modest economic outlook. 

12 

 
 
 
 
                                                            
Graph 7: Decomposition of debt, 
consolidated (% of GDP) 

P
D
G

f
o
%

500

450

400

350

300

250

200

150

100

50

0

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

Financial corporations

Government

Household

Private sector EA17

Non financial corporations

Private sector

Source: Eurostat. 

Graph 8: Indebtedness of EU27 countries, 
2011, households (% of gross disposable 
income)
300

HH debt

e
m
o
c
n

I

l

e
b
a
s
o
p
s
D

i

f

o
%

250

200

150

100

50

0

I

S

K
S

T

I

R
F

L
E

E
B

E
D

T
A

E
E

I

7 F
1
A
E

S
E

T
P

U
L

Y
C

E

I

L
N

T
M

O
R

G
B

T
L

Z
C

L
P

U
H

V
L

K
U

E
S

K
D

euro area

non-euro area

Note :  non-consolidated  figures.  Debt  includes  loans  and 
securities  other  than  shares.  Data  for  BE,  CY,  SK,  BG,  LV, 
LT, HU, RO and the UK are available only up to 2010. For 
LU,  only  2009  data  are  available.  No  data  are  available  for 
MT.  
Source : Commission services, Eurostat. 

The strong rise in gross household debt has levelled off. Household debt reached an all-
time high of 128.5% of GDP (or 266% of disposable income) in 2010, mainly driven by 
the rapid expansion of mortgage debt (Graph 8). Compared to other euro-area members, the 
Netherlands has relatively high levels of leveraged housing wealth, reflecting incentives in the 
institutional  set-up  of  the  Dutch  housing  market.  Notably,  the  tax  deductibility  of  mortgage 
interest  payments  for  primary  residences  encouraged  mortgage  borrowing  and  discouraged 
repayments  for  many  years.  Also,  financial  innovations  gave  households  easier  access  to 
credit  as  financial  institutions  developed  mortgage  instruments,  such  as  interest-only 
mortgages,  which  allowed  households  to  benefit  maximally  from  the  mortgage  interest 
deductibility  scheme.  The  easier  availability  of  credit  has  led  to  distorted  pricing  in  the 
housing  market,  increased  vulnerabilities  among  homeowners,  mismatches  in  the  funding 
model  of  banks  and  concurrent  refinancing  risks,  and  a  risk  exposure  for  the  Dutch 
government via the National Mortgage Guarantee scheme that runs to more than 20% of GDP 
(see also 3.2).  

Until  now,  mortgage  servicing  costs  seem  manageable  and  the  vast  majority  of 
households should be able to honour their obligations to the banks. Nevertheless, a high 
gross  debt  burden  and  some  increased  frequency  of  interest  rate  resets  have  increased  the 
sensitivity of households to income and interest rate shocks. This is mitigated by the stacking 
of interest rate resets, the linking of mortgage interest rates to maturity benchmarks extending 
over the yield curve, and the overall low credit spreads to which the Netherlands is exposed. 

Moreover, the build-up in household debt has been matched by a similar accumulation 
of  assets,  meaning  that  the  net  worth  of  households  has  not  deteriorated.  However,  as  the 
largest share of household assets consist of housing wealth (with a share increasing from 31% 
in  1993  to  39%  in  2010),  a  fall  in  house  prices  would  have  a  larger  impact  on  household 
balance sheets than similar fluctuations in the stock market. This means that households could 

13 

 
 
 
 
 
 
 
 
 
start reining in their spending to rebuild their balance sheets, with negative wealth effects on 
GDP growth and employment. In view of that risk, a closer look at private-sector debt as well 
as housing market developments seems warranted (see section 3.2). 

Graph 9: Leverage ratios, non-financial 
corporations 

120

100

80

60

40

20

0

)

%

,
s
t
e
s
s
a

l

a
t
o
t

&
P
D
G

,
y
t
i
u
q
e

.
s
v
(

s
o
i
t
a
r

t
b
e
D

5
9

6
9

7
9

8
9

9
9

0
0

1
0

2
0

3
0

4
0

5
0

6
0

7
0

8
0

9
0

0
1

1
1

Debt / GDP

Debt / assets

Debt / equity

Debt / assets, consolidated

Note: * indicates estimated figure using quarterly data. 
Source: Eurostat. 

As regards the non-financial corporate sector, various indicators of the financial wealth 
of Dutch corporations do not point to any significant sustainability risks (Graph 9). The 
debt-to-equity  ratio  has  declined  from  90.7%  to  71.7%  between  1995  and  2011  and  is 
currently below the average for the euro area (77.9%). It should also be noted that there has 
been a significant downward adjustment in the corporate debt level over the past three years, 
with  the  debt-to-equity  ratio  correcting  by  some  18  percentage  points,  due  to  contracting 
credit  to  non-financial  corporations.  The  debt-to-asset  ratio  was  (substantially)  below  the 
euro-area average for both consolidated (47.9%) and non-consolidated data (45.6%) in 2011, 
having  almost  halved  for  both  measures  over  the  last  15  years.  The  debt-to-GDP  ratio  of 
Dutch corporations has gradually declined from 102.5% in 2000 to 96.9% in 2011.  

2.5. 

House price developments 

House price developments in the Netherlands over the last decades have been moderate, 
both  by  historical  and  international  standards  (Graph  10).  House  price  increases  in  the 
long  expansion  that  started  in  the  mid-1980s  were  not  nearly  as  strong  as  in  the  build-up 
phase of the previous major house price cycle in the late 1970s (Graph 11), and not as strong 
as in some other EU countries that experienced a sustained boost ahead of the financial crisis 
(Graph 12).  

14 

 
 
 
 
 
 
 
 
 
 
  
 
 
Graph 10: Nominal house price developments and transactions, 1971 – 2011 

40

30

20

10

0

-10

-20

-30

Households and NPISH, long term loans, y-o-y

y-o-y change of house prices

average y-o-y change of house price (1971-2011)

y-o-y change of number of transactions

1
7

6
7

1
8

6
8

1
9

6
9

1
0

6
0

1
1

Source: ESTAT, OECD. 

Graph 11: House price developments 
around turning points (quarterly data) 
100

90

80

70

60

50

40

t-16

t-12

t-8

t-4

t=0

t+4

t+8

t+12

t+16

Graph 12: House price cycles across 
countries 

NL (2008=100)
IE (2007=100)
DK (2007=100)
UK (2007=100)

FI (2010=100)
ES (2007=100)
SE (2007=100)

120

110

100

90

80

70

60

50

40

10 - 90 percentile

25 - 75 percentile

-32 -28 -24 -20 -16 -12 -8 -4

0

4

8

12 16 20

2008 - 2012

1978 - 1983

Quarters around the peak

Source: De Nederlandsche Bank (2012). 

Source: Commission Services. 

House  price  developments  over  the  past  three  decades  have  been  driven  by  a 
combination of macroeconomic factors on both demand and the supply side, as well as 
by  fiscal  incentives,  the  regulatory  environment  and  financial  innovations  (see  section 
3.2.1 below). Following a strong slump in the late 1970s, Dutch house prices started a very 
long  expansionary  phase  in  the  mid-1980s.  House  prices  peaked  together  with  shortages  on 
the  labour  market  in  the  second  half  of  the  1990s.  The  labour  participation  rate  of  women 
steadily increased (from around 40% in 1983 to over 70% currently), leading to expectations 
(and realisations) of higher household income over the life cycle. This was reinforced by the 
(expected)  rise  in  the  value  of  their  assets.  Other  supportive  factors  included  demographic 
trends,  lower  and  less  volatile  inflation,  economic  growth,  and,  most  importantly,  the  rapid 
trend in financial innovations giving households much easier access to credit. The downward 
trend  in  interest  rates,  coinciding  with  a  phase  of  heightened  globalisation  and  EU  market 
integration  boosted  by  monetary  union,  supported  the  trend  towards  higher  household 
financial leverage.  

15 

 
 
 
 
 
It  is  very  difficult  to  assess  if  and  to  what  extent  prices  in  the  Netherlands  were 
misaligned during the period of sustained increases. Estimates of equilibrium house prices 
are  fraught  with  methodological  difficulties.  For  the  Netherlands,  institutional  and 
geographical  limitations  of  supply  elasticity  are  important  in  this  respect.  Most  studies  that 
did  attempt  an  estimate  provided  evidence  of  no  or  only  limited  overvaluation  and  suggest 
that Dutch house prices have developed in line with fundamentals. The Netherlands' Bureau 
of Economic Policy Analysis (CPB, 2005) reported an overvaluation of 10 % in 2003.9 Using 
data  up  to  2004,  an  IMF  country  report  (2005)  concluded  that  there  was  no  significant 
deviation  from  fundamentals.10  The  OECD  (2006)  arrived  at  a  similar  conclusion,  arguing 
that the probability of Dutch house prices reaching a peak and starting to decline in 2006 was 
low.11 

The  modest-yet-accelerating  slump  in  the  housing  market  since  the  outbreak  of  the 
financial  crisis,  is  evidenced  both  by  the  fall  in  prices  and,  even  more  clearly,  by  the 
much  sharper  drop  in  the  number  of  transactions.  Transactions  have  fallen  by 
approximately 45% since its 2006 pre-crisis peak. The slump in the housing market reflects 
clouded  economic  prospects  amidst  a  fall  in  disposable  income,  the  anticipation  of  a 
progressive  tightening  of  interest-rate-deductibility  rules  and  of  banks'  mortgage  lending 
standards,  a  moderate  increase  in  unemployment and consumer confidence  hovering  around 
historic  lows.  By  the  end  of  2012,  nominal  house  prices  had  fallen  from  their  peak  at  end-
2008  by  16.6%,  which  corresponds  to  a  decrease  of  4.1%  per  year  on  average,  however 
slightly accelerating in the last year (-8% in 2012). 

While  the  slump  was  triggered  by  the  crisis  and  the  related  falls  in  activity  and 
confidence, it is also a result of the gradual yet progressive build-up of vulnerabilities in 
the Dutch housing market (see 3.2.1 below). The slump in house prices is therefore likely to 
be  protracted.  Even  in  the  presence  of  a  policy  response  targeted  at  the  tax  deductibility  of 
mortgage  interest  payments,  it  will  take  time  to  unwind  the  rigidities  in  the  housing  market 
and the extension of household balance sheets, which have built up over many years. This can 
explain  the  relatively  moderate  pace  of  recent  house  price  declines  compared  to  other 
European countries that experienced sharp house price increases in the run up to the crisis. 

3. 

IN-DEPTH ANALYSIS OF SELECTED TOPICS 

3.1. 

The current account surplus 

The  merchandise  trade  balance  traditionally  has  been  the  main  driving  factor  behind 
the large current account  surplus. As illustrated in section  2.2, the relative  importance of 
exports of goods has even increased considerably over the last decade. It is therefore essential 
to  examine  the  trade  balance,  in  order  to  understand  the  persistent  character  of  the  current 
account surplus.  

Apart from the product and geographical structure, the relatively stable performance of 
Dutch exports is largely explained by the country's strong overall competitiveness. This 
is  illustrated  by  the  market  share  analysis  in  the  next  section  (3.1.1).  To  complement  this 
analysis  section  3.1.2  provides  an  assessment  of  Dutch  competitiveness  through  an 
examination  of  relative  competitiveness  (or  real  effective  exchange  rate)  indicators  whereas 

9 CPB (2005) Document No. 81. 
10 IMF (2005) Country Recommendation No. 05/225. 
11 OECD (2006) Working Paper No. 488. 

16 

 
 
                                                            
sections 3.1.3 and 3.1.4 focus on the sectoral composition of the current account balance and 
the Dutch NIIP. 

3.1.1.  Market share analysis 

Exports of goods are concentrated in a few categories notably "machinery and transport 
equipment" (30.2%), "chemicals and related products" (17.8%), and "crude materials" 
(13.3%). The high share of crude materials (largely food and oil and gas) can be explained by 
the fact that the Netherlands is a producer and an exporter of gas, an importer of crude oil and 
an exporter of refined oil products.  

