COMMISSION STAFF WORKING DOCUMENT Assessment of the 2013 national reform programme and stability programme for the NETHERLANDS Accompanying the document Recommendation for a Council Recommendation on the Netherlands' 2013 national reform programme and delivering a Council Opinion on the Netherlands' 2013 stability programme for 2012-2017
Date: 2013-05-29
Institutions: European Commission
Subjects: Netherlands, budgetary equilibrium, economic recession, female work, indebtedness, migrant worker, property market, research and development, tax reform, youth unemployment

EUROPEAN 
COMMISSION 

Brussels, 29.5.2013  
SWD(2013) 369 final 

COMMISSION STAFF WORKING DOCUMENT 

Assessment of the 2013 national reform programme and stability programme for the 
NETHERLANDS 

Accompanying the document 

Recommendation for a Council Recommendation 

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

{COM(2013) 369 final} 

EN 

   EN 

 
 
 
 
  
 
TABLE OF CONTENTS 

Executive summary .................................................................................................................... 3 

1. 

2. 

2.1. 

2.2. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

4. 

5. 

Introduction .................................................................................................................. 5 

Economic developments and challenges...................................................................... 6 

Recent economic developments and outlook............................................................... 6 

Challenges .................................................................................................................... 7 

Assessment of policy agenda ....................................................................................... 9 

Fiscal policy and taxation............................................................................................. 9 

Financial sector .......................................................................................................... 14 

Labour market, education and social policies ............................................................ 15 

Structural measures promoting growth and competitiveness..................................... 20 

Modernisation of public administration ..................................................................... 26 

Overview table ........................................................................................................... 28 

Annex ......................................................................................................................... 32 

2 

 
EXECUTIVE SUMMARY 

Economic Outlook  

The Dutch economy is in recession, weighed down by weak domestic demand stemming from 
adverse  trends  in  employment  and  disposable  income.  The  persistent  nature  of  the  current 
economic  weakness  owes  much  to  rigidities  and  distortive  incentives  built  up  over  decades 
which shaped house financing and sectoral savings patterns.  Gross domestic product shrank by 
0.9% in 2012 and economic growth is expected to remain negative in 2013 at -0.8%, turning positive 
at 0.9% in 2014, according to the Commission's spring 2013 forecast. Unemployment averaged 5.3% 
in  2012,  but  is  forecast  rise  to  6.9%  in  2013  and  7.2%  in  2014.  After  reaching  2.8%  in  2012, 
inflation is expected to fall to 1.5% in 2014. 

The  headline  general  government  deficit  was  4.1%  of  GDP  in  2012  and  is  expected  to  fall  to 
3.6% of GDP in 2013. The efforts made to reduce the deficits in 2011-2013 have been sizeable and 
the adjusted fiscal effort amounts to an average of 1.1% of GDP a year, above the required ¾% of 
GDP. The structural balance (net of one-off and temporary measures) amounted to 2.6% of GDP in 
2012,  and,  according  to  the  Commission  services'  Spring  2013  forecast,  will  improve  to  2.0%  of 
GDP in 2013 before deteriorating to 2.3% in 2014, if policies remain unchanged.  Sufficient progress 
towards the medium term objective is not ensured on the basis of the stability programme. The debt 
ratio is expected to increase steadily to 71.2% of GDP in 2012, 74.6% of GDP in 2013 and 75.8% of 
GDP in 2014.  

Key Issues 

The  Netherlands  has  been  identified  by  the  Commission  as  experiencing  macroeconomic 
imbalances,  particularly  with  regard  to  private  sector  debt.  A  strong  negative  feedback  loop 
from the housing market to the real economy, notably through its effect on wealth and confidence, is 
weighing on economic activity. 

The  Netherlands  has  made  some  progress  on  meeting  the  2012  CSRs,  particularly  on  fiscal 
consolidation and the  long-term sustainability of public finances.  Some  progress  has also been 
made  in  response  to  the  recommendations  concerning  the  labour  market  and  the  housing  market. 
Good  progress  has  been  made 
innovation  and 
science/business  links.  However,  further  measures  remain  necessary  in  all  areas  where  the 
recommendations have not yet been fully achieved. 

the  recommendation  on 

in  response 

to 

The  policy  response  needs  to  strike  a  balance  between  the  need  to  make  adjustments  and 
pursue  reforms  and  the  desirability  of  supporting  near-term  activity.  Within  the  fiscal 
constraints, efforts to promote innovation and safeguard growth-enhancing expenditure will be key 
to achieving a balanced adjustment. Managing the transition in the housing market gradually and at a 
sustainable  pace,  yet  with  a  sufficient  level  of  ambition,  will  be  a  defining  element  of  such  a 
strategy. 

The  immediate  policy  challenge  for  the  Netherlands  will  be  to  contain  balance  sheet 
adjustments, to restore confidence and harness growth while simultaneously stabilising public 
finances.  There  are  considerable  challenges  when  it  comes  to  fiscal  policy,  the  labour  market,  the 
housing market, investments in research and development (R&D) and education.  

3 

 
•  Public  finances:  The  Netherlands  reduced  its  budget  deficit  to  4.1  %  in  2012,  thanks  to  a 
strong  and  sustained  fiscal  effort.  With  the  adoption  of  additional  sizeable  consolidation 
measures  in  2013  the  deficit  is  expected  to  decline  further  to  3.6  %  of  GDP.  However,  the 
fiscal consolidation measures listed in the stability programme would not suffice to achieve 
the correction of the excessive deficit by 2014. The social partners agreed on elements of a 
pension reform including bringing the statutory retirement age in the second (funded) pillar 
in  line  with  the  first  pillar.  Ongoing  consolidation  is  required  to  ensure  a  sustainable 
correction of the excessive deficit and to achieve the medium-term objective (MTO), while 
safeguarding  growth-enhancing  expenditure  areas  directly  relevant  for  growth  such  as 
education, innovation and research.  

•  Labour  market/education:  The  Dutch  labour  market  is  still  performing  relatively  well 
compared to other EU Member States. However, unemployment is on the rise and population 
ageing is putting further pressure on the labour supply. A large pool of untapped labour is still 
available: the average number of hours worked in the Netherlands is much lower than the EU 
average, especially for women (77% of whom worked part-time in 2012); employment rates 
of people with migrant backgrounds have been falling since 2008; and youth unemployment 
rose  to  9.5%  in  2012. Additional  efforts  to  reduce  tax  disincentives  on  labour  would  make 
work  more  attractive. Although  the  Dutch  school  system  performs  well  overall,  it  fails  to 
deliver excellence, and high achievers score much lower than their international peers. 

•  Housing  market:  The  high  average  amount  of  mortgage  debt  –  which  is  to  a  large  extent 
down  to  long-standing  fiscal  incentives,  notably  full  mortgage  interest  deductibility  –  has 
made households vulnerable to falling house prices. Banks have also been offering mortgages 
exceeding the value of the house, leading their balance sheets to be heavily geared towards 
housing finance, which as the housing market adjusts, weighs on their credit portfolio. The 
rental  market  is  dominated  by  a  strictly  regulated  social  housing  (around  one  third  of  total 
dwellings), and the incentive for people with higher incomes to move out of social housing is 
very limited.  

•  Research and innovation: Dutch firms’ relatively low investment in research (expenditure 
was  1.07%  of  GDP  in  2011,  below  the  EU  average  of  1.26%),  and  public  funding  for 
research are currently on a decreasing trend. There is also no significant orientation towards 
research-intensive sectors (with some exceptions in the machinery and equipment industry), 
skill  shortages  in  engineering  and  technology,  all  of  which  may  adversely  affect  the  future 
competitiveness of the Dutch economy.  

4 

 
 
1.  INTRODUCTION 

In  May  2012,  the  Commission  proposed  a  set  of  country-specific  recommendations  (CSRs)  for 
economic  and  structural  reform  policies  for 
these 
recommendations, the Council of the European Union adopted five CSRs in the form of a Council 
Recommendation in July 2012. These CSRs concerned fiscal policy and public finances, the labour 
market,  innovation  policy  and  the  housing  market.  This  Staff  Working  Document  (SWD)  assesses 
the state of implementation of these recommendations in the Netherlands. 

the  Netherlands.  On 

this  basis  of 

The  SWD  assesses  policy  measures  in  light  of  the  findings  of  the  Commission’s  Annual  Growth 
Survey 2013 (AGS)1 and the second annual Alert Mechanism Report (AMR),2 which were published 
in  November  2012.  The  AGS  sets  out  the  Commission’s  proposals  for  building  the  necessary 
common understanding about the priorities for action at national and EU level in 2013. It identifies 
five priorities to guide Member States to renewed growth: pursuing differentiated, growth-friendly 
fiscal  consolidation;  restoring  normal 
the  economy;  promoting  growth  and 
competitiveness for today and tomorrow; tackling unemployment and the social consequences of the 
crisis;  and  modernising  public  administration.  The  AMR  serves  as  an  initial  screening  device  to 
determine  whether  macroeconomic  imbalances  exist  or  are  at  risk  of  emerging  in  Member  States. 
The AMR found positive signs that macroeconomic imbalances in Europe are being corrected. To 
ensure  that  a  complete  and  durable  rebalancing  is  being  achieved,  the  Netherlands  and  13  other 
Member States were selected for a review of developments  in the accumulation and unwinding of 
imbalances.3 

lending 

to 

Against  the  background  of  the  2012  Council  Recommendation,  the  AGS  and  the  AMR,  the 
Netherlands presented updates of its national reform programme (NRP) and a stability programme 
on 29 April 2013. These programmes provide detailed information on progress made since July 2012 
and on the government’s future plans. The information contained in these programmes provides the 
basis for the assessment made in this Staff Working Document. 

The  programmes  submitted  went  through  an  inclusive  consultation  process  involving  the  national 
parliament.  The  NRP  was  also  discussed  with  stakeholders,  the  social  partners  and  subnational 
governments. 

Overall assessment  

The analysis in this SWD leads to the conclusion that the Netherlands has made some progress on 
measures taken to address the CSRs of the Council Recommendation. Some progress has been with 
respect to the CSRs on fiscal consolidation, the long-term sustainability of public finances and the 
housing  market.  Only  limited  progress  has  been  made  in  response  to  the  recommendations 
concerning the labour market. Good progress has been made in response to the recommendation on 
innovation and science/business links. Despite progress made, further measures remain necessary in 
all areas where the recommendations have not yet been fully achieved. 

The challenges identified in July 2012 and reflected in the AGS remain valid. In the short term, the 
main  challenge  is  to  support  economic  recovery  by  addressing  structural  impediments  in  an 
appropriately  sequenced  fashion.  This  involves  ensuring  fiscal  adjustment  while  improving  its 
quality in terms of prioritising and safeguarding growth-enhancing expenditure, and better utilising 
the potential in the labour marker. Higher quality in the education and research system would help 

1 COM(2012) 750 final. 
2 COM(2012) 751 final. 
3 Commission Staff Working Document (2013), In-depth review for the Netherlands, SWD(2013) 121 final. 13 in-depth 
reviews were published on 10 April 2013. While selected for an in-depth review in the AMR, Cyprus was ultimately not 
reviewed under the Macroeconomic Imbalance Procedure in view of the advanced preparations for a financial assistance 
programme. 

5 

 
                                                 
support  innovation  and  human  capital,  improve  competitiveness  and  boost  the  medium-  and  long-
term growth prospects. 

The  policy  plans  submitted  by  the  Netherlands  address  most  of  the  challenges  identified  in  last 
year’s  Staff  Working  Document,  and  broad  coherence  between  the  two  programmes  has  been 
ensured. The national reform programme confirms the commitment to address shortcomings in the 
areas identified in last year’s Staff Working Document.  

2.  ECONOMIC DEVELOPMENTS AND CHALLENGES 

2.1. 

Recent economic developments and outlook 

Recent economic developments 

In 2012 and early 2013, growth and employment in the Netherlands were strongly affected by 
a  combination  of  a  weak  international  environment  and  the  unwinding  of  distortions  on  the 
housing market, notably through negative wealth and confidence effects. Falling house prices, a 
low  numbers  of  transactions  and  high  gross  household  debt  and  leverage  are  dampening  private 
consumption and investment in housing. These negative effects on wealth stem from balance sheet 
adjustments,  whose  effects  have  been  compounded  by  uncertainty  and  generally  weak  confidence 
among  Dutch  economic  agents.  This  dynamic  interacts  with  the  effects  of  adjustments  in  the 
(relatively  large)  financial  sector  where  the  need  for  stabilisation  has  resulted  in  discretionary 
increases in the public deficit and debt through interventions in the banking sector. Meanwhile, the 
scope for competitive export industries to offset weakness in domestic demand has been impeded by 
uncertain prospects for exports.  

The  economy  is  in  recession,  weighed  down  by  weak  domestic  demand.  Quarter-on-quarter 
economic  growth  has  been  negative  since  the  second  quarter  of  2011,  apart  from  the  first  half  of 
2012,  when  it  was  marginally  above  zero.  Net  exports  turned  strongly  negative,  while  domestic 
demand  continued  to  decline.  Real  GDP  continued  to  decrease  in  the  fourth  quarter  of  2012,  with 
private  consumption  falling  for  the  eight  quarter  in  a  row,  to  a  level  last  reached  in  2003.  Gross 
domestic product shrank by 0.9 % in 2012. Last year, HICP inflation stood at close to 3 %, having 
been boosted by increases in energy prices and certain policy measures, notably the higher VAT rate 
as of October 2012. In 2012 the unemployment rate averaged 5.3 %, but it has been increasing and 
reached 6.4 % in March 2013. 

Economic outlook 

The near-term prospects remain muted. According to the Commission’s 2013 spring forecast, real 
GDP growth is forecast to remain negative in 2013 at -0.8 %. Quarterly growth is projected to return 
to  modest  positive  territory  in  the  course  of  2013,  on  the  back  of  supportive  trade  developments, 
which are set to recover from a poor end of last year. In contrast, domestic demand is expected to 
remain  depressed  well  into  2013.  The  combination  of  increasing  unemployment,  budget 
consolidation, continued weakness in the housing market, cuts in pension payments by some pension 
schemes  and  a  soft  patch  in  external  demand  is  exerting  an  ongoing  drag  on  households  and 
corporations. 

6 

 
In  2014,  a  fragile  but  gradual  recovery  is  expected  to  set  in.  The  decline  in  domestic  demand 
should come to a halt in the second half of this year, with growth turning mildly positive in 2014. 
This  is  supported  by  tax  relief  for  employees,  which  should  translate  into  a  positive  impact  on 
private  consumption,  and  by  a  recovery  in  private  investment,  especially  for  export-oriented 
businesses.  Downside  risks  mainly  relate  to  unemployment  and  the  strength  of  housing-related 
balance sheet adjustments. 

The macroeconomic outlook presented in the NRP and the SP is broadly realistic. The SP and 
the  NRP  share  the  same  macroeconomic  outlook,  which  is  fairly  close  to  the  Commission  2013 
spring forecast yet slightly more positive on the prospects for economic growth. The NRP includes 
an estimate of the macroeconomic impact of structural reforms. It presents estimates of the annual 
total average effect of the coalition agreement on economic growth, private consumption, the current 
account  balance,  net  exports  and  employment  (albeit  not  adjusted  for  the  substantial  later 
amendments). It uses the Netherlands Bureau for Economic Policy Analysis (CPB)’s Safier II model 
to this end.  

2.2. 

Challenges  

The Netherlands faces considerable challenges as regards fiscal policy, the labour market, the 
housing  market,  investments  in  research  and  development  (R&D)  and  education.  These 
challenges are broadly the same as in the 2012 assessment.  

The  immediate  policy  challenge  will  be  to  contain  balance  sheet  adjustments,  restore 
confidence, and harness growth while simultaneously stabilizing public finances. Fiscal policy 
is geared to achieving the necessary fiscal adjustment in an environment of weak economic growth, 
particularly due to depressed domestic demand. Within the overall fiscal constraints, it is important 
to support the Dutch economy’s long-term growth potential.  

A key challenge lies in the housing market where rigidities and distortive incentives have built 
up  over  decades  to  shape  house  financing  and  sectorial  savings  patterns  (see  also  Box  1). 
Households’ tendency to leverage gross mortgage debt against housing wealth is, to a large extent, a 
reflection  of  long-standing  fiscal  incentives,  notably  full  mortgage  interest  deductibility.  The  high 
average  amount  of  mortgage  debt  has  made  households  vulnerable  to  falling  house  prices,  or  a 
prolonged  period  of  low  or  negative  economic  growth.  Simultaneously,  banks  have  been  offering 
new financial instruments, allowing home purchases to be financed entirely with borrowed money. 
As  households  leveraged  against  housing  wealth,  financial  institutions’  balance  sheets  became 
heavily geared towards housing finance. As the housing market is adjusting, the negative impact of 
this process is being felt across the economy. 

The rental market for houses is characterised by the strong presence of strictly regulated social 
housing, organised in a way which hampers (labour) mobility. Efficient allocation of capital in 
the social housing sector is impeded by rents that do not reflect scarcity, the fact that social housing 
corporations work on a not-for-profit basis and shortcomings in the governance framework of social 
housing corporations. 

The  ageing  of  the  population  brings  about  considerable  challenges  in  guaranteeing  the 
sustainability  of  public  finances  and  pension  systems.  The  main  challenge  in  this  regard  is  the 
sustained implementation of the increase of the statutory retirement age in the second pension pillar, 
including  an  appropriate  intra-  and  intergenerational  division  of  costs  and  risks.  Moreover,  an 
overhaul of the governance of the second pillar pension funds, which would help underpin resilience 
to ageing, is overdue. Implementation of the plans to reform long-term care would help curb the fast-
rising costs of ageing and would thus support the sustainability of public finances. In this regard, the 
quality and accessibility of long-term care has to be guaranteed.  

7 

 
Ageing is also putting labour supply under pressure, although a large pool of untapped labour 
supply  is  still  available,  including  women,  people  with  a  migrant  background,  people  with  a 
disability, the young and older workers. Stimulating labour market participation of these groups, 
including by (further) reducing fiscal disincentives for second earners, measures to promote life-long 
learning and ensure employability, and a further increase in the effective retirement age will be vital 
to prevent labour supply shortages.  

Another  challenge  is  fostering  the  Dutch  economy’s  capacity  for  innovation.  Dutch  firms’ 
underinvestment  in  R&D,  the  absence  of  a  significant  structural  orientation  towards  research-
intensive  sectors  (with  some  exceptions  in  the  machinery  and  equipment  industry),  skill  shortages 
especially in engineering and technology related professions, and pressure on funds for fundamental 
research may adversely affect the future competitiveness of the Dutch economy. Although the Dutch 
school system performs well overall, it fails to deliver excellence; high achievers score much lower 
than their international peers. There is also a mismatch between labour market needs and the skills 
obtained, in particular in vocational higher education.  

Box 1 — Summary of the 2013 in-depth review (IDR) under the Macroeconomic Imbalance Procedure 
(MIP) 

Main macroeconomic challenge 

The  In-Depth  Review  (IDR)  for  the  Netherlands  indicates  that  macroeconomic  developments 
regarding  private  sector  debt  and  balance  sheet  adjustments,  coupled  with  the  remaining 
inefficiencies  in  the  housing  market,  are  the  main  challenges.  The  development  of  the  current 
account deserves attention, although the large surplus does not raise risks similar to large deficits.  

The Netherlands has been tapping financial flows from abroad on a large scale, while simultaneously 
shifting  huge  capital  flows  abroad.  This  heightens  the  Dutch  economy’s  sensitivity  to  swings  in 
financial conditions, with uneven distribution across sectors. Household savings mostly end up with 
pension schemes and insurance companies, which channel the bulk of these savings abroad. While 
such  a  strategy  could  be  justified  by  portfolio  diversification  and  higher  expected  returns,  it  also 
makes these institutional investors’ balance sheets more sensitive to portfolio shifts, flight-to-quality, 
and  revaluations  of  foreign  investments.  Alongside  their  substantial  pension  savings,  Dutch 
households  are  highly  leveraged  against  their  housing  wealth,  encouraged  by  long-standing  tax 
incentives  and  financing  trends.  This  has  heightened  their  balance  sheets’  sensitivity  to  negative 
shocks, such as falls in house prices, weak economic growth or changes in real interest rates. In turn, 
the high level of institutionalised and often mandatory households savings (related to second-pillar 
pensions),  coupled  with  changes  in  Dutch  households’  leveraging  position  have  highlighted  the 
extent  to  which  bank  balance  sheets  have  become  geared  towards  housing  finance,  giving  rise  to 
deposit funding gaps. Dutch banks are reconsidering their funding model in the light of the altered 
market conditions and more stringent regulatory requirements. 

Policy challenge 

Comprehensive, gradual and predictably sequenced reforms in the housing market will be a defining 
element of a successful adjustment process. Such reforms should extend to both the owner-occupied 
and rental segments of the housing market. Although balance sheet adjustments are likely to dampen 
near-term economic activity, they will be a necessary precondition for sustainable recovery. Policy 
measures should eventually improve the allocation of capital, thus supporting the Dutch economy’s 
long-term  growth  potential.  Exploiting  possibilities  in  the  institutional  framework  to  pursue 
differentiated  wage  increases  and  pension  contributions  in  the  second  pillar  may  help  adjust 
household balance sheets without unduly inhibiting domestic demand.  

8 

 
3.  ASSESSMENT OF POLICY AGENDA  

3.1. 

Fiscal policy and taxation 

As outlined in the stability programme, the authorities aim to correct the excessive deficit by 2014, 
one year after the original deadline set by the Council in 2009. Since current forecasts indicate that it 
is unlikely that this will be achievable without further measures, the stability programme confirms 
the Dutch authorities’ commitment to bringing the headline deficit sustainably below 3 % of GDP in 
2014.  For  the  years  after  2014,  it  presents  nominal  deficit  projections  which  are  only  partly 
underpinned  by  the  measures  taken.  As  the  2012  stability  programme  is  silent  on  this  matter,  the 
medium  term  objective  (MTO)  for  the  Netherlands  is  assumed  to  be  kept  at  -0.5 %  of  GDP.  The 
MTO reflects the objectives of the Stability and Growth Pact. How the Netherlands plans to ensure 
sufficient progress towards its MTO is, however, not specified and the programme does not plan to 
achieve the MTO within the programme period.  

The  general  government  deficit  outturn  for  2012  was  in  line  with  the  government’s  expectations. 
The budgetary outcome for 2012 was a general government deficit of 4.1 % of GDP, very much in 
line with the projection of 4.2 % of GDP in last year’s stability programme. For 2013, the deadline 
for  the  correction  of  the  excessive  deficit,  the  programme  expects  a  deficit  of  3.4 %  of  GDP, 
compared to 3.6 % in the spring forecast and 3 % in the 2012 stability programme. The deterioration 
compared to last year’s stability programme is partly due to cyclical conditions, but also reflects the 
net  impact  of  additional  savings  measures  the  authorities  have  taken  since  then  and  some  specific 
one-off  transactions  related  in  particular  the  auction  of  mobile  telephony  licenses  and  the 
nationalisation of SNS Reaal.  

The commitment set out in the programme to reduce the general government deficit to 3 % of GDP 
in 2014 is challenging. The objective is based on a macro-economic scenario which is slightly more 
optimistic than the 2013 spring forecast while the projections based on implemented measures add 
up to a deficit of more than 3 % of GDP in 2014. Possible additional measures presented to bring the 
headline  deficit  to  3 %  of  GDP  have  been  withdrawn  until  further  notice  and,  on  the  basis  of  the 
2013 spring forecast, would in any case not have sufficed to achieve the improvement in the general 
government  deficit  committed  to  for  next  year.  Hence,  additional  measures  over  and  above  those 
listed in the programme will be needed to achieve a correction of the excessive deficit by 2014. 

The programme includes additional measures to reduce the budget deficit. These measures are based 
on  the  current  government’s  coalition  agreement  that  was  presented  in  September  2012.  The 
coalition agreement includes measures until 2017, but the most significant budgetary impact of these 
newly-presented  measures  will  be  felt  in  2013.  Although  tax  increases  will  make  the  main 
contribution to the 2013 budgetary consolidation, the programme announces a focus on the reduction 
of public expenditure in 2014 and beyond.  

After  2014,  the  programme  envisages  a  strong  improvement  in  the  headline  deficit.  This 
improvement is based on an older medium-term economic scenario that is inconsistent with the more 
up-to-date  projections  for  2013-2014.  The  projections  for  2015  and  beyond  embody  excessively 
optimistic  economic  growth  projections  which  do  not  take  into  account  already  adopted 
consolidation  measures  that  will  put  an  additional  drag  on  economic  growth.  While  revenues  are 
forecast  to  fall  slightly  from  2014,  expenditure  is  expected  to  be  cut  even  more  sharply.  This 
projection  of  a  strong  decrease  in  expenditure  driving  an  improvement  in  the  fiscal  balance  is  not 
underpinned by consolidation measures.  

A  bottom-up  approach,  listing  discretionary  savings  measures  implemented  and  decided  on 
from 2011 onwards, confirms the very sizeable multi-annual consolidation effort for the period 
2011-2013 identified by an output gap-based top-down approach. For the period 2011-2013 the 
overall fiscal effort as calculated using the bottom-up approach amounts to 4 % of GDP, or around 
1.3 %  of  GDP  annually,  broadly  equally  divided  between  revenue  and  expenditure  measures.  The 

9 

 
discretionary measures identified include the phasing-out of the 2010 fiscal stimulus, including some 
additional savings measures (EUR 5 billion); an initial round of budgetary savings from September 
2010  implemented  by  the  first  Rutte  government  (EUR  19  billion);  measures  embedded  in  the 
‘Kunduz’  agreement  of  April  2012  (EUR  9  billion);  and,  finally,  the  coalition  agreement  of  the 
second  Rutte  government  outlined  in  September  2012  (EUR  15  billion).  A  draft  package  of  some 
EUR 4 billion in possible additional savings announced in April 2013 has since been withdrawn by 
the government until further notice in view of an agreement with the social partners.4 It is therefore 
not taken into account and does not figure in the breakdown underpinning the deficit projections in 
the  programme,  although  the  package  is  notionally  presented.  Significant  one–off  transactions, 
notably the sale of 4G mobile telephony  licenses and the  deficit increasing nationalisation  of SNS 
Reaal (both affecting 2013) broadly cancel each other out. The implementation of the consolidation 
measures  for  2013  and  beyond  is  on  track.5  Should  the  current  plans  be  fully  implemented,  the 
Netherlands will have taken net discretionary measures adding up to an estimated amount of nearly 
7 % of GDP between 2011 and 2017. 

Specified and agreed measures that are embedded in the multi-annual fiscal projections imply 
continued  consolidation  in  2014.  However,  there  are  implementation  risks  attached  to  the 
measures embedded in the medium-term budgetary plans. These partly relate to downside risks 
to the macro-economic scenario but also may affect the implementation of plans agreed between the 
coalition partners. A different type of budgetary risk relates to the sizeable planned decentralisation 
measures.  Some  of  the  budgets  and  responsibilities  concerning  youth  and  long-term  care  will  be 
transferred to municipalities. This process will also include cuts to the respective budgets, on top of 
generic  cuts  on  funds  transferred  to  municipalities.  It  remains  to  be  seen  wether  the  planned 
efficiency gains can be fully realised. Limited deviations will be compensated within the expenditure 
ceilings set but more persistent ones would have to be countered by fresh measures. There is a risk 
that growth-enhancing expenditures on education and research will not be safeguarded. The current 
budgetary plans set out some reductions in these items. Public expenditure on education and training 
amounted  to  5.77 %  in  2011.6  Nominal  expenditure  on  these  categories  is  projected  to  remain 
roughly stable over the coming years, implying a slight decline in their ratio to GDP, to 5.48% of 
GDP  in  2014.  Overall  expenditure  on  innovation  and  research  is  expected  to  decrease  up  to  2016 
from  the  peak  years  of  2010-2012  due to  the  expiry  of  crisis  measures,  while  within  the  envelope 
there  has  been  a  shift  towards  a  more  intensive  use  of  R&D  tax  incentives.  Public  spending  on 
fundamental  research  not  earmarked  as  programme-related  and  largely  carried  out  by  universities 
and  public  research  institutions  with  the  status  of  independent  administrative  public  entities 
(zelfstandige bestuursorganen) would be reduced by a further orientation of funds towards sectoral 
uses. 
The structural balance7 amounted to -4 %, -3.7 % and -2.6 % of GDP in 2010, 2011 and 2012, 
respectively. The Commission services’ 2013 spring forecast projects a further improvement in 
the structural balance to -2.0% of GDP in 2013 but subsequent deterioration to -2.3 % in 2014 
if policies remain unchanged. The average annual apparent fiscal effort over the 2011-2013 period 
is  estimated  at  0.7 %  of  GDP.  When  adjusted  for  the  significant  downward  revision  in  potential 
output growth since the point at which the 2009 Excessive Deficit Procedure (EDP) recommendation 
was  issued  and  the  impact  of  revisions  to  the  composition  of  economic  growth  in  revenue,  the 
average  annual  adjusted  structural  effort  increases  to  1.1%  of  GDP.  This  exceeds  by  a  substantial 
margin the recommended average annual fiscal effort (¾ % of GDP) over 2011-2013 required in the 
2009 Council EDP recommendation. 