Unsurprisingly, the total share of exported goods going to the EU is high, reaching 80% 
in 2011 (of which almost 60% went to the rest of the euro area, notably Germany 24.3%). The 
gross  trade  balance  is  significantly  in  surplus  and  rising  with  respect  to  the  rest  of  the  EU 
(16% of GDP), while it is in deficit with respect to non-EU countries (-10% of GDP), mainly 
China. The largest share of total Dutch imports comes from the EU (61.8%, of which some 
40%  originated  from  euro-area  countries  in  2010).  As  for  the  re-exported  goods,  most 
originate in the USA and Asia, in particular China, and are primarily oriented towards the rest 
of the EU12, which illustrates the role of the Netherlands as a major transit country for global 
trade and supply chains.  

The  Netherlands  increased  its  export  market  share  in  goods  before  the  crisis,  but  lost 
some ground since then (Graph 13). Although the country still benefits from a small positive 
effect of the product structure of its exports on its market share, the geographical composition, 
which had a positive effect before the crisis, started to act as a drag on the export market share 
as the cycle entered a downward leg. However, relatively strong competitiveness effects have 
had  a  significant  cushioning  effect,  and  redirection  towards  more  dynamic  geographical 
destinations has mitigated the loss. 

Graph 13: Market share gains in product 
markets and geographical destinations  

Source: COMTRADE, Commission services. 

In  contrast  to  the  improvement  of  the  relative  export  performance  of  re-exports,  the 
recent  performance  of  domestically-produced  exports  of  manufactures  has  been 

12 The markets for domestically-produced exports and re-exports are broadly the same. 

17 

 
 
 
 
                                                            
decreasing  in  the  last  few  decades.13  An  important  explanatory  factor  for  the  relative 
underperformance of Dutch domestically produced exports can be found in the very different 
product  mix  of  domestically-produced  exports  versus  that  of  re-exports.  Domestically-
produced  exports  are  dominated  by  agricultural  products,  foodstuffs,  chemical  products, 
rubber  and  plastics,  machinery  and  transport  equipment.  By  contrast,  computers  and 
electronic equipment account for nearly half of re-exports and re-exports account for around 
two thirds of the total exports of machinery and transport equipment. Since global demand for 
agricultural  products  and  foodstuffs  tends  to  grow  less  rapidly  than  the  world  markets  for 
electronic  equipment  and  telecommunications,  the  overall  percentage  share  of  Dutch 
domestically-produced exports in world trade is falling. Second, and even more importantly, 
many  of  the  Dutch  exports  markets  are  saturated,  especially  for  some  products,  such  as 
foodstuffs;  increasing  profits  can  only  come  from  an  increase  in  market  share,  not  from 
growing demand. Venturing into new markets is necessary if global export market shares are 
to be maintained.  

3.1.2.  Cost, price and other competitiveness indicators  

Developments in unit labour costs follow a cyclical pattern and do not pose a significant 
problem.  Low  or  negative  productivity  growth  pushed  up  nominal  unit  labour  costs  in  the 
2007-09 period. Subsequently, productivity growth rebounded and unit labour costs fell in the 
2010-11 period. This is the same pattern as observed in the previous cycle, where unit labour 
costs shot up in 2001-02, as productivity slowed while costs and inflation increased, only to 
fall  back  to  virtually  zero  in  2004  as  the  labour  market  cooled  down  and  companies 
rationalised  their  operations  (Graph  14).  Exporters'  profit  margins  (approximated  by  the 
relative development of export prices and unit labour costs) decreased slightly over the 2000-
2010 period (due to a pricing-to-market strategy).  

Graph 14: Decomposition of ULC 
developments  

Graph 15: Decomposition of developments in 
REER  

6

5

4

3

2

1

0

-1

-2

-3

-4

)

%

(

h
t
w
o
r
g
C
L
U
o
t

s
n
o
i
t
u
b
i
r
t
n
o
C

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Inflation (GDP deflator) Compensation per Employee
Real Compensation per Employee
Productivity Contribution (negative sign)
Nominal unit labour cost
ULC in Euro Area

Source: AMECO. 

6

5

4

3

2

1

0

-1

-2

-3

-4

)

%

(

h
t
w
o
r
g
R
E
E
R
o
t

s
n
o
i
t
u
b
i
r
t
n
o
C

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

NEER
REER (HICP)

relative HICP (-)
REER (ULC)

Source: AMECO. 

Measured against cost developments in trading partner economies, Dutch price and cost 
competitiveness indicators do not point to any serious competitiveness challenge. Broad 

13 Market performance correlates the volume trend of domestically-produced exports to that of domestically-produced exports 
in other countries or to export market growth for Dutch manufactures (CPB). 

18 

 
 
 
 
 
 
 
 
 
 
 
 
                                                            
competitiveness  indicators  based  on  various  price  and  cost  measures,  such  as  consumer 
prices,  export  prices  and  unit  labour  costs  do  not  point  to  major  divergences  between  the 
Netherlands  vis-à-vis  a  group  of  36  industrialised  countries  or  the  euro  area.  Overall,  most 
cost  and  price  competitiveness  indicators  appreciated  from  1997  to  2002,  pointing  to 
decreasing competitiveness, and have stabilised since then (Graph 16). 

Graph 16: Real cost- and price- competitiveness indicators (1999 = 100) 
115

115

Deflator: Nominal ULC Manufacturing

Deflator: Nominal ULC

94

98

02

06

10

Deflator: HICP

110

105

100

95

90

115

110

105

100

95

90

110

105

100

95

90

115

110

105

100

95

90

94

98

02

06

10

Deflator: Prices of Exported Goods & Services

94

98

02

06

10

94

98

02

06

10

vs rest of EA17

vs rest of EU27

300.0

200.0

1 994

1 998

2002

200 6

2 01 0

vs rest of IC36

Source: Commission services 

Observed differences in unit labour costs measured against cost developments in trading 
partner  economies  appear  to  have  resulted  mainly  from  differential  trends  in 
compensation  of  employees  rather  than  from  differences  in  productivity.  Since  it  is 
difficult to increase productivity through the implementation of new policy measures, at least 
in the short run, policy makers tend to plea for wage moderation when competitiveness needs 
to  be  improved.  In  the  Netherlands  they  have  done  so  during  the  1980s,  following  the 
Wassenaar agreement14, and, to a lesser extent, at the beginning of the 1990s. From the mid-
1990s  on,  the  growth  of  nominal  compensation  per  employee  in  the  Netherlands  has  been 

14  The  agreement  reached  in  1982  between  employers'  organizations  and  trade  unions  implied  restrained  wage  growth  in 
return  for  the  adoption  of  policies  to  combat  unemployment  and  inflation,  such  as  reductions  in  working  hours  and  the 
expansion of part-time employment.  

19 

 
 
 
 
 
 
 
                                                            
relatively high compared to its main trading partners; over the period from 2000 to 2010, unit 
labour  costs  rose  by  around  24%  in  the  Netherlands,  which  is  somewhat  above  the  22.5  % 
increases in France and Belgium, but markedly above the 4% increase in Germany over the 
same  period.  However,  on  the  whole,  labour  cost  dynamics  do  not  appear  to  have  been 
causing  very  strong  losses  in  Dutch  external  competitiveness  when  measured  over  a  longer 
period given the preceding period of relative wage moderation since the early 1980s. 

While  wage  moderation  may  have  favourable  effects  on  employment  in  the  tradable 
sectors, it may well result in some downward pressure on real disposable income, which 
is the main driver behind private consumption. Given its potentially dampening effect on 
domestic demand, wage moderation alone may not be a promising long-term strategy, all the 
more so if sectoral specialisation and possibly adverse effects, such as induced innovation, are 
taken  into  account.15  This  has  given  rise  to  a  longstanding  debate  on  whether  or  not  wage 
moderation  in  the  Netherlands  has  had  long-term  negative  consequences  for  total  factor 
productivity  growth.  Arguably,  even  if  the  impact  of  wage  moderation  on  productivity  or 
innovation  was  not  damaging,  one  may  still  surmise  that  the  induced  skewness  in  the 
distribution  of  national  income  (with  a  higher  profit  share  falling  to  enterprises)  may  have 
brought about dynamic inefficiencies in terms of the returns on profits generated (see below). 
Indeed,  as  a  result  of  relatively  subdued  wage  developments,  wage  shares  have  had  a 
tendency to decline, while corporate margins and savings increased.  

Taking a broader perspective on competitiveness, other factors may have played a role 
in  explaining  the  relatively  stable  performance  of  Dutch  exports  in  spite  of  the 
deterioration  of  the  real  effective  exchange  rate  vis-à-vis  a  group  of  35  industrialised 
countries.  The  World  Economic  Forum's  Global  Competitiveness  report  ranks 
the 
Netherlands  very  high,  coming  in  fifth  in  the  2012-13  edition  (out  of  more  than  140 
countries).  Among  the  Netherlands'  strengths  are:  the  quality  of  its  institutions  and 
infrastructure, its health and education level, the goods market efficiency and its technological 
readiness  (all  ranked  5  to  9),  whereas  it  scores  lower  on  macroeconomic  stability,  financial 
and labour market efficiency, market size and also financial market development (all ranked 
in the 17 – 41 bracket).  

Geographical  conditions  and  trade  frictions,  i.e.  how  accessible  the  country  is  to 
international competition, and at the same time, how accessible foreign markets are for 
domestic  producers  and  exporters,  are  also  an  important  determinant  of  non-price 
competitiveness. Regarding the latter, the Netherlands has made significant investment in key 
destinations  and  shifted  production  facilities  abroad.  Depending  on  the  purpose  of  the 
engagement in FDI and the stage of the investment, this can lead to higher or lower exports.  

Losses  or  gains  in  export  market  share  may  therefore  not  necessarily  be  due  to 
developments  in  price  competitiveness,  but  rather  to  the  internationalisation  of 
production.  Using  FDI  destination  countries  as  export  bases  would  lower  home  production 
and  thus  Dutch  exports.  The  opposite  holds  if  unfinished  products  are  imported  back  and 
exported  after  only  minor  processing.16  In  this  respect,  the  good  trade  performance  of  the 
Netherlands can partly be explained by the relatively large share of exports accounted for by 

15 Kleinknecht, 1994. 
16 Di Mauro et al., 2008. 

20 

 
 
 
                                                            
medium-sized  firms  (50-249  employees),  contrary  to  many  other  countries.  Medium-sized 
firms  seem  to  account  for  a  similar  share  of  exports  to  closer-to-home  destinations  (EU27), 
although  larger  firms  (+250  employees)  still  weigh  stronger  in  exports  to  distant  extra-EU 
markets (Graph 17). 

Graph 17: Distribution of exports by size class, 2010  
% of total
45

40

35

30

25

20

15

10

5

0

EU-27

Extra EU-27

0 - 9

10 - 49

50 - 249

250+

Number 
of employees

Source: Commission services. 

Against  this  background,  it  appears  that,  despite  declining  export-market  shares  for 
domestically-produced  exports,  the  Netherlands  does  not  exhibit  serious  problems 
regarding  its  competitiveness  or  export  performance.  The  positive  trade  balance  reflects 
the increasing links of the Dutch economy into global production chains and the benefits from 
locational factors, but also a competitive edge from adding even a small percentage of value 
added to the large flows of goods channelled through the Dutch territory. By contrast, relative 
market  shares  for  domestically  produced  exports,  originating  notably  in  industries  such  as 
foodstuffs  and  chemicals,  have  developed  less  favourably,  pointing  to  a  possible  challenge 
with respect to the competitiveness of domestically-produced exports.  

3.1.3. 

Sectoral contribution to the current account balance 

The  current  account  not  only  provides  information  about  a  country's  net  exports  and  its 
remittances. As part of the general balance of payments equation, it is also the counterpart of 
the  financial  account  (and  the  capital  account  which  is  of  much  smaller  size).  Moreover,  in 
national  account  terms,  a  current  account  surplus  implies  an  excess  of  savings  over 
investment aggregated across institutional sectors. Therefore, this section takes a closer look 
at  the  sectoral  savings  balances  in  order  to  examine  to  what  extent  savings  and  investment 
decisions  of  households,  firms  and  the  government  have  been  driving  the  current  account 
surplus.  

The most striking development in the sectoral breakdown of the Dutch current account 
is the switch from a significant  savings'  surplus emanating from  households  towards a 
savings'  surplus  of  non-financial  corporations  from  approximately  1999  onwards  (as 
illustrated in Graph 18). For many decades Dutch households have recorded a sizeable saving 
surplus.  This  was  mainly  due  to  significant  occupational  pension  savings,  which,  although 
managed  by  pension  funds,  are  part  of  households'  savings,  leading  to  a  near-term  savings 

21 

 
 
 
bias  that  will  fade  out  as  ageing  progresses.  The  importance  of  the  second  pension  pillar  is 
much higher in the Netherlands than in other countries with pension funds of which the assets 
constitute an ever-larger part of total accumulated savings in the country17; they have grown 
from  approximately  70%  of  GDP  in  1990  to  136%  of  GDP  in  2010.  However,  since  2002, 
even  if  the  mandatory  second  pillar  occupational  pension  contributions  and  the  third  pillar 
contributions are taken into account, total savings of Dutch households have been below the 
euro area average18. Therefore, the often heard reasoning that the national savings surplus is 
due to the high households' pension savings, may have held until the mid-1990s but no longer 
applies.  From  2005  onwards,  the  household  net  lending  position  turned  into  a  trend  deficit 
(allowing  for  cyclical  influences).  One  important  explanatory  factor  for  this  shift  is  the 
increase in financial leverage of households, largely reflecting trends in housing and mortgage 
markets (see below).  

The  positive  saving-to-investment  balance  of  non-financial  corporations  can  be  mainly 
explained by high aggregate corporate profitability going hand in hand with substantive 
capital exports. Corporate net lending has been around 8% of GDP on average over the last 
decade  (Graph  18).  The  excess  of  gross  corporate  saving  over  fixed  investment  amplified 
between 1998 and 2004, mirroring a roughly equivalent rise in gross saving and fall in gross 
fixed capital formation starting around the turn of the century (Graph 19). A trend fall in the 
domestic  investment  ratio  seems  to  have  occurred  also  across  other  euro-area  countries, 
possibly  partly  related  to  capital-saving  biases  in  new  technologies.  Moreover,  residential 
investment has dropped to particularly low levels, especially in light of the strong increase in 
housing demand and mortgages in the decade prior to 2008.  

17 The Netherlands has a long-standing funded second pension pillar (dating back to the 1950s), on top of a public first pillar 
for  every  Dutch  citizen  of  65  years  or  older  organized  as  a  PAYG  system.  The  second  pillar,  the  supplementary  pension, 
which  is  also  mandatory,  and  in  which  in  principle  every  employee  has  to  participate,  is  the  most  important  part  of  the 
system.  The  third  pension  pillar,  which  is  relatively  modest  in  size,  consists  of  additional  private  savings,  for  instance, 
through tax-preferred pension accounts.   
18 In 2011 households gross savings rates were 11.6 % in the Netherlands vs. 16.5 % in Germany, 13.1 % for the euro area 
and 11 % for EU27 (Eurostat National Accounts).  

22 

 
 
                                                            
Graph 18: Net lending and borrowing by 
sector  

Graph 19: Savings and investment of non-
financial corporations 

d
e
d
d
a

e
u
a
v

l

f

o
%

20

18

16

14

12

10

8

6

4

2

0

35

30

25

20

15

10

5

0

d
e
d
d
a

e
u
a
v

l

f

o
%

Source: Eurostat. 

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

Net lending/borrowing, Non-financial Corporations
Gross savings (right axis)
Gross capital formation (right axis)

Source: Eurostat. 

To  an  important  extent,  the  emergence  of  a  persistent  savings'  surplus  in  the  non-
financial  corporate  sector  is  a  result  of  the  increasing  importance  of  globalisation  and 
financial  integration  in  shaping  corporate  balance  sheet  adjustments.  The  increase  in 
corporate  savings  has  been  accentuated  since  the  crisis  by  cyclical  weakness  in  domestic 
investment and the slump in the housing market weighing on housing investment. The mirror 
image  of  sluggish  domestic  capital  formation  has  been  the  increase  in  foreign  direct  and 
portfolio investments since 2000. Non-financial corporations have used direct investments to 
penetrate new markets or to achieve efficiency gains through splitting the value chain of the 
production19. FDI inflows also expanded, seemingly attracted by the favourable geographical 
location and historical ties of the Netherlands, but also due to its reliable institutional setting 
and legal framework. It is not clear to what extent these capital flows are genuine investment 
from  one  country  to  another  or  whether  they  represent  “round-tripping”  of  capital.  In  this 
sense,  part  of  gross  FDI  inflows  and  outflows  could  be  considered  merely  as  a  statistical 
discrepancy  and  may  to  a  large  extent  be  attributed  to  the  strong  presence  of  multinational 
companies residing in the Netherlands, channelling FDI and redirecting income flows to and 
from  subsidiaries  or  affiliates  in  other  countries  through  so-called  Special  Financial 
Institutions  (SFIs).20  Since  SFIs  do  little  else  than  channel  funds,  their  external  claims  and 

19 Financial flows are classified as direct investment when a foreign investor possesses at least 10% of the total equity capital 
or voting rights or the equivalent thereof. Therefore, portfolio investment data and FDI data are closely related. FDI can be 
categorized  into  three  components:  equity  capital  (for  example,  mergers  and  acquisitions),  reinvested  earnings  (i.e. 
undistributed profits imputed to the direct investor) and intra-company loans. What is important is that the investor acquires a 
permanent interest in the company and can exert a substantial influence in the companies' management board. 
20 An SFI is a subsidiary - sometimes little more than a letterbox or an anonymous office - of a foreign parent company that 
receives or borrows funds from abroad and transfers them to the parent or to other group companies, often to reduce global 
tax  exposure.  SFIs  are  particularly  active  in  the  field  of  direct  investment  (participating  interests  and  intercompany 
financing). SFI's are generally set up with foreign capital only, which is usually also brought back in there again under the 
semblance of 'foreign' investment. The aggregate balance sheet of all SFIs was over EUR 2300 billion (in 2009), almost half 
of the total Dutch external claims (EUR 4700 billion, more than nine times GDP). More than four-fifths of their assets (EUR 
1900 billion at the end of 2009) are in external investments. On the liabilities side of the 'Dutch SFI balance sheet' the share 
of investments is smaller. Because the amount that SFIs transfer is so huge they are not included in the 'overall' balance of 
payments statistics and, since 2003, they are registered on a separate sheet. SFI's FDI positions account for no less than three 
quarters of total FDI from the Netherlands.  

23 

 
 
 
 
 
 
 
 
 
 
                                                            
obligations nearly cancel each other out. This is why they are of little significance to the net 
external  asset  position  of  the  Netherlands  and  to  the  measured  flow  of  the  current  account 
balance.  

As FDI outflows have increased, investment earnings in the form of profit remittances21 
received  from  foreign  operations  have  also  grown  substantially,  clearly  affecting  the 
balance  of  payments.22  This  trend  appears  to  have  been  supported  by  the  favourable  tax 
treatment of repatriated foreign income in the Netherlands. One of the factors that make the 
Netherlands fiscally attractive is the so-called ‘participation exemption’ that exempts business 
profits (dividends as well as capital gains) from subsidiary companies abroad from corporate 
income tax levied in the Netherlands.23 A second factor is the large Dutch Double Taxation 
Treaty (DTT) network that substantially reduces withholding taxes on dividends, interests and 
royalty payments between Treaty countries and the Netherlands. A third factor is the "advance 
tax  ruling"  system  whereby,  contrary  to  many  other  countries,  the  Netherlands  offer  the 
possibility  to  discuss  tax  positions  in  advance  with  the  Dutch  tax  authorities.  These 
discussions can be formalized in agreements binding both the taxpayer and the tax authorities. 
Something that should be duly taken into account when interpreting FDI data is the fact that 
to avail of such tax treatment, transactions generally take place via intra-company channels. 
These  intra-company  transfers  often  reflect  shifting  profits  between  countries  (notably  in 
multinational companies). 

Dutch multinational companies make a large contribution to the Dutch current account 
surplus  as  registered  in  the  official  data  because  a  large  part  of  their  earnings  are 
retained  and  reinvested,  rather  than  being  paid  out  as  income  to  foreign  portfolio 
investors,  thus  driving  measured  corporate  savings  (Graph  20).  The  Netherlands  is 
relatively sensitive to this effect because the presence of multinationals in the country attracts 
many  foreign  investors  (Dutch  shares  in  foreign  hands  amounted  to  55%  of  GDP  in  2011 
versus  only  20%  in  Germany  and  15%  in  the  United  States).  All  of  their  profits  (both 
distributed and non-distributed profits or reinvested earnings) realised abroad through foreign 
subsidiaries are counted entirely as income for the Netherlands. As a result, the more profits 
Dutch  multinationals  make  and  the  less  is  paid  out,  the  higher  the  effect  on  the  current 
account.  

21  Profit  remittances  on  FDI  not  only  cover  payments  of  direct  investment  income,  which  consist  of  income  on  equity 
dividends, branch profits, and reinvested earnings, but also income on the intercompany debt (interest). Some of these profits 
do not derive from physical goods, but from, for example, royalties on intellectual property, which makes it easier to shift 
them to a tax haven. 
22 The net impact on the balance of payments of outward FDI results from subtracting the FDI outflow from all the positive 
flows associated with the outflow, mainly repatriated profits, dividends and interest (on the income account), and net receipts 
of royalties and license payments (on the services account). 
23  Traditionally,  this  participation  exemption  on  cross-border  intra-firm  dividend  payments  has  been  a  major  attractor  of 
companies to the Netherlands. It implies that when transnational companies repatriate affiliate income, or in other words, pay 
themselves dividends from abroad, the tax treatment of this income is not subject to domestic taxation. Although this system 
is applied in most EU countries, with the exception of Greece, Ireland, Spain and the United Kingdom, the extent to which 
income is fully or partially exempted varies across countries and is affected by the provisions of bilateral tax treaties. 

24 

 
 
                                                            
Graph 20: Profit margins of non-financial corporations  

d
e
d
d
a
e
u
a
v

l

f
o
%

60

50

40

30

20

10

0

35

30

25

20

15

10

5

0

d
e
d
d
a

e
u
a
v

l

f
o
%

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

Gross entrepreneurial income
Gross operating surplus
Retained earnings (right axis)
Retained earnings, EA17 (right axis)

Source: Eurostat. 

Dutch  pension  funds,  by  far  taking  the  lion's  share  of  Dutch  shareholders'  interests  in 
foreign companies, counterbalance this upward effect on the current account, since only 
the profits (generated by the foreign company) that are distributed as dividends to the Dutch 
shareholder are counted as revenue in the Netherlands (given the investors' interest of below 
10%).  

3.1.4.  The net international investment position 

According to official statistics, the Netherlands has had a poor track record in terms of 
building  up  a  solid  net  international  investment  position  (NIIP),  despite  generating 
persistent and large current account surpluses. Graph 21 shows that the external assets and 
liabilities  position  of  the  Netherlands  has  been  subject  to  persistent  significant  negative 
valuation  effects  which  have  contributed  to  dampening  the  effect  of  the  current  account 
surpluses on the NIIP. Over decades, the Dutch net savings surplus initially did translate into 
a small positive NIIP. In 1998, for the first time, the country became a net debtor. In 2002, 
finally, the NIIP reached a low of minus EUR 113 billion (24.4% of GDP) despite a history of 
persistent  current  account  surpluses.  The  net  external  position  only  turned  positive  again  in 
2004 and 2006 by a mere EUR 2 billion (less than 1% of GDP). In recent years, sharp swings 
in asset valuation in response to the economic and financial crisis in 2008-2010 have clouded 
longer-standing trends: paradoxically, the Dutch NIIP improved markedly during these crisis 
years.  

25 

 
 
 
 
 
 
 
 
 
600

500

400

300

200

100

0

-100

-200

Graph 21: Cumulative sum of current account 
balances vs. NIIP (% of GDP) 

% of GDP

Cumulative Current Account Balance

Net IIP

Graph 22: NIIP by instrument  

80

60

40

20

0

-20

-40

-60

P
D
G

f
o
%

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 111

Net portfolio investment
Reserve changes (net)
Other investment (net)
Net direct investment
Net financial derivatives
Net external debt (neg. sign)
Net int'l investment position
Marketable debt (portfolio debt instr. and other investment, net)

Note: * indicates estimated figure using quarterly data. 
Source: Eurostat. 