4  In  addition,  the  April  2013  agreement  for  the  health  sector  implies  that  savings  considered  from  a  voluntary  wage 
freeze in health care will not materialise. 
5 Source: 30 Miljard Monitor (Miljoenennota 2013). 
6 Source: Eurostat (General government expenditure by function (COFOG). 
7 Cyclically adjusted balance net of on-off and temporary measures.  

10 

 
                                                 
Following  an  overall  assessment  of  the  Netherlands’  budgetary  plans,  using  the  structural 
balance  as  a  reference,  including  an  analysis  of  expenditure  net  of  discretionary  revenues,  a 
significant  deviation  from  the  adjustment  path  towards  the  MTO  is  to  be  expected  for  2015 
and beyond. The structural balance calculated on the basis of the stability programme amounts to -
1.5 % of GDP in 2013, -1.6 % of GDP in 2014 and would improve only slightly to -1.4% of GDP in 
2017,  leaving  a  structural  deficit  still  well  above  the  MTO.  Differences  in  the  structural  balances 
estimated  in  the  programme  and  the  Commission’s  spring  2013  forecast  reflect  the  somewhat 
different  macroeconomic  scenarios  as  well  as  one-off  revenues  that  are  not  accounted  for  in  the 
programme. For the later years of the programme, the recalculated structural balances are based on a 
medium-term scenario that is not consistent with the short-term outlook for 2013-2014, implying an 
assumed closure of the output gap in 2017.  

On the basis of the technical expenditure projections for 2014 and 2015, compliance towards 
the  expenditure  benchmark  is  secured.  According  to  the  information  provided  in  the  stability 
programme,  government  expenditure  net  of  discretionary  revenues  measures  in  2015-2016  is,  on 
average,  expected  to  grow  at  a  rate  below  the  applicable  reference  rate.  The  growth  rate  of  this 
expenditure is below -0.14%, the lower rate under the expenditure benchmark. 

Box 2 — Excessive Deficit Procedure for the Netherlands 

On 2 December 2009, the Council decided that an excessive deficit existed in the Netherlands and 
adopted  the  most  recent  Council  recommendation  under  Art.  126(7)  TEC.  The  Council 
recommended that the Dutch authorities should put an end to the present excessive deficit by 2013. 
Specifically, in order to bring the  general government deficit below  3 % of GDP in  a  credible and 
sustainable manner, the Netherlands was recommended to (a) implement the fiscal measures in 2010 
as  envisaged  in  the  2010  budget  and  to  start  consolidation  in  2011  in  order  to  put  an  end  to  the 
present excessive deficit situation by 2013; (b) ensure an average annual fiscal effort of ¾ % of GDP 
over the period 2011-2013, which should also contribute to halting the rapid rise of the government 
gross debt ratio, which was forecast to breach the reference value; (c) specify the measures that are 
necessary to achieve the correction of the excessive deficit by 2013, cyclical conditions permitting, 
and accelerate the reduction of the deficit if economic or budgetary conditions turn out better than 
currently expected. 

An overview of the current state of excessive deficit procedures, including additional steps adopted 
after the finalisation of this Staff Working Document, is available on: 

http://ec.europa.eu/economy_finance/economic_governance/sgp/deficit/index_en.htm  (please  refer 
to country sections at the bottom of the page).  

The debt ratio is expected to increase in the first years of the programme. On the basis of the 
Commission 2013 spring forecast the debt ratio is expected to increase steadily to 71.2 % of GDP 
in 2012, 74.6 % of GDP in 2013 and 75.8 % of GDP in 2014. This is predominantly the result of 
the persistent headline deficits in combination with anaemic nominal GDP growth, while EFSF and 
ESM transactions attributed to the government debt only have a relatively small upward effect. The 
increase in the expected gross debt ratio for 2013 includes debt-increasing transactions equivalent to 
some 1% of GDP arising from the nationalisation of SNS Reaal in early 2013 (on top of the deficit-
enhancing measures amounting to around 0.6 % of GDP). The relatively contained development of 
Dutch sovereign interest rate spreads vis-à-vis German benchmarks suggests that market participants 
still have a relatively high degree of confidence. 

11 

 
 
Progress  towards  the  debt  benchmark  cannot  be  assessed  on  the  basis  of  the  information 
provided in the programme. For the years 2015 and beyond, the stability programme is based on 
an outdated forecast that does not match the data provided for 2013 and 2014. Due to this break in 
the data and the fact that it is outdated for the later years of the programme, an assessment of the 
progress towards the debt benchmark cannot be made.  

Long-term sustainability 

The Netherlands has to address its long-term fiscal sustainability risk. The Netherlands does not 
face a risk of fiscal stress in the short-term. The country is at high sustainability risk in the medium 
to  long  run,  influenced  by  the  cost  of  ageing.  Government  debt  (71.2 %  of  GDP  in  2012  and 
expected to rise to 75.8 % in 2014) is above the 60 % of GDP Treaty threshold. Risks would be lower 
if the structural primary balance were to revert to the higher values observed in the past, such as the 
average  for  the  period  between  1998  and  2012.  The  focus  should,  therefore,  be  on  reducing 
government debt. Moreover, further containing age-related expenditure growth (especially related to 
long-term  care)  appears  necessary  to  help  ensure  that  public  finances  are  sustainable  in  the  long 
term. 

The  long-term  sustainability  of  the  pension  system  has  been  strengthened  through  the 
implementation of a gradual increase of the first-pillar statutory retirement age from 65 years 
in 2012 to 67 in 2023. The linking of the pensionable age to life expectancy after 2023 (which is a 
very  early  move  in  comparison  with  other  Member  States)  takes  account  of  future  increases  in 
longevity and will substantially curb the pressure of age-related expenditure on public finances. As 
an effect of the reform, projected pension expenditure increases are reduced by 1.8 p.p. as a share of 
GDP up to 2060 in comparison to the projections set out in the Ageing Report 2012 and will remain 
only slightly above the EU average in the long term (+1.7 p.p. against an EU average of +1.4 pp. to 
2060).  Similarly,  the  age  for  building  up  new  occupational  pension  rights  in  the  second  pension 
pillar will rise to age 67 by 2014 and thereafter be linked to increases in life expectancy. While this 
will improve the long-term financial situation of second pillar schemes, the maturing of the system 
and  impact  of  the  crisis  on  financial  markets  on  asset  prices  and  interest  rates  have  led  to  a 
significant decrease in pension funds’ coverage ratios. Future adjustments to contribution rates and 
benefit levels should ensure a fair sharing of risks within and between cohorts. 

The Netherlands has fully addressed the part of the recommendation regarding increasing the 
statutory  retirement  age  and  linking  it  to  life  expectancy,  both  for  the  first  and  the  second 
pension  pillar.  Other  measures,  such  as  adjusting  the  second-pillar  pension  legislation  and 
introducing accompanying labour market measures for the older workers, have  only  been partially 
done  as  discussions  with  the  social  partners  are  still  ongoing.  Further  legislative  proposals  in  this 
field are planned for 2013 and 2014. 

With  regard  to  health  care,  the  Netherlands  has  undertaken  reforms  to  improve  the  cost-
effectiveness and sustainability of the system while ensuring access to high quality care. Health 
care  providers,  health  care  insurers  and  doctors  concluded  several  agreements  in  2011/2012  to 
ensure controlled development in hospital care. The Dutch government has provided a blueprint for 
an ambitious reform in the area of long-term care. The blueprint aims at upgrading the role of local 
governments,  separating  living  costs  from  care  costs,  monitoring  quality  issues  and  putting  more 
emphasis  on  individual  responsibility  and  informal  care.  It  will  be  important  to  implement  the 
planned reform in such a way that it ensures accessible, cost-effective and sustainable provision of 
high-quality  long-term  care.  While  the  plans  entail  substantial  budgetary  savings,  additional 
measures are likely to be necessary to fully restore the long-term sustainability of public finances.  

12 

 
Fiscal framework 

The  Netherlands  has  a  well-developed  fiscal  framework.  The  Dutch  medium-term  budgetary 
framework can be considered a best-practice within the EU. The main characteristics of the multi-
annual  trend-based  fiscal  framework  currently  in  place  in  the  Netherlands  are:  (i)  the  use  of  real 
expenditure  ceilings,  which  are  determined  ex  ante  and  apply  to  the  entire  term  of  office  of  the 
government;  (ii)  automatic  stabilisation  of  revenues;  and  (iii)  the  use  of  independently  derived 
macroeconomic  assumptions.  When  a  new  government  is  formed,  medium-term  budgetary  targets 
are set by determining the way in which general government expenditure should evolve and the tax 
burden for each year until the last year of the government’s term. The current framework does not 
cover local government. In this respect, the government is working on legislation that will transpose 
the  EU  fiscal  rules  into  national  legislation.  This  will  entail  giving  the  medium-term  budgetary 
framework  a  legal  basis  and  laying  out  provisions  and  coordination  mechanisms  for  local 
government finances.  

However,  the  economic  crisis  of  the  recent  years  has  exposed  weaknesses  in  the  fiscal 
framework  and  successive  governments  have  increasingly  adjusted  the  budget  outside  the 
procedures  laid  down  in  the  framework.  Successive  governments  have  amended  their  medium-
term  budgetary  plans  with  sizeable  consolidation  measures,  partly  because  initial  expenditure 
ceilings had been based on growth paths which turned out to be overly optimistic. According to the 
coalition agreement, automatic stabilisers are free to operate within each of the separate expenditure 
ceilings as long as the country’s overall fiscal position remains in accordance with European fiscal 
rules. Although the Dutch authorities are fully committed to their obligations under the Stability and 
Growth  Pact  (SGP),  the  Netherlands  has  not  yet  ratified  the  Treaty  on  Stability,  Coordination  and 
Governance  in  the  Economic  and  Monetary  Union.  Interest  payments  are  kept  outside  the  overall 
expenditure  ceiling,  whereas  other  expenditure  that  is  sensitive  to  cyclical  trends  (notably 
unemployment and social assistance benefits) is kept within the expenditure ceiling framework. This 
impedes the working of automatic stabilisers in an economic downturn. In addition, possible actions 
to put into practice the commitment to abide by European provisions are not specified in detail. 

Tax system 

The  tax-to-GDP  ratio  was  38.4 %  in  2011,  slightly  below  the  EU  GDP-weighted  average 
(38.8 %). Concerning the composition of revenues, indirect taxes and direct taxes each account for 
slightly less than a third of total tax revenues, with social contributions – among the highest in the 
EU – representing 14.8 % of GDP.  

The Netherlands is frequently used by multinational companies to channel tax driven financial 
flows to other jurisdictions. A recent OECD study8 suggests that some international corporations 
may shift profits to low-tax jurisdictions via the Netherlands. Indeed, the absence of withholding tax 
on  outbound  royalties  and  interest  payments  and  the  fact  that  the  Dutch  tax  administration  gives 
advance  clearance  (tax  rulings)  on  the  tax  consequences  for  such  activities  has  contributed  to 
companies known as Special Purpose Vehicles being registered in the Netherlands without having a 
substantial  physical  presence  there.  This  generates  gross  financial  flows  made  through  special 
purpose  entities  through  the  Netherlands  that  amount  to  USD  2,625  billion  for  inward  stock 
investment and to USD 3,023 billion for outward stock investment in 2011, both equivalent to more 
than  3  times  Dutch  GDP  in  that  year.  The  current  international  pressure  to  reform  tax  rules  to 
prevent the use of such vehicles in this way may have adverse economic effects for the Netherlands 
and other Member States. 

8 Addressing Base Erosion and Profit Shifting (OECD, 2013). 

13 

 
                                                 
Environmental  taxation  is  comparatively  advanced  in  the  Netherlands.  Revenues  from 
environmental taxes were equivalent to 3.9 % of GDP in 2011—the second highest value among EU 
Member  States.9  Revenues  from  energy  taxes  are  relatively  high,  despite  below  average  revenues 
from transport fuel taxes. The green taxation aspect of the car taxation has been reinforced. In 2013, the 
upper  CO2  limit  for  the  exemption  of  the  vehicle  tax  has  been  further  reduced,  while  vehicles  with 
higher CO2 emissions are taxed more heavily. However, tax incentives for the private use of company 
cars  reduce  the  base  of  income  tax.  There  is  also  room  for  phasing  out  hidden  water  subsidies. 
Furthermore, companies in energy-intensive industries and horticulture pay lower taxes on energy10 
thereby creating inter-sectoral distortions regarding resource efficiency.  

The current tax system leaves room for growth-friendly taxation reform. This could include the 
broadening of tax bases (e.g. reducing the scope of the reduced VAT rate and reducing the deduction 
for small mortgage interest payments), reducing environmentally harmful subsidies, increasing green 
taxes, and accelerating the planned reduction in mortgage interest deductibility. 

3.2. 

Financial sector 

In  recent  years,  the  Dutch  financial  sector  has  increased  its  resilience,  despite  the  worsening 
economic environment and the nationalisation of a bank. With balance sheet values amounting to 
around four times its GDP, the Netherlands has one of the largest financial sectors in the EU. Since 
the  nationalisation  of  SNS  Reaal  in  February  2013,  the  Dutch  government  owns  two  of  the  four 
largest banks and has given financial support to a third. Nonetheless, the banking sector still needs to 
improve its capital buffers in line with international requirements. Also, as they are highly dependent 
on  market  funding,  banks  have  to  maintain  sufficient  capital.  Despite  having  increased  slightly 
recently,  banks’  capital  buffers  have  remained  under  pressure  through  increasing  losses  and 
provisions  on  loans.  The  government  is  currently  in  discussion  with  stakeholders  to  reduce  the 
number of mortgages that banks have on their balance sheets, but such a measure would have several 
drawbacks. Selling government-guaranteed mortgages on a large scale to a government-guaranteed 
financial institution would reduce the average quality of mortgages privately-run banks have on their 
books  and  could  amplify  the  difficulties  that  banks  have  in  increasing  their  risk-weighted  capital 
buffers. Selling them to the pension schemes could amplify negative effects on wealth in a recession.  