02

06

10

86

90
Souce: De Nederlansche Bank. 

94

98

The Netherlands relied on FDI as a vehicle to invest its excess savings abroad (Graph 22). 
The stocks of FDI abroad have clearly exceeded direct investment by foreign investors in the 
home  economy.  At  the  end  of  2011,  the  net  positions  in  FDI  were  very  high  in  the 
Netherlands  (51%  of  GDP)  compared  to  other  countries.  These  figures  might  give  a 
somewhat distorted picture, since an important part of direct investments takes place because 
of  tax  optimisation  strategies  of  multinational  companies  through  so-called  special  purpose 
vehicles  (SPVs).  This  is  also  apparent  in  the  very  high  stocks  of  inward  and  outward 
investment,  which  are  largely  composed  of  intercompany  loans  and/or  undistributed  (and 
reinvested) profits. This role of the Netherlands as an international financial intermediary is 
also  highlighted  by  the  geographical  composition of  the  NIIP  (mainly  outside  the  euro  area 
and EU-27) (see above).  

In  contrast,  the  Netherlands  has  had  a  negative  net  stock  of  portfolio  investment. This 
means  that  the  stocks  of  domestic  portfolio  debt  and  equity  owned  by  foreign  investors 
exceed the gross holdings of foreign portfolio assets by  residents. This  can be  explained  by 
the relative attractiveness of Dutch corporate and government bonds for foreign investors, in 
particular  those  from  outside  the  EU,  as  safe  investment  instruments,  but  also  to  a  lesser 
extent  of  private  equity.  Other  investment  mainly  consists  of  cross-border  loans  (to  a  large 
part  inter-bank  and  intra-bank  loans)  but  also  comprise  official  loans  and  intra-Eurosystem 
balances. 

Box 1: Valuation effects 

The discrepancy between the cumulative sum of current account balances and the NIIP can be explained 
by a number of economic factors and accounting methods used to value various categories of assets. Apart 
from the recorded volume of transactions in the current account, a change in the NIIP also includes capital gains 
(or losses) due to exchange rate fluctuations occurring during the year, shifts between financial instruments, and 
revaluations of cross-border external assets and liabilities. The fact that Dutch assets abroad are less marked to 
market  than  foreign  assets  in  the  Netherlands  also  plays  a  role.  The  changes  in  the  outstanding  amounts  also 
include other adjustments  (e.g.  sectoral reclassifications, or  exceptional  events).  Since  these  valuation  changes 
do  not  concern  transactions,  they  are  neither  recorded,  nor  observable  in  the  flow  statistics  of  the  balance  of 

26 

 
 
 
 
 
payments. 

The  Dutch  net  losses  are  the  result  of  a  combination  of  these  factors.  First,  the  steady  appreciation  of  the 
guilder  and,  subsequently,  the  euro,  has  reduced  the  value  of  foreign-currency  denominated  assets  and 
liabilities.24  Boonstra  (2008)  and  Lane  and  Milesi-Ferretti  (2004)  estimate  a  negative  exchange  rate  effect  of 
some  0.4%  per  year  in  the  period  1987-200625.  Second,  foreign  direct  investments  in  the  Netherlands  have 
outperformed Dutch direct investments abroad in terms of return, causing foreign holdings in the Netherlands to 
rise more sharply in value. Also, Dutch foreign assets have tended to be largely in FDI, whereas Dutch liabilities 
vis-à-vis  foreigners  have  been  more  heavily  directed  towards  portfolio  equities,  which  tend  to  have  higher 
returns.  These  'performance'  and  'composition'  effects  presumably  played  an  important  role  in  the  1990s.  In 
addition, apart from exchange rate and asset price effects, one of the main other economic factors that influence 
the net external position of the Netherlands concerns write-offs on paid goodwill (reflecting lower than expected 
future profits of the company that has been taken over), leading to a lower value of direct investment. Finally, 
accounting  methods  used  to  value  various  categories  of  assets  play  an  important  role  in  explaining  the 
discrepancy  between  the  cumulative  sum  of  the  current  account  balances  and  the  NIIP.  For  example,  foreign 
subsidiaries are recorded at book value (the value entered in the books of the Dutch parent company), whereas 
the stocks that foreign investors hold in Dutch stock-market-listed companies are rated against market value (the 
value recorded at the end of the year). Accordingly, an increase in stock prices will lead to an increase of foreign 
liabilities, whereas the book value of foreign participations does not change, even if their market value increases, 
and,  consequently,  the  net  external  position  is  underestimated.  A  similar  story  holds  for  the  valuation  of 
immaterial assets (e.g. human capital, market accessibility of the company in question, brand value, etc.). Graph 
23  illustrates  that  these  underestimations  have  been  very  significant  for  the  Netherlands.  In  the  period  2004-
2011, the difference was often higher than EUR 100 billion, sometimes twice this amount. At the end of 2011, 
the  country  was  more  than  EUR  70  billion  richer  according  to  the  market-value  figures  of  both  outgoing  and 
incoming participations (estimations by De Nederlandsche Bank (2012b), in addition to the usual figures). Stock 
market conditions played an important role in this respect: the more optimistic the investors, the greater the price 
effect, i.e. the greater the gap between market and book value.  

Graph 23: AEX index and distortion of net external assets (billion euro), 2004 – 2011 

AEX

600

500

400

300

200

100

0

with subsidiaries at market value

with subsidiaries at book value

400

350

300

250

200

150

100

50

0

-50

-100

04

05

06

07

08

09

10

11

12

04

05

06

07

08

09

10

11

12

Source: De Nederlandsche Bank. 

Source: De Nederlandsche Bank. 

While valuation effects are not new, two factors at play in recent years have contributed 
to making them both more important and more volatile. First, with an increasing size of 
gross  external  assets  and  liabilities  relative  to  GDP  (2.5  times  the  Dutch  GDP  in  2011),  a 
given differential in rates of return across assets and liabilities has an increasing effect on the 

24 Depreciation of a country’s currency results in gains on its holdings in foreign currency denominated assets and vice versa. 
On the other hand, such a depreciation may also translate in an increase in value of it foreign liabilities.  
25 This is a rough approximation, as the currency composition of most asset and liability categories is not known. 

27 

 
 
 
 
 
                                                            
dynamics of the net position. As a result, valuation effects have become more important for 
the  external  position  of  countries  than  the  current  account  flows.  Second,  the  relative 
importance  of  direct  and  portfolio  investments  in  international  portfolios  has  increased,  and 
these instruments have on average higher and more volatile returns than debt instruments. In 
these high risk categories the return usually comes in the shape of capital gains or losses, and 
adjustments  in  the  book  value  of  FDI,  which  do  not  result  into  measured  cross-border  cash 
flows and therefore fall outside the scope of the balance of payments (but affect the net IIP 
through  valuation  changes).  In  the  low  risk  categories  (debt  instruments,  loans,  interbank 
positions), the yield comes in the form of interest income, which is recorded on the income 
account  of  the  balance  of  payments,  but  these  all  carry  relatively  minor  weight26.  The 
volatility of returns is illustrated by the crisis, which brought about sign changes in returns on 
equity, indicating a reversal of fortune in the prices of foreign equity assets versus liabilities 
(Graph 24). In this sense, the improvement of the Dutch NIIP since 2008 appears to have been 
driven largely by relatively larger declines in the value of equity liabilities owed to foreigners 
compared to those in the value of equity assets. In other words, it is to a sizeable extent driven 
by a worse performance of the Dutch stock market than the average of global indices. 

Graph 24: Valuation effects  

50.0

40.0

30.0

20.0

10.0

0.0

-10.0

P
D
G

f
o
%

-20.0

-30.0

-40.0

-50.0

05q1

06q1

07q1

08q1

09q1

10q1

11q1

12q1

Dir inv, assets

Dir inv, liab

Portfolio inv, assets

Portfolio inv, liab

Other inv, assets

Other inv, liab

Fin derivatives (net)

Reserves (net)

Total net

Note: * indicates estimated figure using quarterly data. 
Source: Eurostat. 

Graph 25: Sectoral contribution to the Dutch 
external net lending or borrowing (% of GDP) 
800

600

400

200

0

-200

-400

-600

86 88 90 92 94 96 98 00 02 04 06 08 10

Investment companies
Banking
DNB
Non financial corporations
Government
Other (a.o. households)
Pension funds and insurances
Other financial institutions (OFIs)

Source: De Nederlandsche Bank. 

Pension funds and insurance  corporations by far hold the largest stocks of net foreign 
assets27, followed by investment companies and 'other financial institutions'28 (Graph 25). 
In 2010, the net external assets of these three sectors combined showed an increase, mainly as 
a result of revaluations, to EUR 838 billion, or 142% of GDP29. The external asset position of 
pension funds and insurances deteriorated in 2008 and 2009, caused by the fact that pension 
funds  shifted  a  substantial  proportion  of  their  investments  abroad  to  (domestic)  investment 

26  Lane and Milesi-Ferretti (2004). 
27 The data on pension funds were included into the 'other/households' category until 2002; from 2003 on they are registered 
apart in a 'pension funds and insurances' category, explaining the break in continuity between 2002 and 2003. 
28  Including  a.o.  investment  funds,  financial  holding  companies,  special  purpose  vehicles  (SPVs)  and  special  financial 
institutions (SFIs). 
29 De Nederlandsche Bank; commission services' calculations. 

28 

 
 
 
 
 
                                                            
funds, but also due to the losses they suffered as a result of a strong decline in equity prices 
(mainly stocks) as well as market interest rates. At the end of 2008 and 2011, this led to a fall 
of  coverage  ratios30  below  the  statutory  minimum  of  105%  and  in  some  cases  even  below 
100%, compared with 144% at the end of 2007. 

Other  institutional  sectors,  such  as  the  Dutch  government,  non-financial  corporations 
and the Dutch banking system, all have a net external liability position. In 2008, negative 
valuation effects implied a strong decline in foreign obligations of non-financial corporations, 
due to the fact that the large majority of stocks issued by these corporations are quoted on the 
stock exchange, whilst on the asset side they mainly hold non-quoted stocks.  

3.2. 

Household  indebtedness 

This section analyses in greater detail the nature of household debt and the factors underlying 
its build-up as well as the possible risks that the high level of household debt may entail for 
the  economy,  given  that  debtors  are  vulnerable  to  shocks,  e.g.  interest  rate  increases  and 
house price declines, and any deleveraging pressures would negatively impact on growth.  

3.2.1.  Factors underlying the build-up in household debt 

Household debt has increased strongly over the last decade and reached an all-time high 
of 128.5% of GDP (or 266% of disposable income) in 2010, before decreasing afterwards 
to  127.6%  in  2011.  The  bulk  of  household  borrowing  has  taken  the  form  of  mortgage 
debt:  outstanding  residential  mortgage  debt  amounted  to  EUR  640  billion  -  corrected  for 
securitization31 - in 2011, or 106% of GDP.32 In view of this, a closer look at housing market 
developments is warranted. 

3.2.1.1.  Housing market policy framework 

The Dutch housing market has been largely shaped by government policies. A range of 
policy interventions and incentives were originally aimed at stimulating home ownership and 
providing affordable good quality housing to low income classes. They encompass direct and 
indirect government subsidies and fiscal incentives, controls of the supply of housing through 
zoning restrictions and rent regulations, and financial guarantees.  

In  response  to  public  policies,  the  Dutch  housing  market  has  shifted  towards  higher 
owner-occupancy  over  the  past  three  decades.  Today,  around  60%  of  the  7.4  million 
dwellings  are  owner-occupied,  up  from  42%  in  1980  but  still  comparatively  low  on  a 
European  scale.  By  contrast,  nowhere  else  in  Europe  does  social  housing  dominate  the 
housing  market  as  it  does  in  the  Netherlands.  Social  housing  represents  33%  of  total 
dwellings.  More  than  three-quarters  of  all  tenants  rent  a  dwelling  from  a  social  housing 
corporation, non-profit organisations that have to act on a commercial basis but are required 
to use their profits for the provision of good and affordable housing. Social corporations were 
formally separated from the public sector in the 1990s and now form part of the non-financial 

30 The Financial Assessment Framework, which is part of the new Pension Act for the 2nd pillar, sets out the requirements for 
the  financial  position  of  a  pension  fund,  which  is  largely  reflected  by  the  coverage  ratio  (i.e.  the  relationship  between  the 
fund’s assets and the pension fund liabilities). In addition a pension fund must hold enough financial buffers (equity) to be 
able to cope with setbacks, such as interest rate developments, increasing life expectancy and financial markets turmoil. The 
pension fund’s investment results as well as the liabilities are valued at market price. 
31 De Nederlandsche Bank. 
32 40 % of GDP in 2007 for the euro area as a whole. Mortgage debt as a share of disposable income increased from 151% in 
2000 to 250% in 2010, according to Eurostat, one of the highest shares recorded of any advanced economy and the highest in 
the euro area, which had an average ratio of 99% in 2010 . 

29 

 
 
                                                            
business sector, even though their core mandate is to pursue a public function and to this end 
they  are  heavily  regulated.  The  expansion  of  the  social  housing  sector  up  to  the  mid-1990s 
was accompanied by a sharp fall in private renting, which currently accounts for a mere 7% of 
the total housing stock.33 

However, collectively, these interventions have become costly and inefficient in achieving 
their aims, with a gradual build-up of distortions and rigidities in the housing market, which 
carry  an  economic  efficiency  cost  in  the  wider  economy,  inter  alia,  in  terms  of  capital 
misallocation toward housing, disproportionately favoring high-income taxpayers, budgetary 
costs,  redistribution  of  wealth,  and  having  ambiguous  effects  on  housing  tenure  and  labour 
force mobility due to high transaction costs. The institutional set-up also stoked house price 
rises.34  

Graph  26:  Residential 
building permits 

investment  and 

Graph  27:  Structural  housing 
(average 2008 – 2011) 

features 

0
0
1
=
5
0
0
2

140

120

100

80

60

40

20

0

95

97

99

01

03

05

07

09

11

Building Permits (2005=100)

Residential Investment (% of GDP, right axis)

Note: 2012 estimated figure using quarterly data. 
Source: Eurostat. 

P
D
G

f
o
%

7

6

5

4

3

2

1

0

)

%

(
n
o
i
t
a
u
p
o
p

l

l

a
t
o
T

Netherlands

EA17

EU27

80

70

60

50

40

30

20

10

0

Tenant

Owner

Low inc.

High inc.

Housing cost overburden 
rate 

Owner occupancy rate 

Source: Eurostat. 

Box 2: The 1901 Housing Act and the 1994 grossing and balancing operation 

The  foundations  of  the  strongly  regulated  Dutch  housing  supply  and  planning  were  laid  in  the  Housing 
Act  (Woningwet)  of  1901,  which  responded  to  the  often  poor  housing  conditions  prevailing  at  the  time  and 
obliged  municipal  governments  to  develop  and  enforce  formal  zoning  plans.  Government  involvement  in 
housing supply was further boosted in the aftermath of the Second World War. In the course of the 1980s, the 
political  agenda  changed,  and  the  sense  of  urgency  with  respect  to  housing  construction  waned  as  outright 
shortages  had  been  overcome.35  Since  then,  a  process  of  decentralisation  has  been  underway,  and,  today, 
providing  social  housing  is  seen  less  as  a  task  of  central  government  than  a  responsibility  of  the  regional  and 
local  levels,  with  municipalities,  housing  corporations  and  households  as  the  main  players.  Municipalities  can 
develop their own regulations, as long as they comply with the 1965 law for spatial planning (Wet Ruimtelijke 
Ordening) the aim of which is to concentrate people in urban areas, to preserve landscapes and townscapes and 
to take into account the special topography of the Netherlands. Spatial plans in conformity with the law provide 
very  detailed  regulations  affecting  the  environment,  air quality  and  urban  aesthetics,  as  well  as  detailed  urban 

33 CBS (2011). 
34 Vandevyvere and Zenthöfer (2012). 
35 Vermeulen and Rouwendal (2007). 

30 

 
 
 
 
 
 
 
 
                                                            
development  criteria  on  the  types  of  dwellings  that  can  be  built,  often  including  a  very  restrictive  maximum 
height of houses, limiting the possibility to increase living space on a given lot. This has led to constraints on 
land supply in suburban areas in a period of growing housing demand and may have been a factor causing house 
prices to rise. Building regulations and administrative procedures arguably restrict housing supply and led to a 
supply that is quite inelastic to house price changes.36 At the same time, in a densely populated country such as 
the Netherlands spatial planning processes have arguably helped manage competing claims on scarce land. 

A major change in the Dutch housing policy occurred in the 1990s, when most of the subsidies on housing 
construction  were  abandoned,  and  housing  corporations  became,  after  many  years  of  deregulation, 
financially independent at the end of 1994, although still subject to government supervision; they work hand in 
hand with local authorities to roll out policy initiatives. They are also granted an exemption from corporate tax 
and can buy public land at reduced prices for the purpose of building social housing. Since then, on top of the 
rents  from  their  tenants,  housing  corporations  mainly  raise  funds  through  activities  in  the  non-social  housing 
sector  (renting  to  people  with  higher  income,  construction  and  selling  of  homes)  and  can  raise  capital  from 
selling dwellings which are recorded on their books at values far below market values. The government offers 
housing  corporations  various  cost-reducing  facilities,  mainly  through  the  Guarantee  Fund  for  Social  Housing 
(Waarborgfonds  Sociale  Woningbouw,  or  WSW).  Social  housing  corporations  can  also  obtain  loans  at 
favourable conditions from the Bank of Dutch Municipalities (Bank Nederlandse Gemeenten, or BNG), a special 
purpose  public  bank  with  an  exceptionally  good  credit  rating,  which  only  lends  to  municipalities  and  housing 
corporations  and  the  Nederlandse  Waterschapsbank  (NWB).  Although  the  BNG  has  a  limited  liability,  its  top 
rating can only be sustained under the implicit assumption that the government would support the bank in case of 
financial  problems37.  Finally,  social  housing  corporations  receive  support  from  the  Central  Housing  Fund 
(Centraal Fonds voor de Volkshuisvesting, or CFV), which redistributes funds from financially healthier housing 
corporations toward weaker ones, to the extent that the need arises on the part of the latter. 

This  policy  change  led  to  a  substantial  decrease  in  the  construction  of  social  housing.  While  the  total 
amount of social sector dwellings has remained constant since 1995, their share in the total housing stock has 
slowly decreased from a peak of 39% in 1998 to 33% at present. 

The rent regulation is based on three key elements: a maximum rent level, annual rent 
adjustments,  which  are  capped  by  the  government,  and  tenant  protection.  The  rent 
ceiling  is  regulated  by  a  point  system38,  depending  on  the  quality  of  the  dwelling  (size  and 
facilities)  and  the  surrounding  area  (availability  of  shops,  schools,  public  transport,  etc.). 
Tenants also benefit from caps to the annual rent increase, which is set by the parliament and 
linked  to  inflation.  In  the  Netherlands,  15%  of  the  population  receive  cash  allowances  for 
rents, the third highest value in the OECD.39  

In  1993,  the  Dutch  government  set  up  the  National  Mortgage  Guarantee  system  or 
Nationale  Hypotheek  Garantie  (NHG))  to  stimulate  home  ownership.  Homebuyers  may 
insure their risk of default as a result of unemployment, divorce and health circumstances by 
paying a small insurance premium (0.7% of the mortgage loan in 2012, increasing to 0.85% 
from  1  January  2013).  Mortgages  up  to  the  ceiling  of  EUR  320.000  are  guaranteed.  The 
facility  also  reduces  the  credit  risk  for  banks  arising  from  mortgage  loans  (see  below).  For 
mortgages not covered by the NHG, lenders have to write off the remaining debt should the 
debtor be unable to pay the residual debt after selling  the  property. Because of this implicit 
subsidy, banks urge homebuyers to obtain a guarantee by offering lower interest rates when 
taking a NHG facility. Ultimately, the Dutch government underwrites the scheme in the event 

36 OECD (2011). 
37 BNG (2010). 
38 The points system is a score card according to which property characteristics are graded: square meters, facilities, type of 
heating  etc.  score  points.  Within  the  point  system  local  scarcity  does  not  play  a  role.  However,  as  of  1  October  2011,  25 
additional “housing points” for property value (WOZ) were awarded to rental homes in areas of particular scarcity. 
39 Andrews et al. (2011). 

31 

 
 
                                                                                                                                                                                          
the guarantee fund should prove inadequate.40 Public guarantees totalled EUR 782 million at 
end-2012,  implying  a  capital  coverage  ratio  of  0.52%.41  The  government  thus  assumes  the 
risks  of  households  and  financial  institutions  stemming  from  mortgage  debt  and  acts  as 
indirect  guarantor  for  a  growing  proportion  of  the  Dutch  housing  market.  On  31  December 
2012, the NHG scheme was guaranteeing mortgage loans up to a value of EUR 122 billion, or 
around 20% of GDP. 

Among  the  housing  market  policy  interventions  the  generous  mortgage-interest-rate-
deductibility (MID) scheme stands out as particularly conducive to debt accumulation. 
Private  home  ownership  has  been  encouraged  by  allowing  home  owners  to  fully  deduct 
interest payments on their mortgage loan from their taxable income, a policy that has been in 
place since 1893. This has been an important benefit especially for higher income households, 
given the relatively high marginal rates of income tax. For mortgages on primary residences, 
the  interest  payments  are  income-deductible  for  a  maximum  period  of  30  years. 
Consequently,  paying  off  mortgages  is  often  postponed  until  the  loan  matures  and  a  large 
fraction of bought homes is fully financed by borrowed capital. This latter point is evidenced 
by the high average loan-to-value (LTV) ratio (the amount borrowed relative to the value of 
the  collateral)  for  mortgages  in  an  international  comparison.  Apart  from  influencing  the 
amount  of  mortgage  debt  taken  up  by  households  and  the  number  of  households  with 
mortgage debt, this subsidy also had implications for the types of loans involved, like interest-
only loans (see below).  

Policy  measures  proposed  (and  partly  adopted)  since  April  2012  aim  at  unlocking  the 
Dutch  housing  market,  by  stimulating  investment,  providing  more  support  to  (first-time) 
buyers,  and  addressing  rental  market  distortions  while  protecting  vulnerable  groups.  Box  3 
provides a summary. 

Box 3 Policy measures in the housing market 

•  The mortgage interest rate deductibility scheme is maintained. However, new mortgage loans (i.e. those 
initiated in 2013 and beyond) must take an annuity or linear form in order for mortgage interest to be deductible 
(adopted  measure).  From  2014  onwards,  the  maximum  deduction  rate  of  52%  (for  the  highest  income  tax 
bracket) will fall to 38% in steps of half a percentage point per year (over 28 years). Only the highest earners 
will be affected at first. The reform will be applicable to new as well as existing mortgage loans.  

•  On  top  of  this,  it  will  be  possible  to  take  another  loan  for  repayment  of  the  first  loan.  With  each 
repayment on the first loan, a second interest-only loan builds up (it starts at zero to reach a maximum of 50% of 
the  value  of  the  property  after  30  years).  The  interest  rate  on  the  second  loan  cannot  be  below  that  of  the 
principal  loan,  but  is  not  tax  deductible.  On  the  one  hand,  this  allows  buyers  to  lower  their  monthly  interest 
payments, on the other hand, it allows them to build up residual debt (after 30 years). 

•  More  funding  will  be  made  available  for  providing  loans  to  first-time  buyers,  to  support  the  ailing 
housing market. The already existing Housing Stimulation Fund Dutch municipalities (SVn) will receive funding 
of EUR 50 million. 

•  Prospective home  buyers  face  more  restrictive  lending  conditions,  mainly  in  the  form  of  lower  LTV-

ratios, which will gradually decrease from 106% in 2012 to 100% in 2018 (adopted measure).  

40 The NHG is an insurance provided by the Stichting Waarborgfonds Eigen Woning (WEW), a fund that receives the onetime 
premiums paid by home buyers and which is used to cover any future losses. However, since the liabilities of the fund are 
guaranteed by the government, any large increase in defaults would ultimately have to be covered by the government. If the 
funds of WEW are depleted, it can request an interest-free loan from the government. 
41 Kwartaalcijfers Stichting Waarborgfonds Eigen Woningen, 4e Kwartaal 2012. 