To  boost  capital  and  reduce  funding  gaps,  and  in  view  of  the  relatively  low  level  of  private 
savings,  Dutch  banks  appear  to  be  withholding  profits  and  offering  relatively  high  deposit 
interest rates compared to banks in neighbouring countries. Lending rates, on the other hand, are 
also higher and have been increasing at a faster pace in recent years (in particular for housing loans). 
The charging of these higher lending rates is probably due to the need to reduce the leverage ratio, 
Dutch  banks’  relatively  high  funding  costs,  which  are,  in  turn,  a  reflection  of  their  reliance  on 
wholesale  funding,  the  withdrawal  of  a  number  of  competitors  from  the  market  and  the  perceived 
risk  profile  of  the  loan  portfolio.  Losses  on  loans  are  increasing  and  the  share  of  non-performing 
loans has reached the highest level since the outbreak of the crisis. As house prices are still falling, 
25 % of homes already have a value that is lower than the gross value of the outstanding mortgage 
(of which many are interest-only). Payment arrears and the number of foreclosures are still very low 
compared to other countries. Dutch banks currently have close to EUR 80 billion (13 % of GDP) of 
loans outstanding to real estate companies. With provisions being at less than 2% of the portfolio, 
banks may have difficulties absorbing large losses, especially since valuations of collateralised real 
estate were often done more than a year ago, prices are falling and vacancy rates are relatively high 
and still increasing.  

9 Taxation Trends in the European Union (European Commission, 2013). 
10 Taxing Energy Use: A graphical analysis (OECD, 2013). 

14 

 
                                                 
The  proportion  of  small  and  medium-sized  enterprises  (SMEs)  reported  to  experience 
problems with access to finance in the Netherlands is higher than the EU average and seems to 
have worsened further in 2012.11 If banks were acting solely in response to an objective worsening 
of  economic  prospects  and  credit  conditions,  this  would  be  a  welcome  development.  However,  if 
banks  are  shrinking  their  SME  credit  portfolios  partly  to  adjust  balance  sheets,  this  development 
could  be  counter-productive.  The  Dutch  authorities  have  taken  a  number  of  measures  to  support 
SMEs’  access  to  finance,  for  example  by  continuing  existing  guarantee  schemes,  by  re-enforcing 
available  budgets  and  by  increasing  the  maximum  ceiling  for  micro-credits.12  Regarding  access  to 
risk  capital,  the  government  closely  cooperates  with  the  European  Investment  Fund  and  the 
European  Investment  Bank  in  developing  additional  financial  instruments  for  SMEs.13  All  these 
measures are steps in the right direction. Nevertheless, it is important to continue efforts to ensure 
appropriate  access  to  finance  for  SMEs  given  the  stage  of  the  business  cycle,  in  line  with  the 
priorities identified in 2013 Annual Growth Survey. 

3.3. 

Labour market, education and social policies 

Labour market and social policies 

The Dutch labour market is still performing relatively well compared to other EU countries. 
However,  from  2011  to  2012  the  unemployment  rate  in  the  Netherlands  increased  steadily 
(from 4.4 % to 5.3%) and is projected to strongly rise further in 2013 and 2014 (to 6.9 % and 
7.2 % respectively). In view of the ambitious EU 2020 employment target of 80% and with a view 
to  addressing  future  labour  supply  shortages,  the  Dutch  authorities  announced  in  their  NRP/SP 
comprehensive  labour  market  reforms  in  line  with  the  2012  country-specific  recommendations 
(CSRs). Most of the planned reforms have not yet been implemented. 

In  2012,  the  Council  Recommendations  for  the  Netherlands  contained  a  CSR  on  the  labour 
market, addressing the issue of low average number of hours worked. The average number of 
hours worked in the Netherlands is much lower than the EU average, especially for women. This is 
partially due to the fact that many people, especially women, work part time. While to a considerable 
extent  this  appears  to  reflect  preferences,  removing  the  remaining  disincentives  to  working  more 
hours  has  the  potential  to  alleviate  future  labour  supply  shortages.  Reducing  tax  disincentives  on 
labour  would  make  work  more  attractive.  In  order  to  make  work  more  financially  attractive  for 
second income earners, in 2009 the Netherlands started phasing out the transferable tax credit over a 
period of 15 years. The double general tax credit, provided to those on welfare benefits, is also being 
phased out over a period of 20 years starting in 2012. This phasing-out is enshrined in law, and in 
terms  of  relevance  and  credibility  represents  progress  in  terms  of  CSR3.  However,  the  long  time 
span of the phasing out (15 and 20 years respectively) is not very ambitious.  

Labour  market  participation  and  access  to  jobs  for  second-income  earners  would  further  be 
facilitated  through  adequate  provision  of  quality  childcare.  The  use  of  full-time  childcare 
services  in  the  Netherlands  lies  well  below  EU  average  for  all  age  cohorts.  The  report  of  the 
European Network of Experts on Employment and Gender Equality Issues report on out-of-school 
care emphasises the low quality of childcare facilities for 0-4 year olds, and also refers to the low 
quality of out-of-school care facilities as well. In addition, only half of the care facilities offer out-of-

11 Survey on the access to finance of SMEs in the euro area, European Central Bank, 
https://www.ecb.int/stats/money/surveys/sme/html/index.en.html. 
12  E.g.  the  budget  for  the  guarantee  scheme  'Borgstellingskrediet  MKB’  has  been  increased  from  EUR  750  million  to 
EUR 1 billion while other guarantee schemes such as 'Garantie Ondernemingsfinanciering’ and 'Groeifaciliteit’ are also 
being continued; The maximum ceiling for micro-credits has been raised from EUR 50 000 in 2012 to EUR 150,000 in 
2013. 
13 For example, in 2012 a Fund-of-Funds has been created with an initial capital of EUR 150 million, which will provide 
later stage funding for fast growing innovative or high-tech businesses 
(http://www.eif.org/what_we_do/equity/news/2012/DVI_PPM_Oost.htm). 

15 

 
                                                 
school  care  on  all  school  days,  which  indicates  there  are  bottlenecks  in  the  availability  of  care 
facilities.  Implemented  and  planned  budgetary  cuts  on  childcare  may  reduce  some  dead-weight 
losses (in particular by cutting subsidies to high income households), but could also have a negative 
impact on the labour participation of second-income earners, especially for those that cannot rely on 
informal childcare. 

Employment  rates  of  people  with  a  migrant  background  have  been  falling  since  2008  and 
youth unemployment has been increasing. The Netherlands performs notably worse than the EU 
average  regarding  the  employment  gap  between  people  with  a  migrant  background  and  nationals. 
Youth unemployment has been increasing at an accelerated pace in recent months, although youth 
unemployment  rates  in  the  Netherlands  are  still  well  below  the  European  average.  If  the  large 
increase in youth unemployment could be stopped, this could potentially help prevent labour supply 
shortages  in  the  future  and  prevent  a  loss  of  human  capital  and  valuable  skills.  Another  source  of 
potential labour supply is people with a disability. The labour participation rate of those entitled to 
disability  benefits,  but  with  a  remaining  earning  capacity  between  20%  and  65%,  is  substantially 
lower  than  the  overall  participation  rate.  The  Participation  Act  aims  to  improve  labour  market 
participation through the merger and reform of several benefit schemes while shifting responsibility 
for their execution to the level of municipalities and reducing overall funding. The Act is expected to 
enter into force in January 2014 and should replace the draft Work Capacity Act referred to in last 
year’s Staff Working Document. Social benefits are being checked more stringently, with a tougher 
approach to fraud and to social benefit recipients’ duty to seek work. Moreover, the social partners 
have agreed on a target for employers to hire 100,000 partially disabled employees over a period of 
12 years from 2014.  

The  Participation  Act  reform  is  ambitious  and  relevant  as  it  aims  to  boost  labour  market 
participation.  However,  the  reforms  are  not  yet  enshrined  in  law  and  the  time  span  for 
implementation  seems  rather  short  in  view  of  the  substantial  accompanying  efforts  expected  from 
local governments, which will coincide with significant budgetary cuts. For instance, major cuts are 
planned in the budgets for sheltered work places and other regular integration tools. A specific risk 
in implementing policies for people with a disability is the scale of the shift in responsibilities to the 
municipalities.  They  are  being  given  responsibility  for  a  EUR  8.5  billion  budget  for  supporting 
jobseekers  with  a  disability,  while  simultaneously  taking  over  responsibility  for  the  General 
Exceptional Care Act, which covers a large portion of the long-term care (equivalent to some EUR 
2.8 billion) previously financed by a national entity the Algemene Wet Bijzondere Ziekekosten (see 
section 3.1). Municipalities are expected to manage costs more efficiently, but the size of budgetary 
cuts means that it may be difficult for them to do so. There is a push from the central government to 
merge municipalities into new, larger ones with at least 100,000 inhabitants in order to perform these 
new  tasks  adequately.  With  regard  to  the  target  for  disabled  employees,  the  plans  to  impose  a 
requirement on firms with 25 or more employees to have at least 5 % of their workforce made up of 
the partially disabled have been abandoned, as the foreseen fine for breaching the quota would have 
likely  been  ineffective  and  the  quota  could  have  led  to  labour  substitution.  At  the  same  time,  the 
current plans seem to imply few binding obligations and have been pushed back considerably (well 
beyond the term of the current government), thereby increasing implementation risks. 

Another underused source of potential labour is that of older workers. In recent years, measures 
implemented  to  promote  labour  force  participation  by  curtailing  favourable  options  for  effective 
early  retirement  in  the  60-to-64  age  bracket  have  already  borne  fruit.  The  average  effective 
retirement age increased steadily from 61 in 2006 to 63.6 in 2012, contributing to a narrowing of the 
gap  between  the  statutory  and  the  effective  retirement  age.  However,  under  current  arrangements, 
older  workers  can  still  use  a  combination  of  relatively  high  severance  pay  and  generous 
unemployment  benefits  as  a  route  to  early  retirement.  In  addition,  relatively  strict  employment 
protection  legislation  for  workers  with  permanent  contracts  and  potentially  high  (seniority-linked) 
severance pay give older workers in the Netherlands few incentives to change jobs (see Box 3). This 
has caused labour mobility to be relatively low, and increases the risk of long-term unemployment 
16 

 
when  jobs  are  lost.  Older  workers  have  adjusted  less  to  labour  market  changes  and  would  benefit 
from life-long learning (LLL) and active ageing measures. Hence it is troubling that older workers 
only make up less than half of all adult participants in lifelong learning.  

Box 3 — Labour market rigidities in the Netherlands 

In general, the Dutch labour market can be regarded as quite flexible, mainly on account of the high 
participation rates by both men and women, the ample possibilities to work on a temporary or part-
time  basis,  and  the  large  group  of  self-employed  people.  Nonetheless,  the  Netherlands  is 
characterised by relatively strict employment protection legislation (EPL) for permanent workers. In 
addition,  the  Dutch  system  provides  for  relatively  generous  unemployment  benefits  with  a  long 
maximum duration (38 months).  

These  characteristics  have  an  adverse  effect  on  labour  mobility.  The  current  EPL  system  benefits 
‘insiders’  at  the  expense  of  ‘outsiders’  and  reduces  incentives  to  seek  out  new  opportunities, 
particularly for older workers. Since accumulated severance pay rights are lost when changing jobs, 
there is a particularly strong disincentive for older workers to switch jobs. At the same time firms are 
reluctant  to  hire  older  workers,  due  to  the  EPL  and  relatively  high  tenure-based  pay  in  the 
Netherlands which may result in misalignments between wage costs and productivity levels. 

The Netherlands could benefit from tackling the above rigidities. In particular, while strict EPL may 
delay  or  impede  a  strong  rise  in  unemployment,  it  increases  hiring  costs.  This  might  lead  to  more 
long-term unemployment and could, in combination with the high unemployment benefits, provide a 
disincentive  for  firms  to  hire  once  the  economic  recovery  kicks  in.  At  the  same  time,  however,  it 
must  be  recognised  that  tackling  these  labour  market  rigidities  may  have  negative  transitional 
effects. There is a heightened risk that specific cases (in particular low-skilled employees or those on 
a  low  income)  would  be  confronted  with  significantly  lower  incomes  in  combination  with  scant 
prospects  of  finding  a  new  job  in  the  short-term.  These  cases  should  be  actively  monitored  and 
supported  with  appropriate  measures.  The  coalition  government  and  the  social  partners  recently 
reached an agreement on reforming EPL and unemployment benefits from 2016 (see below).  

Against  this  background,  the  Netherlands  announced  reforms  concerning  the  unemployment 
benefit scheme and employment protection legislation (EPL), which are planned to enter into 
force  as  of  2016.  The  reforms,  agreed  on  through  negotiations  with  the  social  partners  (‘Sociaal 
Akkoord’) and not yet enshrined in law have secured broad public support and as such can be seen 
as fitting in a tradition of Dutch consensual decision making (‘poldermodel’), which had been less 
prominently  visible  in  recent  years.  The  reforms,  in  combination  with  a  mobility  tax  credit 
(‘mobiliteitsbonus’) for employers who hire social security beneficiaries aged 50 or above or people 
with a disability, target at the lower end of the labour market by increasing incentives both on the 
demand  and  supply  side.  The  agreement  with  the  social  partners  implies  that  publicly  financed 
unemployment  benefits  will  be  reduced  in  duration.14  Regarding  EPL,  the  plans  to  introduce 
uniformity  in  the  dismissal  procedure  and  a  cap  on  severance  pay  from  2016  onwards  should 
enhance labour mobility. Better protection is also envisaged for employees with flexible contracts, 
particularly with regard to the right to obtain sickness benefits and the maximum duration of flexible 
contracts.  

14 The Publicly financed part of the WW will be brought back to two years. The social partners can decide on offering an 
extra  14  months  of  benefits  (which  will  be  financed  by  employers  and  employees).  WW  rights  will  be  built  up  at  a 
slower pace than before. 

17 

 
                                                 
The  EPL  reform  embodied  in  the  social  agreement  adequately  addresses  rigidities  in  labour 
matching and hiring, and may particularly benefit the employability of older workers, whose 
relatively  high  severance  pay  and  reservation  wage  reduce  their  chances  of  re-entering  the 
labour  market.  The  expected  enhancement  of  labour  supply  and  the  decreasing  risk  of  long  term 
unemployment for specific groups are welcome. In addition, the reform rightfully aims at preserving 
the  flexible  character  of  the  Dutch  labour  market,  while  reducing  the  gap  between  fixed  and 
temporary  contracts  in  terms  of  access  to  schooling  and  other  social  rights,  thereby  adequately 
reflecting the ‘flexicurity approach’. The reform of unemployment benefits go broadly in the right 
direction.  However,  it  is  regrettable  that  the  planned  reduction  in  the  duration  and  generosity  of 
unemployment  benefits  originally  planned  in  the  coalition  agreement,  has  been  postponed,  as  this 
would have stimulated people to return to the labour market (see Box 3). This is strengthened by the 
fact that people will be confronted with the shortened duration of the publicly funded unemployment 
benefits  only  from  2018  onwards.  The  postponement  of  these  labour  market  reforms  increases 
implementation  risks.  That  said,  the  extent  to  which  the  delay  of  these  reforms  will  have  negative 
impact on labour market performance will also be shaped by the overall employment outlook.  

Furthermore, a bonus to incentivise older workers to continue working is replaced by a new, 
less generous one for which only those on lower incomes will qualify. It is not expected that this 
will significantly improve older workers’ participation in the labour market. In contrast, abolishing 
the pension allowance for partners who have not yet reached the statutory retirement age, which will 
apply  to  all  workers  reaching  the  statutory  retirement  age  in  2015,  is  expected  to  stimulate  older 
workers  partners  to  work  longer.  In  addition  to  this  the  IOAW15  will  be  phased  out,  fiscal 
arrangements  for  pension  savings  will  be  abolished  for  incomes  above  EUR  100,000  and  pension 
accrual rates for occupational schemes will be lowered as of 2014.  

The  Netherlands  has  traditionally  performed  well  on  social  inclusion;  the  at-risk  of  poverty 
indicators  are  relatively  low  compared  to  the  EU  average.  However,  the  figures  show  a 
worrisome trend. The number of people in low-work-intensity households has increased by 75,000 
since 2008, while the Europe 2020 target for reducing the number of people living in a low-work-
intensity household was set at 93,000. Rising unemployment rates could heighten the risk of poverty 
as  more  people  become  dependent  on  benefits.  This  increase  in  poverty  particularly  affects  single 
parents, single people, those with a migrant background, the self-employed, and households living 
on benefits other than pensions. 

The Commission comes to the overall conclusion that the Netherlands has made some progress on 
measures taken to address the labour market CSR. 

Education 

The  Netherlands  has  a  well-functioning  educational  system  and  is  on  track  to  achieving  its 
Europe 2020 targets. Early school leaving already fell from 10.9 % in 2009 to 8.8 % in 2012 and is 
on to hit the 8% target. The tertiary education target is an attainment rate of 40-45 % and, at 42 % in 
2012, has already been achieved.  

For 2012 the most important change in funding is the replacement of the current partly grant-
based  system  of  funding  for  students  in  tertiary  education.  Students  will  have  to  fully  finance 
their  studies  privately,  but  can  take  low-interest  loans  from  the  government.  Repayment  of  these 
loans will depend on the student’s income after graduation. Savings resulting from this measure are 
to be re-invested, especially in the quality of education, although how exactly this will be done is not 
yet  specified.  This  reform  reduces  the  deadweight  loss  of  the  current  grant-based  system  and  may 
also reduce the average duration of tertiary studies, as it should sharpen the choice of study field by 

15  IOAW:  income  provisions  for  older  and  partially  disabled  unemployed  people  who  are  no  longer  entitled  to 
unemployment or disability benefits. 

18 

 
                                                 
prospective  students.  On  balance,  it  may  well  be  that  tertiary  attainment  rates  decrease,  but  that 
graduation  rates  increase.  However,  the  impact  on  tertiary  enrolment  and  on  the  level  of 
qualifications  on  graduation  should  be  closely  monitored,  especially  for  students  from 
underprivileged  backgrounds.  Plans  should  be  amended  if  a  substantially  larger-than-expected 
number of prospective students were either to opt out of pursuing tertiary education altogether, or if 
there was a clear trend to opt for ‘safer’ study choices, e.g. away from technical studies. It will also 
be important to communicate to (loan-averse) prospective students the benefits of further study even 
if this necessitates taking out a loan.  

The  Dutch  educational  system  is,  on  average,  of  high  quality.  This  is  reflected  in  good  PISA 
scores, relatively high employment rates and the good international rankings of universities. But the 
educational system suffers from a few shortcomings. Especially in primary and secondary education 
high-achieving  Dutch  students  score  worse  than  their  international  counterparts,  whereas  students 
with lower and mediums grades score better than their international peers.16 Due to the scarcity of 
excellent students in secondary education, the high (average) level of educational performance at the 
secondary level does not translate into top performance at the tertiary level. Not only is the average 
duration of tertiary study longer in the Netherlands compared to the EU average17, but the number of 
top performers in tertiary education is also small.18 

The Netherlands has an ‘Excellence Policy’19 in place, ‘performance agreements’ signed with 
all individual higher education (HE) institutions that link additional funding to meeting targets 
on education quality, study success and the profiling of education and research.  Furthermore, 
there will be extra requirements for vocational education and for graduates who wish to enter non-
related HE programmes and there are plans to shorten vocational education and training programmes 
to make the road to higher education more attractive. The government recently submitted a draft law 
(‘Wetsvoorstel  kwaliteit  in  verscheidenheid  hoger  onderwijs’)  whose  aims  include  (i)  introducing 
pre-selection for education programmes that are currently subject to a numerus clausus and for the 
pedagogical universities; (ii) improving the transfer of students from secondary to tertiary education 
and  from  vocational  trainings  to  universities  of  applied  science:  (iv)  making  training  more 
appropriate  for  labour  market  needs  and  (v)  putting  greater  emphasis  on  excellence  at  the  tertiary 
level.  As  most  of  the  measures  have  only  recently  been  adopted  or  are  still  in  the  legislative 
procedure, it is unclear whether they will be sufficient to address the shortcomings of the educational 
system, but they are clearly steps in the right direction. 

Adult participation in lifelong learning (LLL) reached 16.7 % in 2012. It thus already surpassed 
the 15 % benchmark set out in Europe 2020. While a number of initiatives have been undertaken to 
encourage training, a formal comprehensive framework for LLL allowing for the possibility to use 
funds for LLL for both intra- and inter-sectoral schooling could further increase the efficiency of the 
system. 

16 Van der Steeg, M., Vermeer, N. and Lanser, D. (2011). Nederlandse Onderwijsprestaties in Perspectief. CPB Policy 
Brief 05. 
17 Source: OCW (2011). Key Figures 2006-2010, Education, Culture and Science. 
18 See also: Commissie Toekomstbestendig Hoger Onderwijs Stelsel (2010) 
19 See e.g. http://www.siriusprogramma.nl/?pid=85  

19 

 
 
 
 
                                                 
3.4. 

Structural measures promoting growth and competitiveness 

Housing market 

Box 4 — Main factors determining the Dutch housing and mortgage market and milestone policy 
measures over the recent decades 

The Netherlands has a long history of public involvement in housing. Households in both the rental 
sector  and  the  owner-occupied  sector  receive  substantial  explicit  or  implicit  subsidies.  Crucial 
subsidy instruments at the national level are the income-based housing allowance for tenants and 
mortgage interest rate deductibility (MID) for homeowners, allowing home owners to fully deduct 
interest  payments  on  their  mortgage  loan  from  their  taxable  income,  and  in  place  since  1893.  In 
addition,  there  is  government  involvement  in  spatial  planning  and  land  policy,  regulation  and 
supervision of housing associations, rent policy and financial guarantees. These policies show up in 
house prices and have in effect furthered substantial and persistent increases in household mortgage 
debt.  

The  trend  was  accentuated  in  the  last  few  decades  for  a  number  of  reasons.  The  existence  of  the 
National  Mortgage  Guarantee  system  (NHG)  since  1993  has  meant  that  the  risk  of  default  for 
mortgages  under  a  fairly  high  threshold  was  transferred  to  the  government.  Generous  mortgage 
lending  and  house  prices  in  the  Netherlands  were  also  boosted  by  a  combination  of  changing 
household  behaviour  patterns,  trends  in  the  labour  market,  financial  innovations,  and  changes  in 
financing conditions, notably increases in affordability due to lower interest rates. Banks designed 
instruments to allow borrowers to benefit to the maximum extent from full MID such as bullet-type 
mortgage loans which kept deductible interest high over the full maturity of the loan. This allowed 
borrowers to postpone paying off the principal until the loan matured. Moreover, lending standards 
were also relaxed. High loan-to-value  (LTV) ratios in excess of 100 % became possible. In 2010 
the  vast  majority  (92 %)  of  outstanding  mortgages  thus  consisted  of  non-amortising  loans. 
Moreover,  since  1993,  in  a  period  of  strong  employment  gains,  banks  have  taken  a  second 
household  income  into  account  when  determining  a  household’s  borrowing  capacity,  further 
driving up prices.  

Over  the  last  decade,  some  measures  have  been  taken  to  limit  full  and  unqualified  MID.  Since 
January 2001, MID has been restricted in three ways. First, deductibility applies only to mortgage 
loans  on  the  borrower’s  primary  residence  (and  not  to  secondary  homes  such  as  holiday  homes). 
Second, deductibility is only allowed for a period of up to 30 years. Finally, the top income tax rate 
has been reduced from 60 % to 52 %. However, these changes did not have a significant impact on 
the  rate  of  mortgage  loan  origination,  mainly  because  of  the  simultaneous  falls  in  of  mortgage 
interest  rates  in  line  with  international  trends.  From  1  January  2004,  the  tax  deductibility  of 
mortgage  loan  interest  payments  was  further  restricted  under  the  Bijleenregeling,  which  limited 
interest deductibility to that part of the mortgage that equalled the price of the new property minus 
the net profit realised on the old one. As from August 2011, the requirements for mortgage lending 
have  been  tightened  leading  to  a  revised  Code  of  Conduct  for  Mortgage  Lending.  Banks  have 
committed to reducing new interest-only mortgages to a maximum of 50 % of the market value of 
the property. In addition, the maximum LTV-ratio will be reduced from 106 % in 2012 to 100 % in 
2018.  

Social housing represents 33 % of total dwellings. 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, mostly rent-controlled. The Dutch authorities provide targeted 
subsidies for low-income households. More than three-quarters of all tenants rent a dwelling from 
social housing corporations, 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. 

20 

 
Some  progress  has  been  achieved  in  addressing  the  2012  Council  Recommendations  on  the 
housing  market.  Since  April  2012  a  series  of  measures  have  been  put  forward  by  the  respective 
Dutch  governments.  While  these  are  steps  in  the  right  direction,  the  overall  pace  of  reforms  to 
address the underlying problems is slow and thus needs to be stepped up. 

Property market 

The  legislative  changes  on  eligibility  for  mortgage  interest  deductibility  are  welcome  as  an 
important  first  step  in  the  direction  of  a  healthier  housing  market.  New  mortgage  initiated  in 
2013  and  beyond  must  take  an  annuity  or  linear  form  in  order  for  mortgage  interest  to  be  tax-
deductible  and  to  qualify  for  NHG  guarantee.  Also  interest  can  only  be  deducted  for  mortgages 
amortised  over  a  maximum  of  30  years.  This  adjustment  in  the  fiscal  treatment  of  mortgages  will 
help gradually unwind the structural deficiencies of the housing market and support public finances 
over  the  long  run.  For  new  loans  it  will  eliminate  the  fiscal  incentive  not  to  gradually  repay  the 
principal over the maturity of the loan, thus reducing the tax incentive to take out mortgage loans. 
Since interest payments automatically decline over time in amortising structures, the absolute size of 
the tax advantage also declines. Limiting the mortgage interest tax relief to bring it in line with full 
annuity repayment should also gradually relieve the Dutch banking sector’s dependency on market 
funding, thus reducing the vulnerability and leverage of both Dutch households and banks. 

However,  under  the  current  plans,  the  phasing  in  of  the  limitation  of  mortgage  interest 
deductibility20  is  in  effect  strongly  back-loaded  due  to  the  very  gradual  restrictions  on 
mortgage interest deductibility for the stock of existing mortgages. The possibility to grandfather 
full mortgage interest deductibility for existing loans when refinancing or moving home21 adds to the 
back-loading of the actual impact on the existing stock of mortgages. Therefore, given the size of the 
outstanding stock of existing mortgages (which for the overwhelming majority consists of interest-
only loans in various guises) the current measures will have an excessively muted effect on the rate 
at which mortgage interest deductions are reduced and will be overly slow in reducing the incentive 
to  leverage  against  gross  housing  debt.  Moreover,  in  effect,  these  measures  limit  first-time 
homebuyers’  access  to  the  mortgage  (and  housing)  market.  Given  that  a  revival  of  activity  in  the 
Dutch housing market will hinge to a large degree on mobilising first-time buyers, spreading the cost 
over a wider group (including those with larger financial buffers) could help cushion the impact of a 
faster reduction in mortgage interest deductibility. 

Since the full effect will be phased in only very gradually, the current plans imply a marked 
difference  in  the  fiscal  treatment  between  new  and  existing  mortgage  loans.  The  latter  will 
continue to be treated more favourably, partly due to grandfathering provisions. Indeed, when an old 
mortgage  loan  is  being  refinanced,  the  borrower  will  be  able  to  transfer  his  tax  benefit  to  a  new 
mortgage loan, even with a different originator.22 The old tax regime is portable until the date that 
mortgage  loan  matures  (under  the  current  legislation  at  least  30  years  after  the  conclusion  of  the 
mortgage). In other words, if a borrower, at the moment of an interest reset date, opts to refinance 
the loan instead of accepting a new interest rate, then, de facto, the above mentioned reform will not 
apply to him. 