32 

 
 
 
                                                            
•  There  is  a  new  approach  concerning  residual  debt  from  the  sale  of  a  former  property:  from  2014 
onwards, the interest payment of residual debt will become fiscally deductible for a maximum of 5 years (under 
certain conditions). 

•  According  to  the  announced  measures  in  the  rental  market,  for  tenants  in  the  social  housing  sector, 
maximum rent increases will become income-dependent. Tenants with a household income of less than €33,614 
would pay up to 1.5 pp above the inflation rate, for tenants with and income between €33,614 and €43,000 the 
difference to inflation will be 2 pp, and those with  incomes above €43,000 face rent increases up to 4 pp above 
inflation.  Landlords  will  be  allowed  to  differentiate  the  rent  increases  among  their  properties,  while  tenants 
experiencing income decreases can obtain rent decreases, and lower-income households are partly compensated 
with rent subsidies for possible losses in purchasing power.  

•  Social housing corporations should focus more on their prime task of constructing and managing social 
housing  and  will  be  brought  under  the  control  of  municipalities.  The  additional  rental  income  of  corporations 
resulting from the rent increases will be skimmed by increasing the property tax levy, amounting to an additional 
€50  million  in  2013,  and  rapidly  rising  to  €1.7  billion  by  2017  (0.3%  of  GDP).  The  adjustment  of  the 
remuneration of directors of housing corporations is accelerated through a law on normalization of top incomes. 
Rules for selling part of the social housing corporations' property will be loosened. 

3.2.1.2.  Housing finance arrangements 

Lending  policies  of  credit  institutions,  considerably  expanding  the  credit  scope  of 
households in the 1990s, magnified the effects of government policies on the build-up of 
debt. Moreover, since 1993, a second household income can be fully taken into account when 
applying  for  a  mortgage  loan  in  the  Netherlands.  Liberalisation  and  increased  competition 
between  lenders  contributed  to  the  availability  of  more  diversified  and  lower  cost  credit 
instruments,  with  longer  maturities  (typically  extending  to  30  years)  and  on  more  flexible 
terms, i.e. lower amortisation requirements and higher loan-to-value ratios.  

Mortgage  products  have  been  designed  to  fully  benefit  from  the  tax  deductibility  of 
mortgage interest by deferring loan redemption until maturity. These include “interest-
only”  mortgages,  which  typically  involve  only  monthly  payments  of  interest  and  represent 
almost  60%  of  total  mortgages  in  the  Netherlands  (Graph  28).  This  enabled  households  to 
take on ever larger loans, especially as interest mortgage rates have declined at the same time. 
However, it is not clear that households will be able to repay the principal at the maturity date, 
even  though  in  practice  interest-only  mortgages  can  still  involve  some  capital  accumulation 
(households do build up earmarked savings and/or partially repay the principal earlier). Very 
recently,  with  the  Code  of  conduct  for  mortgage  loans  (Gedragscode  Hypothecaire 
Financieringen)  agreed  in  2011,  which,  however,  is  not  legally-binding,  banks  have  taken 
steps to reduce new issuance of this type of loan. Interest-only mortgages are now encouraged 
not to exceed 50% of the market value of the home. However, this does not necessarily affect 
gross  mortgage  debt,  since  the  class  of  amortisation-free  mortgages  also  includes  savings, 
investment  and  endowment  mortgages,  which  involve  capital  accumulation  in  a  separate 
vehicle  (often  through  insurance  companies)  intended  to  clear  the  mortgage  at  maturity.42 
With such a cheap source of finance readily available, it is not surprising that households have 
increasingly put their savings into those products (which they hope will bring higher returns 
and provide increased diversification of their portfolio) rather than amortising the mortgage.  

42  Savings-based  loans  are  essentially  a  fiscally-advantaged  way  of  saving  money;  they  include  a  separate  account,  where 
monthly payments are accrued and used to clear the mortgage at maturity. The returns on investment-backed loans depend, of 
course, on the type of investment selected. Given the development of the stock markets over the past decade, however, the 
realized  returns  on  many  of  such  products  are  likely  to  have  been  below  those  on  savings-based  loans.  In  the  1998–2007 
period, more than half of all newly sold asset-backed mortgage products were investment-based. 

33 

 
 
                                                            
Graph  28:  Type  of  outstanding  mortgage 
amounts, 2010 Q2 (% of total)43 

Graph 29: Average LTV-ratio of Dutch home 
purchases 2000 – 2010 (in %) 
120%

Bridging
2% (EUR 13 
bn)

Annuity / 
linear
2% (EUR 11 
bn)

Other
4% (EUR 21 
bn)

Savings 
and/or 
investment 
linked 
36%
(EUR 210 
bn)

Interest-only
56% 
(EUR 321 
bn)

118%

116%

114%

112%

110%

108%

106%

104%

102%

100%

00Q1

02Q1

04Q1

06Q1

08Q1

10Q1

Source: DNB Financial Stability Overview, April 2011. 

Source:  Het  Kadaster  Kwartaalbericht  in:  Overview  of 
Financial Stability in the Netherlands May 2010. 

The  notional  average  LTV-ratio  (or  the  average  value  of  the  loan  relative  to  the 
purchase price or value of the property) increased from 79% in 1970 to 100% around 
the  2000s  and  even  rose  further  to  reach  120%  at  the  end  of  2009  (Graph  29).  Survey 
results show that the total number of households with an LTV-ratio above 100% quadrupled 
between 2002 and 2008.44 The uptrend in LTV-ratios in recent years has a number of causes. 
Undoubtedly, it reflects an underlying increase in new mortgage volumes. In addition, due to 
the  high  number  of  amortisation-free  mortgages,  the  LTV-ratio  of  an  average  mortgage 
decreases less rapidly during the life of the mortgage than it would have for example ten years 
ago.  However,  the  LTV-ratio  figures  are  taken  from  the  cadastre  (the  only  comprehensive 
national  data  source  available)  and  have  to  be  interpreted  with  caution.  Such  ratios  are  to 
some extent overestimated and probably increasingly so in recent years with the onset of the 
crisis. The loan amount registered in the notarial contract is usually higher than the actual loan 
to  allow  the  bank  and  mortgagee  the  possibility  for  future  increases  without  involving 
additional  costs  for  a  new  notarial  agreement.45  Moreover,  often  voluntary  interim 
redemptions on the mortgage are not registered in the cadastre.  

3.2.2.  Risks related to high household indebtedness 

Notwithstanding  a  number  of  mitigating  factors,  the  high  level  of  household 
indebtedness warrants close attention. Indeed, the high debt level implies a heightened risk 
to the Netherlands' macroeconomic stability by making households' net worth more sensitive 
to  negative  shocks,  such  as  swings  in  interest  rates,  significant  drops  in  house  prices,  or  a 
prolonged  period  of  low  or  negative  economic  growth.  Therefore,  it  is  essential  that 
households start repaying more and thus gradually reduce their mortgage debts.  

43 A borrower with an annuity/linear mortgage repays both monthly interest and a portion of the loan amount so that the loan 
is repaid on its maturity. Bridging mortgages are temporary loans that bridge the gap between the sales price of a new home 
and a home buyer's new mortgage, in the event the buyer's home has not yet been sold. 
44 DNB Household Survey 2003 to 2009, in: DNB (2010). 
45  Anecdotal  evidence  suggests  that  the  Kadaster  LTV-ratios  are  distorted  by  around  10  percentage  points  upwardly.  The 
current  average  LTV  is  likely  to  be  even  lower  than  110%  given  the  maximum  LTV-ratio  of  106%  in  the  2011  code  of 
conduct and the fact that the supervision has been tightened.  

34 

 
 
 
 
                                                            
 
3.2.2.1.  Wealth effects 

From  a  balance-sheet  perspective,  the  strong  overall  wealth  position  of  Dutch 
households mitigates their relatively high indebtedness. Much of the build-up in mortgage 
debt has been mirrored by even steeper increases in household wealth,46 meaning that the net 
worth  of  households  has  not  deteriorated  (Graph  30).  Households  have  capitalised  on  high 
and rising house prices, as shown in Graph 31: the total value of the owner-occupied housing 
stock  was  estimated  at  192.1%  of  GDP  in  2011.47  The  share  of  housing  in  total  household 
wealth  rose  from  31%  in  1993  to  39%  in  2011,  thus  becoming  the  most  important  asset  in 
households' portfolios. Gross financial assets roughly equal 300% of GDP, consisting mainly 
of pension and insurance assets, with an estimated value of EUR 1116 billion in 2011.  

Graph  30:  Household  assets  (including 
fund 
insurance  companies  and  pension 
savings) and liabilities (% of total assets)  

Graph  31:  Household  assets  and  liabilities, 
housing wealth and net financial assets48 (% of 
GDP) 
350

% of GDP

% of total 
assets
50

40

30

20

10

0

-10

-20

-30

1993

2011

250

150

50

-50

-150

5
9

6
9

7
9

8
9

9
9

0
0

1
0

2
0

3
0

4
0

5
0

6
0

7
0

8
0

9
0

0
1

1
1

Owner
occupied
housing

Securities
(shares
and bonds)

Deposits in
bank and
saving
accounts

Other
assets

Other debt Mortgages

Holdings in
insurance
companies
and
pension
funds

Source: CBS. 

Source: Eurostat. 

Assets, insurance technical reserves
Liabilities, loans
Assets, currency and deposits
Liabilities, other
Assets, securities other than shares
Assets, other
Assets, shares and other equity
Housing wealth
Net financial assets

Moreover,  Dutch  households  have  a  relatively  low  ratio  of  risky  to  non-risky  assets49, 
thanks to relatively high currency and deposits positions, and relatively low asset positions in 
shares and other equity (Graph 32). 

Nevertheless, as the bulk of assets is tied in pensions and homes, the liquid assets buffer 
for  absorbing  direct  income  or  asset  shocks  of  Dutch  households  is  relatively  modest 

46 Household wealth is defined as the value of financial assets (which include equities, bonds and bank deposits, and indirect 
holdings  in  insurance  companies  and  pension  funds)  plus  real  assets  (principally  housing)  after  the  deduction  of  financial 
liabilities (which are dominated by mortgage borrowing). 
47 Also important are holdings in insurance companies and retirement savings in pension funds of EUR 1117 billion in 2011. 
Other financial assets include deposits in banks and savings accounts (EUR 332 billion in 2011). Households also possess 
bonds and equities to the tune of EUR 200 billion. Total household assets (including housing, financial and other assets, but 
not  holdings  in  insurance  companies  and  pension  funds)  reached  EUR  1952  billion  in  2011,  or  324%  of  GDP  (including 
pension funds: EUR 3068 billion or 510% of GDP) CBS (2012). 
48  Households'  net  financial  assets  include  pension  and  life  insurance  arrangements,  shares,  securities  and  currency  and 
savings deposits, minus households' debt. Note that the value of own real estate property is not included in the net financial 
assets position of households, while mortgage debt is deducted from the financial assets. 
49 The ratio equals "shares and other equity" to "currency and deposits".  

35 

 
 
 
                                                            
(Graph  33)50.  Potential  problems  with  debt  servicing  are  therefore  harder  to  mitigate  by 
selling assets. On the one hand, relatively few households face acute financial problems, amid 
relatively  low  (though  rising)  unemployment  and  a  still  relatively  contained  16.6%  fall  in 
house prices from the peak in 2008. On the other hand, however, household balance sheets are 
now  more  fragile  than  during  earlier  recessions.  The  rise  in  house  prices  has  lengthened 
households’  balance  sheets  in  the  run-up  to  the  crisis,  though  substantial  individual 
differences exist. 

Graph 32: Ratio of risky to non-risky 
households assets 

Graph 33: Financial assets of households (in % 
of GDP, year-end 2010) 

)

%

(
o
i
t
a
R

160

140

120

100

80

60

40

20

0

250

Loans

200

150

100

50

DK

NL
IE

NO

GB

PT

SE

ES

FI

DE

FR

AT

LU

GR

SI

IT

BE

0

0

50

100

150

200

250

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

Source: Eurostat. 

Source: Eurostat. 