20 This favourable tax treatment is reinforced by an additional deduction for small mortgage interest payments. The result 
is that home owners do not pay net taxes on their property, which especially favours wealthier households. 
21 It is not yet clear if, as indicated in the original version of the reforms, borrowers would be able to keep the same, 
grandfathered,  mortgage  deal  for  their  existing  loan  amount  if  they  move  homes.  If  this  is  the  case,  it  is  only  any 
additional borrowing that would be subject to the rule change. 
22 The grandfathering applies to the mortgage loan product as well as to the specific loan amount. 

21 

 
                                                 
A further aspect of the change in the tax treatment of housing finance relates to the gradual 
reduction in the deductible rate from 52 % to 38 %. 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. This reform will be applicable to new as well as existing mortgage loans, but the impact 
will only be felt very gradually because of slow phasing in and grandfathering clauses which allow 
tax advantages to persist on refinancing or relocation of an existing housing loan. A gradual 
approach is needed, but the phasing-in of this measure over a period of 28 years is too slow to have a 
significant impact on amortising behaviour in the coming years. In theory, it will also have an impact 
on existing mortgage holders, but this will only have material effect after a protracted gestation 
period. For the first 20 years only those with taxable income in the highest income tax bracket of 
52 % (who account for only around 18 % of all households23) will be affected. Hence, for 20 years 
the bulk of existing mortgages in the second highest tax bracket of 42% will not be affected. In other 
words, they will not lose the incentive to postpone paying back the housing loan principal.  

The  measures  proposed  increase  net  loan  servicing  costs  over  time,  thereby  affecting  the 
affordability  of  housing,  in  particular  of  first-time  home  buyers  who  are  important  in 
determining prices and in driving the number of transactions. To partly address this, there is a 
possibility  to  take  a  second  interest-only  mortgage  for  a  partial  repayment  of  the  first  loan.  With 
each repayment on the first loan, debt on the other loan builds up to reach a maximum of 50 % of the 
mortgage  sum  after  30  years.  Although  these  second  loans  do  not  qualify  for  tax  deductibility  of 
interest paid, they do allow buyers to initially lower their monthly interest payments. However, the 
duo-mortgage  also  induces  them  to  build  up  higher  residual  debt  compared  to  an  outright  annuity 
mortgage and strongly increases the overall costs of financing the purchase. Therefore, it remains to 
be  seen  whether  people  will  actually  opt  for  up  this  kind  of  second  mortgage.  Nevertheless,  on 
balance interest-only mortgage loans are poised to lose significant market share, which is a positive 
development. The popularity of other amortisation-free mortgage product structures, such as savings, 
investment  and  insurance  structures,  will  also  fall  due  to  the  fact  that  new  loans  of  this  type  no 
longer qualify for a specific tax discount. 

First-time  home  buyers  also  bear  the  brunt  of  more  restrictive  bank  lending  conditions, 
including the stepwise reduction over five years in the maximum loan-to-value (LTV) ratio to 
100 %. Reducing the maximum LTV ratio translates into a limitation of the borrowing capacity of 
more  liquidity-constrained  home  buyers  and  thus  accentuates  further  the  existing  slump  in  the 
housing  market,  due  to  the  interaction  with  restrictions  on  mortgage  interest  deductibility  for  new 
housing loans. 

Negative  equity  is  increasingly  creating  gridlock  on  the  housing  market,  since  most 
homeowners affected are either not willing or able to take losses if they relocate. It is estimated 
that for around 25 % of housing loans the market value of the house is currently below that of the 
outstanding mortgage debt. Relatively young households are particularly affected. In order to partly 
address  this  issue,  from  2014  onwards  the  interest  payment  on  residual  debt  will  still  be  tax 
deductible  for  a  maximum  of  5  years  (up  to  10  years  for  residual  debt  originating  between  29 
October 2012 and 31 December 2017). Nevertheless, actual costs for these homeowners will still rise 
substantially if they sell their properties, as banks will require the remaining debt to be reimbursed 
over  a  period  of  10  years.  Moreover,  although  these  measures  may  contribute  to  an  orderly 
adjustment  of  the  housing  market  in  the  medium  run,  their  short-term  stimulus  effect  is  far  less 
certain.  

23  The  number  of  households  with  an  owner  occupied  dwelling  is  4 214 000. Of  those,  751 000  had  at  least  one 
household member with a taxable income in the highest income tax bracket.  

22 

 
                                                 
Overall,  the  proposed  measures  lead  to  an  overly  back-loaded  adjustment  in  the  owner-
occupied  segment,  as  they  are  geared  towards  preserving  advantages  for  existing  borrowers. 
Therefore,  the  planned  reduction  in  mortgage  interest  deductibility  should  be  accelerated  in 
order  to  reduce  disincentives  to  amortise  and  lower  the  fiscal  drag.  This  will  mean  putting  a 
larger  part  of  the  burden  of  adjustment  on  existing  mortgages.  This  should  make  it  progressively 
more  attractive  for  people  to  start  repaying  their  loan  principal  (through  the  trade-off  between  the 
returns  on  savings,  mortgage  interest  rates  and  the  rates  for  tax  deduction  on  various  sources  of 
taxable  income).  A  gradual  approach  is  still  important  to  avoid  undue  destabilising  effects.  At  a 
micro-level, the turning point of individuals’ decisions on whether or not to amortise will depend on 
their specific situations; at a macro-level, the transition will inevitably still need to be gradual, but 
should be faster than current plans imply.  

Rental market 

The  planned  reforms  for  the  rental  housing  market  aim  at  addressing  rental  market 
distortions,  notably  the  problem  of  so-called  ‘scheefhuurders’  (people  still  living  in  social 
housing, despite having higher incomes), while protecting those who need social housing. They 
are relevant and are a step in the right direction, but fall short of a full implementation of the 
CSR.  The  parliament  recently  approved  income-dependent  rent  increases  for  the  regulated  rent 
sector  (more  than  three-quarters  of  which  consists  of  social  housing  corporations)24,  but  with  a 
maximum annual rent increase of 4 % above inflation25, the incentive for people with higher income 
to move out of social housing is very limited. The measure is expected to have only marginal effect 
in the short- to medium term. The additional rental income that social housing corporations receive 
as a result of the rent increases will be skimmed by a higher the property tax levy, amounting to an 
additional EUR 50 million in 2013, and rapidly rising to EUR 1.7 billion by 2017 (0.3 % of GDP). 
There is a risk that this obligation will lead to a commensurate reduction in investment on the part of 
social housing corporations, given the wider financial constraints they are under. On the other hand, 
rules  for  selling  part  of  the  social  housing  corporations’  property  will  be  loosened  to  encourage 
social  housing  corporations  to  focus  on  their  prime  task  of  building  and  managing  social  housing. 
The  governance  of  the  social  housing  sector  needs  to  be  strengthened  to  prevent  the  build-up  of 
operational risk in the social housing corporations. This is particularly the case if there is not strong 
enough  oversight  (as  in  the  case  of  Vestia)  which  could  lead  to  severe  financial  repercussions  for 
public  finances  and  other  social  housing  corporations.  It  is  fundamental  to  safeguard  the  housing 
corporations’  social  dimension.  Along  with  other  aspects,  such  as  spatial  planning,  this  social  role 
means ensuring that social housing is available to disadvantaged citizens or socially less advantaged 
people,  who,  due  to  solvency  constraints,  are  unable  to  obtain  housing  at  market  conditions"26, 
including in sought-after locations. This will imply a role for targeted income support.  

The Commission comes to the conclusion that the Netherlands has made some progress on measures 
taken to address the CSR on the housing market. 

24 The liberalized rental sector, currently accounting for a mere 7 % of the total housing stock, is not bound to maximum 
rent increases. 
25 Tenants with a household income of less than EUR 33,614 would pay up to 1.5 pp above the inflation rate, for tenants 
with and income between EUR 33,614 and EUR 43,000 the difference to inflation will be 2 pp, and those with incomes 
above EUR 43,000 face rent increases up to 4 pps above inflation. Landlords will thus 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 losses in purchasing power. 
26 See recital 11 of the Commission Decision of 20 December 2011 on the application of Article 106(2) of the Treaty on 
the  Functioning  of  the  European  Union  to  State  aid  in  the  form  of  public  service  compensation  granted  to  certain 
undertakings entrusted with the operation of services of general economic interest, OJ L 7, 11.01.2012, p. 3. 

23 

 
 
 
                                                 
Research and innovation 

According  to  the  Innovation  Union  Scoreboard,  the  Netherlands  is  an  ‘innovation  follower’ 
with  above-average  performance.27  It  is  excellent  in  terms  of  frequently  quoted  scientific 
publications  and  licence  or  patent  revenues  from  abroad  and  it  will  be  important  to  maintain  this 
level.  Although  the  Dutch  research  and  innovation  system  has  managed  to  maintain  and  in  some 
areas improve its innovative capacity, the Netherlands’ relative underperformance in private research 
and development (R&D) expenditure may reduce economic growth and weaken the competitiveness 
of the Dutch economy in the future. 

Research and development intensity was 2.04% in 2011, similar to the EU average of 2.03%. 
However, business enterprise research and development expenditure (BERD) is relatively low 
compared  to  the  EU  average  (1.07%  vs.  1.26%  in  2011).  This  is  partly  due  to  the  fact  that  the 
Dutch economy features a large service sector and a relatively small manufacturing industry, which 
is  geared  towards  medium-tech  sectors.  Moreover, a  significant  proportion  of  private  research  and 
development  expenditure  is  concentrated  in  a  limited  number  of  large  multinational  firms.  In  line 
with its commitments under the Europe 2020 Strategy, the Netherlands has set a national target of 
2.5% of GDP for research and development intensity in 2020. 

The  enterprise  policy  ‘To  the  Top’,  which  features  a  sectoral  approach  to  public-private 
partnerships  in  the  area  of  research,  innovation  and  education  (‘top  sectors’),  is  now  being 
implemented. The strategy enhances cooperation between businesses and research institutions and 
stimulates private investment in R&D and innovation. Stakeholders play a central role in the process 
and  SME  participation  is  supported  and  monitored  closely.  This  approach  is  expected  to  channel 
private research funding in a mutually beneficial way. Several private investment commitments were 
announced  in  2012.  So  far,  the  progress  seems  promising,  but  at  this  stage  it  is  still  too  early  to 
assess to what extent the strategy is able to mobilise additional resources and investments in R&D 
and innovation.  

In  addition  to  sectoral  innovation  policies,  horizontal  research  and  innovation  policies  and 
funding  have  an  important  role  to  play.  For  instance,  it  is  essential  that  companies  with  high 
growth potential that do not fall under one of the chosen ‘top sectors’ can also be brought into the 
enterprise  policy  and  that  the  selection  of  top  sectors  can  be  updated.  Although  some  adjustments 
have been made to the coverage of the top sectors, there do not seem to be plans to carry out regular 
revisions.  Moreover,  it  is  important  to  preserve  an  adequate  level  of  public  funding  for  not-
earmarked fundamental research, in line with the priorities set out in the annual growth survey. In 
the coming years, it will be critical to secure the allocation of funding and additional expenditure for 
fundamental  research  not  earmarked  for  specified  fields,  as  announced  under  the  coalition 
agreement.28  

In recent years, specific subsidies for innovation have been considerably reduced and largely 
transformed  into  tax  incentives  or  generic  tax  reductions.  All  remaining  financial  support 
measures are of a generic nature and are not limited to the top sectors. This shift from administrative 
to  generic  instruments,  irrespective  of  sectors,  is  particularly  welcome,  as  it  limits  the  risk  that 
innovative firms outside pre-selected sectors will fall outside the scope of R&D policies. The R&D 
tax incentive scheme WBSO, which allows for the deduction of R&D wages for tax purposes, was 
evaluated in 2012.29 The evaluation points out that the scheme has had a positive impact in terms of 

27 Innovation Union Scoreboard: 
http://ec.europa.eu/enterprise/policies/innovation/facts-figures-analysis/innovation-scoreboard/index_en.htm 
28 Letter to parliament ‘Uitwerking regeerakkoord voor versterking kenniseconomie’, 11 February 2013. 
29 
2010.html  

http://www.rijksoverheid.nl/documenten-en-publicaties/rapporten/2012/04/02/hoofdrapport-evaluatie-wbso-2006-

24 

 
                                                 
mobilising  additional  private  R&D  expenditure,  while  the  thresholds  seem  to  ensure  a  particular 
concentration in SMEs. 

Skills shortages, especially in engineering and technology related professions, are becoming an 
increasing concern and a potential bottleneck for growth. In reaction to these developments, the 
government  has  recently  announced  the  ‘Techniekpact’  strategy.  Concrete  measures  to  make  the 
educational  system  and  the  labour  market  better  suited  to  the  changing  requirements  of  the 
technology  sector  are  currently  being  developed.  It  will  be  important  to  implement  this  strategy 
effectively in order to preserve and enhance the innovative capacity of high-tech companies in the 
Netherlands. Higher education should aim at making studies for technical profiles attractive. 

The measures taken so far are relevant and are steps in the right direction in promoting closer 
links between science and business and in stimulating additional private investments in R&D 
and innovation. There is a clear link between the measures presented and the challenges identified 
in the country specific recommendation. However, it is still too early to judge the effectiveness of 
these  measures.  It  is  therefore  important  to  remain  ambitious  about  strengthening  the  innovative 
capacity  and  competitiveness  of  the  Dutch  economy,  ensuring  that  innovative  instruments  are 
inclusive across sectors while safeguarding a solid base in fundamental research which is adequately 
funded and delivering good quality higher education. 

The  Commission  comes  to  the  conclusion  that  the  Netherlands  has  made  substantial  progress  on 
measures taken to address the CSR. 

Energy, Climate and Environment  

The latest data suggest that the Netherlands is currently on track to meet its target regarding 
reducing  emissions  not  covered  by  the  EU  Emissions  Trading  Scheme  (ETS).30  By  2020,  in 
accordance with the Effort Sharing Decision, the Netherlands needs to have reduced emissions that 
are  not  covered  by  the  EU  ETS  by  16%  from  their  2005  levels.  However,  the  weak  economic 
activity in the wake of the crisis has probably partly contributed to achieving this. Emission targets 
may well become more difficult to achieve should economic growth pick up again.  