Liquid assets  

In  addition,  in  recent  years,  low  or  even  negative  returns  on  pension  plan  assets  and 
declining  house  prices  have  led  to  a  deterioration  in  the  net  wealth  position  of  Dutch 
households.  In  principle,  this  trend  affects  all  homeowners  in  the  same  way,  but  there  are 
large differences in households’ starting positions. Homeowners, who bought their dwellings 
long ago, have accumulated considerable home equity; on the other hand, given the fall albeit 
moderate in house prices since 2008, a number of first-time buyers, in the 25-35 age group, 
are  now  in  negative  home  equity  (where  the  loan  balance  exceeds  the  house  value).  The 
homes  of  an  estimated  20%  of  Dutch  homeowners  are  worth  less  than  their  outstanding 
mortgage loans which however does not necessarily imply foreclosure.51  

3.2.2.2.  Income and interest rate shocks 

The  main  risk  to  service  mortgage  loans  stems  from  repayments  arrears,  which  have 
however  remained  very  low  by  international  standards  so  far.  Similarly,  household 
defaults are still very much contained; foreclosures in terms of the total housing stock in the 
residential  property  market  still  accounts  for  only  0.07%  of  homes52,  which  is  among  the 
lowest in the EU. This is not only due to strong creditors' rights and a very strict and austere 
Dutch insolvency law, but also to the existence of an extensive and generous unemployment 
insurance system. The Dutch labour market is characterised by a low unemployment rate and 
a high participation rate, in an international context, which can be explained by a very high 

50 If the value of the both owner-occupied housing stock and holdings in insurance companies and pension funds is excluded, 
households have a liquid assets position (including currency and deposits, shares and other equity, and securities) of 117% of 
GDP in 2011. 
51 DNB (2012a). 
52 CBS (2012). 

36 

 
 
 
 
                                                            
proportion  of  part-time  jobs  and  the  prevalence  of  double-income  households.  Moreover, 
mortgage  debt  has  mainly  been  incurred  by  those  with  higher  incomes.  A  full  60%  of  all 
mortgages  are  held  by  the  highest-earning  fifth  of  households,  whereas  the  lowest-earning 
fifth  only  hold  about  3%  of  total  debt.  High-income  earners  usually  face  a  lower  risk  of 
unemployment  and  income  shocks  and  should  thus  be  more  able  to  take  on  debt.  Problems 
concerning  foreclosures  are  therefore  mostly  the  result  of  unexpected  life  events,  such  as 
long-term unemployment, disability, death, and most importantly divorce. 

On  a  macro  scale,  the  current  distribution  of  refinancing  profiles  still  provides 
protection against the pass-through of sudden increases in mortgage interest rates at the 
time of renewal. In 2009, about half of all mortgages had a remaining fixed interest period of 
4  years  or  less,  while  one-fifth  had  a  remaining  fixed  interest  period  of  less  than  one  year 
(Graph 34). Moreover, as real and nominal interest rates have declined, the rise in household 
indebtedness has been associated with a relatively limited debt service burden in many cases, 
with total interest expenditure as a share of disposable income currently at about the average 
level observed over the last decade (around 7%). A trend decline in mortgage rates has made 
it possible for households to service a growing debt stock without allocating a larger share of 
their budgets to debt servicing (Graph 35).  

Graph 34: Cumulative distribution of fixed 
interest rate period and remaining fixed interest 
rate term in years (% of total number mortgages) 

Cumulative remaining interest rate period

Cumulative chosen fixed interest rate period

Graph 35: Interest Burden, Households  

100

90

80

70

60

50

40

30

20

10

0

0

5

10

15

20

25

30

Source:  DNB  Household  Survey  2008,  in:  Overview  of 
Financial Stability in the Netherlands, November 2009. 

Source: Eurostat. 

Nevertheless, relatively young households with an average to high income are currently 
particularly  vulnerable.  They  have  taken  out  high  mortgages  relative  to  their  income, 
savings and the value of their home. Graph 36 shows that young people also spend a higher 
percentage of their gross income on interest charges, even with the current low interest rates. 
This, combined with their high level of debt and significant housing expenses, exposes them 
to heightened risks. 

37 

 
 
 
30%

25%

20%

15%

10%

5%

0%

Graph 36: Interest charges by age category (% 
of homeowner's household income as at 1/1/2011) 

Graph 37: Dutch banks' deposit funding 
gap 2011 (EUR billion) 
1000

454

750

500

250

0

25-34

35-44

45-54

55-64

65+

Total

10 - 90 percentile

25 - 75 percentile Median

Age

Loans

Gap

Deposits

Private sector through securitisations (mainly mortgages)
Corporates direct
Private sector via banking subsidiaries
Households direct
Deposit funding gap

Source: De Nederlandsche Bank. 

Source: De Nederlandsche Bank. 

3.2.2.3.  Financial sector balance sheet adjustments 

Changes in the debt-to-asset position of Dutch households have highlighted the exposure 
of banks to longer-term mismatches on their balance sheets because of deposit funding 
gaps. As illustrated in Graph 37, the current total funding gap of Dutch banks is estimated to 
amount to some EUR 454 billion (or approximately 75% of GDP), larger than elsewhere in 
the  EU  (Graph  38),  despite  the  national  savings  surplus.  Dutch  banks  hold  relatively  large 
home  mortgage  portfolios  compared  to  those  in  other  EU  countries,  with  a  stable  share  of 
around 70%.53 Simultaneously, banks have limited access to savings, as pension capital is not 
accrued  in  banks  but  rather  in  pension  funds.  Since  2008,  the  funding  gap  is  narrowing 
slightly thanks to growth in savings, but remains large (Graph 39). 

53 The Netherlands has a highly developed financial sector (with large banks, large pension and insurance funds, but also 
"special  financial  institutions").  The  Dutch  banking  sector  is  large  from  an  EU  perspective,  with  the  total  value  of  bank 
balance sheets amounting to almost 500% of GDP, lower than the banking sector in the UK (650% of GDP), but much higher 
than that in France and Germany (350% and 250% respectively). Moreover, there is a high degree of concentration across 
three major players (Rabobank, ABN Amro and ING) which hold around half of total outstanding mortgage credit.  

38 

 
 
 
 
                                                            
Graph 38: International comparison of 
deposit funding gap (% of loans not financed 
with deposits, end of 2011) 

60

50

40

30

20

10

0

-10

-20

Graph 39: Development of the deposit funding 
gap 

500

450

400

350

300

IE NL ES PT FI SI

IT GR FR AT DE LU SK BE

04

05

06

07

08

09

10

11

12

Source: De Nederlandsche Bank 

Source: De Nederlandsche Bank 

Dutch  banks  are  under  pressure  to  reconsider  their  funding  model  in  the  light  of  the 
altered market conditions and more stringent regulatory requirements, such as Basel III, 
which  will  require  banks  to  reduce their  dependence  on  market  funding.  In  the  wake  of  the 
crisis,  the  tendency  of  banks  to  fund  mortgage  portfolios  via  wholesale  securitisation  came 
under  pressure  (Graph  40).  Since  banks  can  only  partly  fund  their  large  mortgage  loan 
portfolios through savings deposits, they are dependent on market funding, which may dry up 
in periods of severe market unrest or uncertainty. Mortgage financing is generally issued with 
long maturity. If financing via the financial markets is geared towards short maturities, banks 
are exposed to higher refinancing risks.   

Graph  40:  Savings,  mortgage  debt  and 
securitisation of mortgages since 1970 

billion euro

Graph  41:  Tier  1  ratio,  leverage  and  risk-
weighted assets of European banks 
0.14

1.00

700

600

500

400

300

200

100

0

Savings

Total mortgage debt

Securitised mortgages

0.12

0.10

0.08

0.06

0.04

0.02

0.00

0.90

0.80

0.70

0.60

0.50

0.40

0.30

0.20

0.10

0.00

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

I

S

T

I

T
P

E

I

Y
C

T
A

O
N

R
F

S
E

E
S

B
G

L
N

T
M

R
G

K
D

E
B

I

E F
D

U
H

 Tier 1 ratio

leverage

 risk-weighted assets (right axis)

Source: Central Planning Bureau. 

Source: Central Planning Bureau. 

While  Dutch  banks  have  a  relatively  high  core  tier  1  ratio  in  international  comparison,  the 
amount  of  core  tier  1  capital  as  a  percentage  of  total  assets  is  nevertheless  fairly  low. 

39 

 
 
 
 
 
However,  Dutch  banks  performed  well  in  the  latest  round  of  EBA  stress  tests  thanks  to  a 
favourable weighting of risk-weighted assets (including mortgage loans) and should be able to 
withstand a heightened level of defaults (Graph 41).  

3.2.2.4.  Household sector balance sheet adjustment 

The urgency of balance sheet recovery for Dutch households or the immediate need for 
deleveraging seem less obvious than for other countries. The two most important reasons 
for this are the relatively favourable starting position of unemployment in the Netherlands and 
the relatively gradual and contained development of house prices so far.  

Given the high level of household assets, deleveraging pressures for the household sector 
are relatively contained. However, given the low degree of liquidity of these assets, Dutch 
households might be relatively sensitive to the impact of any balance sheet adjustments that 
do  occur.  Moreover,  when  considering  assets  adjusted  for  valuation  effects,  affecting  both 
financial  (mainly  via  prices  of  shares  and  other  equity)  and  non-financial  assets  (mainly 
through  house  prices),  the  expansion  of  household  balance  sheets  may  have  been  more 
asymmetric than shown by headline ratios (Graph 42), implying deleveraging pressures (Box 
4). 

40 

 
 
Box 4: Household debt sustainability 

The  assessment  of  the  deleveraging  pressures  faced  by  Dutch  households  hinges  on  the  definition  of  a 
benchmark  against  which  to  compare  household  debt  dynamics.  Private  debt  is  considered  "sustainable" 
whenever it implies stationarity in terms of notional leverage.54 Deviations of the notional leverage ratio from a 
balanced path imply increasing deleveraging forces as debt effectively becomes less sustainable (meaning that 
deflated debt did not evolve in line with deflated assets). 

Graph  42  plots  the  evolution  of  different  measures  of  household  indebtedness  (debt  over  GDP,  debt  over 
disposable income and debt over assets) and also reports the dynamics of an estimated sustainable benchmark. 
The ratio of household debt to GDP has increased from 59.1% in 1995 to 127.6% in 2011. The ratio of debt to 
gross disposable income followed a similar evolution. On the contrary, the change in leverage ratio was more 
moderate, from 17.6% in 1995 to 30% in 2011 (see 3.2.2.1) due to the concurrent increase in both asset prices 
and  household  debt.  Adjusting  for  valuations  effects,  however,  the  measure  used  of  notional  leverage  shows 
increases over the period considered. The gap between the actual and notional leverage opened up fairly rapidly 
from the second half of the 1990s and again halfway through the 2000s. Graph 43 shows tentative estimates of 
the annual deviations of the total gross household debt-to-GDP ratio from a synthetic measure of an underlying 
sustainable  path  (attempting  to  adjust  for  valuation  effects).  Using  period  1995  to  2007  to  calculate  the 
cumulated increases in the estimated "excessive debt", it amounts to 38 percentage points. 
Graph 42: Leverage ratios and balance sheet 
repair of Dutch households 

Graph 43: Household sector balance sheet 
adjustment (difference between actual and 
sustainable debt, % of GDP) 

140

120

100

80

60

40

20

0

)

%

,
s
t
e
s
s
a
&
P
D
G

.
s
v
(

s
o
i
t
a
r

t
b
e
D

95

97

99

01

03

05

07

09

11

300

250

200

150

100

50

0

)

%

,
I

D
G

.
s
v
(
o
i
t
a
r

t
b
e
D

45

40

35

30

25

20

15

10

5

0

10

8

6

4

2

0

-2

-4

-6

-8

-10

Debt / GDP

Sustainable debt / GDP

Debt / total assets

Debt / gross disposable income (right axis)

Source: Eurostat, Commission Services. 

95

97

99

01

03

05

07

09

11

Annual change in difference (right axis)

Difference between actual and sustainable debt (% 
of GDP)

Source: Eurostat, Commission Services. 

The rebalancing of household sector balance sheets towards a more sustainable level implies the closure of 
the gap between the actual and the balanced or sustainable debt ratios. This movement depends, on the one 
hand,  on  the  actual  level  of  debt  to  GDP  going  down  (deleveraging  efforts  from  households  reducing  their 
liabilities) and, on the other hand, on the benchmark going up (through corrections or negative valuation effects 
in  asset  prices,  as  houses  prices  and  stock  market  adjust,  allowing  for  an  increase  in  the  sustainable  level  of 
debt). The pace of the adjustment towards a more sustainable level of indebtedness and the associated impact on 
economic activity will crucially depend on the interaction between these two forces.  

In the case of the Netherlands, the existing high share of financial assets (i.e. pension funds) mitigates the impact 
of  negative  valuation  effects  in  non-financial  assets  (drops  in  house  prices)  as  households  have  a  more 
diversified asset portfolio than the average EU country. 

54  Notional  leverage  is  defined  as  the  deflated  (i.e.  corrected  for  valuation  effects)  ratio  between  debt  and  total  assets 
(financial and non-financial). 

41 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
At  the  same  time,  heightened  uncertainty  about  the  economic  outlook  has  reduced  the 
incentives to leverage up against housing wealth. This is illustrated in Graph 4455, which 
builds on survey data but should be taken with some caution as it benchmarks against the EU-
27 and may not necessarily reflect a calibrated gauge of Dutch credit conditions allowing for 
long-run  fundamentals.  The  depreciating  value  of  financial  assets  and  declines  in  house 
prices, along with increased income insecurity, have already prompted households to rein in 
their  spending  and  step  up  saving  in  order  to  rebuild  their  balance  sheets.  Low  confidence 
among  economic  agents  and  the  pro-cyclicality  of  pension  premiums  and  pay-outs  tend  to 
accentuate the drag resulting from housing-related wealth effects.  

Graph 44: Credit demand conditions  

Graph 45: Credit supply conditions  

Unemployment rate

House-purchase
loan demand (bank
survey, inv. scale)

SME loan demand
(SME survey, inv.
scale)

Consumer
confidence (inv.
scale)

Economic sentiment
(inv. scale)

Corporate loan
demand (bank
survey, inv. scale)

House price change
(vs. 2007Q4)

NL
Average

Source:    ESTAT,  ECB,  IMF,  BIS,  European  Commission, 
Datastream, own calculations 

Source:    ESTAT,  ECB,  IMF,  BIS,  European  Commission, 
Datastream, own calculations 

Moreover, by adopting stricter credit criteria banks could potentially speed up balance 
sheet  adjustments.  As  their  capital  ratios  have  to  be  restored,  banks'  ability  to 
accommodate demand for credit could potentially be reduced (Graph 45). Any pick-up in 
credit demand  will exacerbate this tension. In recent  years, banks  have  sharpened the credit 
conditions  for  corporate  loans  due  to  increased  economic  risks  and  capital  and  financing 
costs.  Combined  with  decreased  credit  demand,  this  has  dampened  credit  growth  by  1  to  3 
percentage points, affecting especially  small  and  medium-sized enterprises (SMEs). Though 
currently  Dutch  banks  are  not  yet  scaling  down  their  domestic  activities,  credit  growth  is 
below the long-term trend. This declining credit growth of course follows years of exuberant 

55 Graphs 45 and 46 present stress maps of credit demand and supply conditions. For each variable the range of 
the  graph  is  given by  the  maximum  and  minimum  observation  among  all  Member  States  (MS)  with  available 
data. A weighted average of all available EU27 Member States is provided as a visual reference. Variables are 
plotted on a regular or inverted scale ensuring that a larger map corresponds to more adverse conditions. Credit 
demand-related  data  include  the  EC  Consumer  Confidence  Indicator,  the  Economic  Sentiment  Indicator,  the 
unemployment rate, the house price evolution relative to 2007Q4, the BLS changes in demand for (i) enterprises 
and  (ii)  house  purchase  loans,  and  the  SAFE  variable  on  External  financing  needs.  Credit  supply-related 
indicators  include  the  change  in  overall  non-performing  loans  relative  to  2007,  the  banks'  Tier  1  capital  ratio, 
banks' return on equity, banks' exposure to high risk foreign claims as % of GDP, the sovereign CDS spread, the 
Bank  Lending  Survey  (BLS)  tightening  of  credit  standards  for  (i)  loans  to  enterprises  and  (ii)  house  purchase 
loans (trailing 4-quarter average), and the Survey on the access to finance of SMEs (SAFE) loan request failure 
rate (percentage of requests that did not receive all or most of the amount requested). Most recent available data 
are presented (2012 Q2, Q3 or Q4). 

42 

 
 
 
 
                                                            
lending  and  cannot  be  seen  separately  from  the  weak  economic  recovery  and  the  faltering 
housing market.  

4. 

POLICY CHALLENGES 

The  analysis  in  sections  2  and  3  indicates  that  macroeconomic  developments  regarding 
private sector debt and deleveraging pressures, also coupled with remaining inefficiencies in 
the  housing  market,  is  the  main  challenge  in  the  Netherlands.  Although  the  large  current 
account surplus  does  not raise  risks similar to large deficits, the development of the  current 
account also deserves attention.   

It  should  be  recalled  that  a  relevant  policy  recommendation  on  the  housing  market  was 
reflected and integrated in the country-specific recommendations issued for the Netherlands in 
July  2012.  The  assessment  of  progress  in  the  implementation  of  this  recommendation  will 
take  place  in  the  context  of  the  assessment  of  the  Dutch  National  Reform  Programme  and 
Stability Programme under the 2013 European Semester. Addressing the structural problems 
underlying  the  key  challenge  outlined  for  the  Netherlands  requires  a  gradual  redirection  of 
policies, as embedded patterns need time to adjust.  

Against this background, this section discusses different avenues that could be envisaged to 
address the challenges identified in this IDR. 

The  Netherlands  has  to  a  large  extent  been  tapping  financial  flows  from  abroad  in  an 
original,  yet  potentially  risky  way  which  merits  reorientation.  Dutch  household  savings 
primarily end up with pension funds and insurance vehicles, which channel the bulk of these 
savings  abroad.  In  recent  years  the  net  returns  of  these  institutional  investors  have  been 
disappointing  and  their  buffers  to  be  able  to  cope  with  financial  setbacks  have  significantly 
decreased  since  2008.  Along  with  substantial  pension  savings,  Dutch  households  took  on 
substantial gross housing debt, in turn shaping the funding patterns of the financial sector. At 
the  same  time,  profits  received  from  foreign  affiliates  have  spurred  registered  non-financial 
corporation's  savings,  creating  a  net  savings  surplus.  Owing  to  its  geographical  location, 
historical ties, a traditionally strong competitive position and sound and credible institutional 
setting,  the  Netherlands  has  become  a  hub  for  international  trade  and  capital  flows.  This 
allowed  non-financial  corporations  (mostly  multinationals)  to  channel  FDI  and  "route" 
income  flows,  via  entities  in  the  Netherlands,  between  a  company  in  one  country  and 
subsidiaries  or  affiliates  in  other  countries.  A  partial  and  gradual  reorientation  of  overall 
savings and funding flows towards more balanced patterns across sectors could help mitigate 
risks. 

Profitable segments of the economy with a strong competitive edge can help to underpin 
domestic  purchasing  power.  Aggregate  profitability  of  firms  has  remained  high  in  the 
aggregate  yet  with  very  marked  differences  across  firms  and  industries.  Especially  SMEs 
oriented  towards  the  domestic  market  have  seen  buffers  diminish  as  labour  hoarding  has 
become  costly  in  the  presence  of  protracted  weak  domestic  demand.  In  addition,  exploiting 
the space in the institutional framework for pursuing differentiated wage increases and lower 
pension  contributions,  particularly  in  the  second  pillar,  may  help  vulnerable  households 
restore  their  balance  sheets,  while  also  cushioning  domestic  demand.  Domestic  demand  is 
under  pressure,  with  confidence  indicators  near  historic  lows,  a  deteriorating  labour  market 
situation,  fiscal  consolidation,  and  pressure  on  pension  contributions  and  pay-outs.  Lower 
pension contributions can also contribute to a rebalancing, although households will then have 
to revise their pension expectations.  

43 

 
 
Fairly sluggish productivity increases in the most recent period and the low value added 
of re-exports (the most buoyant segment of exports) illustrate the importance of focusing 
on  fostering  innovation  and  competitiveness.  In  this  regard,  public  spending  on 
fundamental  research,  knowledge  and  education  can  help  support  the  long-term  growth 
potential  of  the  Dutch  economy.  Cyclical  effects,  finance  bottlenecks,  unusually  high 
uncertainty and the impact of (expected) balance sheet adjustments all seem to play a role in 
the  relatively  low  domestic  rate  of  capital  formation,  yet  there  may  also  be  a  structural 
element  at  play.  For  firms,  a  critical  reflection  on  how  best  to  invest  the  proceeds  of 
accumulated surpluses and how to rebalance home and foreign investments seems warranted. 
Balanced adjustment should have a beneficial effect on the domestic investment climate.  

As regards private debt, comprehensive and appropriately timed and sequenced reforms 
in the housing market would reduce vulnerabilities of households, financial institutions 
and the government. They would also improve the allocation of capital, thus supporting the 
long-term  growth  potential  of  the  Dutch  economy.  With  respect  to  housing,  initiatives  that 
eliminate  fiscal  incentives  for  taking  on  debt  and  that  encourage  mortgage  loan  repayments 
are welcome. Recent measures by the government in this area appear to be steps in the right 
direction, but they still have to be assessed in detail. There are also obvious implications of 
the  current  housing  policies  on  government  finances,  notably  in  terms  of  foregone  tax 
revenues. Government measures recently taken only partly address these.  

Moreover, measures are required to correct rigidities in the housing market, including 
those  that  have  prevented  the  emergence  of  a  functioning  private  rental  market  of 
appropriate size. Measures to advance the operation of the housing market by improving the 
functioning  of  the  private  rental  market  and  reducing  the  inefficiencies  and  dead-weight 
losses  associated  with  the  operations  of  social  housing  corporations  may  help  to  get  the 
market afloat. Of course, this should be done while duly protecting the segment of dwellers in 
need of social housing. 

The  imminent  policy  challenge  will  be  to  contain  balance  sheet  adjustments,  restore 
confidence, and harness growth while simultaneously stabilising public finances. Thus it 
is essential to strike an appropriate balance between adjustment needs and the desirability of 
supporting  near-term  activity.  This  implies  any  measures  would  have  to  be  phased  in 
gradually and predictably. In this way, both households and lenders will have time to adjust to 
the  new  circumstances  and  substantial  and  abrupt  adjustments  in  the  housing  market  and  in 
finance  can  be  avoided.  Long-run  gains  could  even  be  larger  if,  after  successful  fiscal 
stabilisation, part of the budgetary savings were to be channeled back into the economy by tax 
relief aimed at reducing the costs of labour, promoting investment, or a combination of such 
measures. 

Although balance sheet adjustments initially would tend to dampen near-term economic 
activity,  they  can  be  expected  to  contribute  to  a  sustainable  recovery  and  the  benefits 
should eventually outweigh the costs. Despite the restraining effect in the coming years on 
activity,  the  process  of  adjusting  balance  sheets  and  savings  patterns  should  reduce  the 
insecurity  about  financial  stability.  Within  the  overall  fiscal  constraints,  efforts  to  promote 
innovation and to exploit fully differentiation opportunities in managing costs and financing 
opportunities will be key to a successful adjustment process. Balanced adjustment will have a 
beneficial effect on the investment climate and, hence, economic prospects in the long term. 
Managing the transition in the housing market at a sustainable pace will be a defining element 
of such a strategy. 

44 

 
 
REFERENCES 

Boonstra, W. (2008), De betalingsbalans en de externe vermogenspositie. Over zwarte gaten, 
zwarte materie en goede statistieken, VU Uitgeverij, Amsterdam. 

Conijn, J. (2011), De Vastgoedlezing 2011: Woningcorporaties op een Kruispunt, Amsterdam 
School of Real Estate.  

Council  for  Socio-economic  Affairs  (2010),  Naar  een  integrale  hervorming  van  de 
woningmarkt,  Commissie  Sociaal-Economische  Deskundigen:  Sociaal-Economische  Raad, 
Centraal Planbureau. 

Centraal Planbureau (2012), CPB Financial Stability Report. 

Centraal  Planbureau  (2010),  Hervorming  van  het  Nederlandse  woonbeleid,  Den  Haag,  CPB 
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