The  renewable  energy  share  in  the  Netherlands  rose  from  to  3.8%  in  2010  to  4.3%  in  2011, 
bringing it within reach of its 2011/2012 interim target of 4.7%. Nevertheless, despite the announced 
more  ambitious  policies  announced  to  promote  renewables,  including  a  continuation  of  the 
sustainable  energy  production  (SDE+)  scheme  with  a  budget  of  EUR  3  billion  for  2013,  the  gap 
between the Netherlands’ current renewable energy share figures and the 2020 target figure is still 
one the widest in the EU (in percentage points). Consequently, if additional policies are not put in 
place swiftly, in particular for projects that need a long lead-time such as off-shore wind, there is a 
risk that the target of 14% by 2020 (let alone the recently announced 16 % government target) will 
not be achieved.  

As  regards  energy  efficiency,  the  Netherlands  has  set  an  indicative  national  target  of  1.5% 
energy  savings  per  year.  However,  it  has  not  complied  with  the  requirements  of  the  Energy 
Efficiency Directive31 to express this target in terms of an absolute level of primary and final energy 
consumption in 2020 and to provide information concerning the basis on which this data has been 
calculated.  As  regards  industry,  the  Covenants  (MJA3  and  MEE)  have  not  achieved  the  expected 

30 Referentieraming Energie en Emissies Actualisatie 2012 (PBL 2012b) 
31 Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on energy efficiency. OJ 
L315 of 14.11.2012, p.1 

25 

 
 
                                                 
results,  with  the  ETS  sector  only  achieving  an  improvement  of  1.6%  in  2011  (compared  to  an 
average expected improvement of 2.7%).  

The  Netherlands  is  the  largest  gas  producer  in  the  EU  and  eighth  largest  in  the  world.  Gas 
makes  up  40%  of  the  Dutch  energy  mix,  against  an  EU  average  of  25%.  With  two  thirds  of  the 
existing gas field reserves used up, the Dutch government is now firmly committed to securing the 
Netherlands’  position  as  the  gas  hub  of  north-west  Europe,  although  the  less  secure  regulatory 
framework is jeopardising the required investments. 

Over  the  last  20  years,  there  has  been  progress  on  environmental  indicators.  For  example, 
there has been a considerable decline in landfilling, and a reduction in air emissions. Problems 
persist,  however,  with  biodiversity  and  nature  conservation,  and  with  meeting  the  targets  of  the 
Water  Framework  Directive.  The  2012  coalition  agreements  states  that  the  Netherlands  strives  to 
create a circular economy and intends to stimulate the (European) market for sustainable materials 
and  for  re-use  of  scarce  materials.  There  is  a  need  to  clarify  how  this  will  be  achieved.  It  is,  for 
example, not clear how skills, capital and knowledge transfer to SMEs will be organised effectively 
in order to stimulate them to save costs and secure jobs by using less resources and energy.32 The 
Netherlands rightfully emphasises the international dimension of resource efficiency and welcomes 
sustainability  criteria  for  all  biotic  resources,  and  a  European  approach  to  defining  subsidies  that 
could result in damage to the environment.  

3.5.  Modernisation of public administration  

The  Netherlands  has  a  tradition  of  policies  that  promote  reliable  public  administration  and 
reductions  in  the  administrative  burden.  According  to  the  World  Bank’s  Doing  Business  2013 
Report,  the  Netherlands  generally  has  a  business-friendly  legal  and  regulatory  environment  that 
encourages  business  competitiveness,  but  there  may  still  be  scope  for  further  improvement  or 
simplification  in  certain  areas  of  regulation.  In  2012,  a  new  target  was  announced  for  a  further 
reduction in the administrative burden. By 2017, a reduction in the regulatory burden on businesses, 
professionals and citizens to the value of EUR 2.5 billion should be achieved. In order to do so, the 
introduction of new regulations is to be linked to the revision or scrapping of existing rules.  

In  2012  and  2013,  procedures  for  starting  a  business  have  been  further  simplified  and 
minimum paid-in capital requirements abolished. The Chamber of Commerce and the innovation 
agency  Syntens  are  currently  being  merged  and  restructured,  which  may  lead  to  reduced  local  or 
regional presence but should enhance electronic information and services provided through a digital 
one-stop shop for entrepreneurs.33 Moreover, mandatory membership fees for enterprises have been 
abolished and the Chamber of Commerce is now directly financed by the public budget. While this 
reorganisation  should  produce  synergies  of  this  reorganisation  it  will  be  important  to  continue  to 
deliver high quality and ensure that key business support services remain available.  

A sizeable proportion of the total fiscal consolidation effort is achieved through savings in the 
size  of  the  public  sector.  Although  this  reduction  should  result  in  considerable  efficiency  gains, 
there is a risk that the high quality standards of public service provision will not be maintained and it 
could  lead  to  an  increase  in  expenditure  on  temporary  workers.  There  is  clear  scope  for  the 
Netherlands to introduce an integrated, systematic and transparent impact assessment system based 
on  the  good  practice  demonstrated  in  the  EU  institutions’  impact  assessment  process.  This  would 
ensure  that  policies  are  coherent  and  effective,  strengthen  the  evidence  base  for  planned  measures 
and  save  costs  including  the  costs  of  non-action,  costs  caused  by  the lock-in  effects  of  inadequate 

32  NL  could  learn  from  one  of  the  most  successful  initiatives  in  Europe  in  this  respect,  the  UK  Enworks  initiative 
(www.enworks.com), co-funded from the ERDF programme budget.  
33 www.ondernemersplein.nl 

26 

 
                                                 
measures,  and  indirect  and  long-term  costs.34  As  part  of  a  net  expenditure  savings  effort,  the 
government  is  also  planning  to  decentralise  a  large  number  of  competences  to  municipalities, 
ranging  from  youth  services  to  long-term  health  care.  Whether  these  efficiency  gains  can  be  fully 
realised is very questionable, especially within the timeframes envisaged.  

In the field of state aid the Dutch administration35 only coordinates the central collection data. 
Additional  responsibilities,  such  as  coordinating  notifications,  drafting  legislation,  recovering  state 
aid and pursuing infringements are divided between different bodies. The Netherlands does not have 
mechanisms  of  control  over  aid  granted,  such  as  transparency  mechanisms  or  bodies  in  charge  of 
checking the eligibility of aid awards.  

34 The European Commission aims to ensure that, by 2020, all Member States carry out systematic ex-ante assessments 
of  the  environmental,  social  and  economic  aspects  of  their  policy  initiatives  (COM(2012)710  final,  p.32:  Proposed 
Environmental Action programme to 2020. 
35 State aid coordinated by the Ministry of Economic Affairs. 

27 

 
                                                 
4.  OVERVIEW TABLE  

2012 commitments 

Summary assessment 

Country-specific recommendations (CSRs) 

in 

effort 

CSR  1:  Ensure  timely  and  durable  correction  of  the 
excessive  deficit.  To  this  end,  fully  implement  the 
budgetary  strategy  for  2012  as  envisaged.  Specify  the 
measures  necessary  to  ensure  implementation  of  the 
2013  budget  with  a  view  to  ensuring  the  structural 
adjustment 
the  Council 
specified 
recommendations under the excessive deficit procedure. 
Thereafter,  ensure  an  adequate  structural  adjustment 
effort  to  make  sufficient  progress  towards  the  MTO, 
including  meeting  the  expenditure  benchmark,  and 
ensure  sufficient  progress  towards  compliance  with  the 
debt reduction benchmark whilst protecting expenditure 
in areas directly relevant for growth such as research and 
innovation, education and training. To this end, after the 
formation of a new Government, submit an update of the 
2012 Stability Programme with substantiated targets and 
measures for the period beyond 2013. 

The  Netherlands  has  partially  implemented  the 
CSR:  
The  authorities  fully  implemented  the  budgetary 
strategy  for  2012  and  submitted  an  update  of  the 
2012  Stability  Programme.  Herein,  they  specified 
substantiated  targets  and  measures  for  the  period 
2013  and  beyond,  that  were  also  foreseen  to  bring 
the general government deficit below 3% of GDP in 
2013  and  to  ensure  the  structural  adjustment  effort 
specified in the Council recommendation under the 
excessive deficit procedure. However, according to 
the Commission Services' 2013 Spring Forecast the 
deficit  is  expected  to  reach  3.6%  of  GDP,  due  to 
unfavourable  economic  developments.  In  2014  the 
deficit is expected to remain above the 3% of GDP 
threshold without additional measures. According to 
the  2013  stability  programme  sufficient  progress 
towards 
the 
expenditure  benchmark  and  sufficient  progress 
towards  compliance  with 
reduction 
benchmark,  are  not  guaranteed.  Safeguarding 
expenditure directly relevant for growth will depend 
on budgetary implementation in the coming years. 

including  meeting 

the  MTO, 

the  debt 

the 

CSR  2:  Take  measures  to  increase  the  statutory 
retirement  age,  including  linking  it  to  life  expectancy, 
and  underpin  these  with  labour  market  measures  to 
support  raising  the  effective  retirement  age,  whilst 
improving 
long-term  sustainability  of  public 
finances.  Adjust  the  second  pension  pillar  to  mirror  the 
increase  in  the  statutory  retirement  age,  while  ensuring 
an  appropriate  intra-  and  inter-generational  division  of 
costs  and  risks.  Implement  the  planned  reform  in  long-
term  care  and  complement  it  with  further  measures  to 
contain  the  increase  in  costs,  in  view  of  an  ageing 
population. 

is  not  expected 

The  Netherlands  has  partially  implemented  the 
CSR:  
The statutory retirement age has been increased and 
will be linked to life expectancy. The lowering and 
eventual  abolition  of  the  partner  allowance  in  the 
first-pillar  pension  is  expected  to  have  a  positive 
effect  on  older  workers  participation  in  the  labour 
market and might therefore stimulate an increase the 
effective retirement age. 
The tax credit for older workers is being replaced by 
a new one which targets to the lowest incomes only. 
It 
this  will  contribute 
that 
significantly  to  the  effective  retirement  age,  but 
given  the  necessity  to  take  austerity  measures  the 
actions  seem  appropriate  For  instance,  a  bonus  for 
employers  who  hire  people  with  a  disability  or 
beneficiaries  of  social  assistance  aged  50  or  above 
is being introduced).  
Loosening  employment  protection  legislation  and 
making  unemployment  benefits  less  generous  is 
expected to increase older workers’ labour mobility, 
and  might 
labour 
participation,  the  effective  retirement  age  and  the 
sustainability of public finances. 
However, these reforms have been watered down or 
postponed based on the agreement reached with the 
social partners. 
Reforms to the second pension pillar, to mirror the 
increase 
are 
in 
implemented.  

retirement 

contribute 

therefore 

statutory 

age 

to 

28 

 
 
 
Increasing  the  statutory  retirement  age  has  been 
addressed, with additional plans to increase the pace 
at  which  the  increase  will  be  implemented.  It  is 
questionable to what extent the other measures will 
actually  support  an 
the  effective 
retirement  age.  Moreover,  although  understandable 
from an austerity point of view, the reduction in the 
‘prolonged-working  bonus’  may  have  a  negative 
effect.  Furthermore  the  second  pension  pillar  has 
not  yet  been  adjusted  fully  and  reforms  are  still 
under being negotiated with the social partners. 

increase 

in 

CSR  3:  Enhance  participation  in  the  labour  market, 
particularly  of  older  people,  women,  and  people  with 
disabilities  and  migrants,  including  by  further  reducing 
tax  disincentives  for  second-income  earners,  fostering 
labour market transitions, and addressing rigidities. 

CSR  4:  Promote  innovation,  private  R&D  investment 
and  closer  science-business  links,  as  well  as  foster 
industrial renewal by providing suitable incentives in the 
context  of  the  enterprise  policy,  while  safeguarding 
accessibility  beyond  the  strict  definition  of  top  sectors 
and preserving fundamental research. 

CSR  5:  Take  steps  to  gradually  reform  the  housing 
market,  including  by:  (i)  modifying  the  favourable  tax 
treatment  of home  ownership,  including  by  phasing out 
the 
mortgage 
system  of  imputed  rents,  (ii)  providing  for  a  more 
market-oriented pricing mechanism in the rental market, 
and  (iii)  for  social  housing,  aligning  rents  with 

interest  deductibility  and/or 

through 

second-income 

The  Netherlands  has  partially  implemented  the 
CSR:  
The  Participation  Act  could  reduce  the  number  of 
people on benefits by stimulating them to work, and 
hence  will  contribute  to  budget  savings.  These 
reforms are still being negotiated. 
The  phasing-out  of  the  transferrable  tax  credit  for 
single-breadwinner families is likely to contribute to 
the  participation  of 
earners, 
although it is to be phased out very slowly (15 years 
from 2009). 
The  phasing-out  of  the  double  tax  credit  for  those 
on  social  assistance  should  reduce  inactivity  and 
help  prevent  low  wage  traps,  but  it,  too,  will  be 
done at a slow pace (20 years from 2012). 
The increase in the general worker tax credit should 
make  work  more  attractive  and  thereby  promote 
labour  market  participation.  The  relevant 
tax 
measures have been implemented. 
Loosening of employment protection legislation and 
making  unemployment  benefits  less  generous  is 
expected to increase individual labour mobility, and 
ultimately contribute to labour market participation. 
However, these reforms have been watered down or 
postponed further to the agreement reached with the 
social partners. 
Although  the  measures  taken  touch  upon  many 
aspects  of  the  CSR,  tax  disincentives  are  only 
reduced  at  a  very  slow  pace  and  no  significant 
measures  are  taken  to  enhance  the  participation  of 
people  with  a  migrant  background  in  the  labour 
market. 

The  Netherlands  has  made  good  progress  in  the 
implementation of the top sectors business strategy 
which  addresses  challenges 
for  research  and 
innovation  mentioned  in  this  CSR.  However,  in 
view of the latest budgetary measures, safeguarding 
of  funding  for  fundamental  research  in  line  with 
priorities set out in the Annual Growth Survey does 
not appear certain. 

The  legislative  changes  on  eligibility  for  mortgage 
interest  deductibility  are  welcome  as  a  first  step  in 
the right direction, but need to be stepped up for the 
stock  of  existing  mortgages.  The  planned  reforms 
for  the  rental  housing  market  are  equally  relevant, 
but fall short of full implementation of the CSR. 

29 

 
 
household income. 

Europe 2020 (national targets and progress) 

Employment rate target: 80%. 

R&D target: 2.5% of GDP. 

The employment rate went up from 76.8% in 2010 
to 77% in 2011 and 77.2% in 2012. Given that the 
(rising)  employment  rate  is  already  close  to  the 
target value, it is likely that the target will be met in 
time.  

The Netherlands has set an ambitious national target 
of  2.5%  of  GDP  for  R&D  in  2020,  without 
indicating a subdivision between public and private 
expenditure. In 2011, the Dutch R&D intensity was 
2.04%,  similar  to  the  EU  average  of  2.03%.  The 
increase  from  the  2010  value  of  1.85%  is  at  least 
partially  explained  by  a  change  in  the  way  data  is 
collected.  
Private R&D expenditure (BERD) is relatively low 
(1.07% vs. 1.26% EU average in 2011) and, before 
the change of methodology in 2011, had decreased 
from 1.07% in 2000 to 0.89 % in 2010. 
Public R&D expenditure (GOVERD and HERD as 
%  of  GDP),  at  0.98%  in  2011,  is  on  the  contrary 
well above the EU average of 0.74% GDP, and the 
Netherlands  is  ranking  at  4th  position.  After  strong 
increases  up  to  2010,  public  funding  for  R&D  is 
currently  on  a  decreasing  trend,  including  by  the 
ending  of  anti-crisis  measures  taken  in  2009-2010. 
However,  according  to  the  NRP,  the  total  of  direct 
and  indirect  public  expenditure  is  foreseen  to  be 
higher in 2016 than in the pre-crisis year 2008. The 
share  of  total  funds  for  innovation  and  research 
according  to  the  NRP  increased  from  0.94%  of 
GDP in 2008 to 1.17% of GDP in 2012, notably by 
a more intensive use of R&D tax incentives, and is 
foreseen to decrease to 0.99% of GDP in 2016, as a 
result of the expiry of temporary crisis measures.  
The  feasibility  of  reaching  the  EU  2020  target  of 
2.5%  of  GDP  will  depend  heavily  on  a  significant 
leverage  effect  of  the  top  sector  policy  and  tax 
incentive  schemes  on  private  investments,  and  on 
safeguarding  the  planned  direct  and  indirect  public 
R&D expenditure until 2016. 

Greenhouse  gas 
-16% 
(compared  to  2005  emissions;  ETS  emissions  are  not 
covered by this national target). 

(GHG)  emissions 

target: 

Change  in  non-ETS  greenhouse  gas  emissions 
between  2005  and  2011:  -8%.  According  to  the 
latest  national  projections 
the 
into  account  existing 
Commission  and 
measures, the target is expected to be reached: -19% 
in  2020  compared  to  2005 (with  a  margin  of  3 
percentage points). 

submitted 

taking 

to 

Renewable energy target: 14 % 

Share of renewable energy in the transport sector: 10 % 

The  share  of  total  renewable  energy  in  gross  final 
energy  consumption  was  4.3 %  in  2011  and  4.6 % 
in  the  transport  sector.  (Source:  Eurostat.  April 
2013.  For  2011,  only  formally  reported  biofuels 
compliant  with  Art.  17  and  18  of  Directive 
2009/28/EC are included).  
To  achieve  its  renewable  energy  share  targets,  the 
Netherlands  would  have  to  make  sure  additional 

30 

 
 
 
Energy efficiency target: 1.5% per year (partial). 
The  preliminary  data  suggests  that  the  final  energy 
consumption level in 2020 would be 52.1 Mtoe. 

Early school leaving target: <8% 

Tertiary education target: 40-45%  

Risk  of  poverty  or  social  exclusion  target:  -100,000 
(reduction  of  people  aged  0  to  64  in  a  jobless 
household). 

policies  are  put  in  place  quickly,  in  particular  for 
projects that need a long lead-time. 

Netherlands  has  set  an  indicative  national  energy 
efficiency target. However, it has neither expressed 
it,  as  required,  in  terms  of  an  absolute  level  of 
primary and final energy consumption in 2020, nor 
has provided information on the basis on which data 
this has been calculated. 

Early school leaving rate: 10.9% in 2009, 10.0% in 
2010, 9.1% in 2011 and 8.8% in 2012. 
Reaching  the  early  school  leaving  target  seems 
highly feasible. 

Tertiary attainment rate: 40.5 in 2009 41.4 in 2010, 
41.1% in 2011 and 42% in 2012. 
In  2012,  42%  of  those  aged  30-34  years  had 
completed  tertiary  education.  The  40%  target  has 
thus already been reached. The trend since 2005 has 
been  for  this  rate  to  grow  by  an  average  of  2.76% 
on  a  compound  annual  basis.  To  reach  the  45% 
target  a  compound  annual  growth  rate  of  1.01%  is 
needed, and hence this also seems feasible.  

The  number  of  people  (aged  0  to  59)  in  low-work 
intensity  households  has  risen  by  75,000  people 
since  2008,  instead  of  falling  by  the  required 
93,000.  Hence  achieving  this  target  seems  highly 
problematic. 

31 

 
 
5. 

ANNEX 

Table I. Macroeconomic indicators 

Core indicators
GDP growth rate
Output gap 1
HICP (annual % change)
Domestic demand (annual % change) 2
Unemployment rate (% of labour force) 3
Gross fixed capital formation (% of GDP)
Gross national saving (% of GDP)
General Government (%  of GDP)
Net lending (+) or net borrowing (-)
Gross debt
Net financial assets 
Total revenue 
Total expenditure
  of which: Interest
Corporations (%  of GDP)
Net lending (+) or net borrowing (-)

1995-
1999

2000-
2004

2005-
2009

2010

2011

2012

2013

2014

3.9
0.0
1.7
4.3
5.4
21.9
26.9

-1.6
69.0
-48.3
46.7
48.2
5.0

1.7
-0.4
3.0
1.1
3.6
20.3
26.8

-1.0
51.9
-35.3
44.7
45.8
2.9

1.5
0.0
1.6
1.6
4.0
19.6
26.2

-0.9
52.7
-30.2
45.7
46.6
2.2

1.6
-1.7
0.9
0.2
4.5
17.3
23.1

-5.1
63.1
-34.4
46.1
51.3
2.0

1.0
-1.4
2.5
0.5
4.4
17.7
26.4

-4.5
65.5
-38.8
45.4
49.9
2.0

-1.0
-2.5
2.8
-1.5
5.3
16.8
25.5

-4.1
71.2
n.a
46.4
50.4
1.9

-0.8
-3.3
2.8
-1.6
6.9
16.3
25.6

-3.6
74.6
n.a
47.3
50.9
1.9

0.9
-2.7
1.5
0.3
7.2
16.3
25.8

-3.6
75.8
n.a
47.2
50.8
1.9

4.1

6.7

7.9

10.1

12.0

11.9

10.2

10.9

n.a
n.a
8.7
25.9

n.a
n.a
8.7
26.6

n.a
n.a
8.7
26.3

-75.6
-8.4
9.3
25.4

-44.0
-15.6
9.4
26.3

-53.6
-13.2
8.7
26.1

0.1
n.a
39.0
5.0
23.6
5.4

-137.3
-27.0
12.3
24.4

-110.2
-25.2
10.2
24.5

0.4
169.7
39.0
4.2
22.9
5.9

0.6
175.7
40.5
6.9
22.5
7.7

-0.6
166.5
39.2
4.0
23.0
5.3

2.9
205.9
42.4
9.0
23.7
10.3

-0.7
158.8
38.6
5.5
21.5
6.6

Net financial assets; non-financial corporations
Net financial assets; financial corporations
Gross capital formation
Gross operating surplus
Households and NPISH (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Gross wages and salaries
Net property income
Current transfers received
Gross saving
Rest of the world (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Net exports of goods and services
Net primary income from the rest of the world
Net capital transactions 
Tradable sector
Non tradable sector
  of which: Building and construction sector
Real effective exchange rate (index, 2000=100)
Terms of trade goods and services (index, 2000=100)
Market performance of exports (index, 2000=100)
Notes:
1 The output gap constitutes the gap between the actual and potential gross domestic product at 2005 market prices.
2 The indicator on domestic demand includes stocks.
3  Unemployed persons are all persons who were not employed, had actively sought work and were ready to begin working immediately or within two weeks. 
The labour force is the total number of people employed and unemployed. The unemployment rate covers the age group 15-74.

7.9
-71.4
8.9
0.9
-0.3
39.9
49.7
4.8
102.8
98.9
103.8

4.5
-65.1
8.2
-1.6
-0.6
39.3
50.0
4.8
102.5
98.7
104.8

8.0
n.a
8.8
1.0
-0.3
40.2
49.7
4.4
100.2
98.0
107.0

7.7
n.a
9.2
1.0
-0.9
n.a
n.a
n.a
101.5
97.7
109.5

6.2
-44.7
8.0
0.1
-0.3
40.1
48.7
5.1
101.8
99.6
100.3

8.7
n.a
9.6
1.0
-0.3
n.a
n.a
n.a
101.3
97.5
108.5

6.2
-4.9
6.3
1.5
-0.2
41.4
47.7
5.1
96.6
99.2
101.2

4.4
6.7
5.1
0.8
-0.3
43.0
46.6
4.9
93.5
97.0
99.8

1.2
n.a
38.9
5.4
24.4
6.2

1.1
n.a
39.0
5.4
24.2
6.1

Source :
Commission services’ 2013 spring forecasts (COM); Stability programme (SP).

32 

 
 
Table II. Comparison of macroeconomic developments and forecasts 

Real GDP (% change)
Private consumption (% change)
Gross fixed capital formation (% change)
Exports of goods and services (% change)
Imports of goods and services (% change)
Contributions to real GDP growth:
- Final domestic demand
- Change in inventories
- Net exports
Output gap1
Employment (% change)
Unemployment rate (%)
Labour productivity (% change)
HICP inflation (%)
GDP deflator (% change)
Comp. of employees (per head, % change)
Net lending/borrowing vis-à-vis the rest of 
the world (% of GDP)

2012
COM SP
-0.9
-1.0
-1.5
-1.4
-4.9
-4.6
3.1
3.3
2.8
3.1

2013
COM SP
-0.4
-0.8
-1.6
-2.4
-2.1
-3.3
2.8
3.3
2.0
2.9

2014
COM SP
1.1
0.3
2.3
4.2
4.2

0.9
-0.1
1.6
3.9
3.6

-1.5
0.1
0.4
-2.5
-0.1
5.3
-0.1
2.8
0.7
1.3
8.0

-1.4
0.0
0.5
-2.9
-0.2
5.3
-0.7
2.8
1.1
2.2
8.0

-1.7
0.2
0.6
-3.3
-1.6
6.9
0.2
2.8
1.4
1.8
7.7

-1.1
-0.2
0.9
-3.3
-0.4
6.3
0.0
2.8
1.6
2.2
8.8

0.3
0.0
0.6
-2.7
-0.1
7.2
1.0
1.5
1.7
2.1
8.7

0.6
0.1
0.4
-2.5
0.1
6.4
0.9
1.7
1.6
2.7
9.0

2015
SP
1.6
0.1
2.6
5.1
4.5

0.5
0.0
1.1
-1.6
0.5
6.7
1.1
1.5
0.9
1.3
11.2

2016
SP
1.6
0.1
2.6
5.1
4.5

0.5
0.0
1.1
-0.7
0.5
6.6
1.1
1.5
0.9
1.3
11.1

2017
SP
1.6
0.1
2.6
5.1
4.5

0.5
0.0
1.1
0.0
0.5
6.1
1.1
1.5
0.9
1.3
11.5

Note:
1In percent of potential GDP, with potential GDP growth recalculated by Commission services on the basis of the programme scenario 
using the commonly agreed methodology.

Source :

Commission services’ 2013 spring forecasts (COM); Stability programme (SP).

33 

 
 
Table III. Composition of the budgetary adjustment 

(% of GDP)

Revenue
of which:
- Taxes on production and imports
- Current taxes on income, wealth, etc.
- Social contributions
- Other (residual)
Expenditure
of which:
- Primary expenditure

of which:

Compensation of employees
Intermediate consumption
Social payments
Subsidies
Gross fixed capital formation
Other (residual)
- Interest expenditure
General government balance (GGB)
Primary balance
One-off and other temporary measures
GGB excl. one-offs

Output gap

2

Cyclically-adjusted balance

2

3
Structural balance (SB)
Change in SB
Two year average change in SB 

3

Structural primary balance
Change in structural primary balance
Expenditure benchmark

Applicable reference rate

4

2012

2013

2014

2015

2016

2017

COM COM SP
46.7
47.3
46.4

1
COM
47.2

11.4
10.9
16.5
7.5
50.4

12.0
10.9
16.9
7.5
50.9

12.0
11.1
16.8
6.8
49.9

12.1
10.7
17.1
7.3
50.8

SP
47.0

12.2
10.8
17.0
7.0
50.4

SP
46.8

11.9
12.4
15.9
6.6
48.9

SP
46.7

11.9
12.6
15.7
6.5
48.7

SP
46.5

12.0
12.8
15.6
6.1
48.0

48.5

49.0

48.0

48.9

48.6

46.9

46.6

45.9

9.7
7.7
24.0
1.3
3.4
2.5
1.9
-4.1
-2.2
0.0
-4.1

-2.5

-2.6

-2.6
1.0
0.7

-0.7

9.8
7.5
24.6
1.2
3.4
2.5
1.9
-3.6
-1.7
0.2
-3.8

-3.3

-1.8

-2.0
0.7
0.8

-0.1
0.7

9.7
7.6
23.8
1.2
3.1
1.9
1.9
-3.4
-1.3
0.0
-3.4

-3.3

-1.5

-1.5
1.1
1.1

0.4
1.1

9.7
7.5
24.8
1.1
3.3
2.4
1.9
-3.6
-1.7
0.2
-3.8

-2.7

-2.0

-2.3
-0.3
0.2

-0.4
-0.3

9.5
7.4
24.0
1.1
3.2
1.9
1.8
-3.0
-1.6
0.0
-3.0

-2.5

-1.6

-1.6
-0.1
0.5

0.2
-0.2

9.0
7.0
24.2
1.1
3.0
2.7
2.0
-2.0
-0.1
0.0
-2.0

-1.6

-1.1

-1.1
0.5
0.2

0.9
0.7

8.9
6.9
24.2
1.0
2.9
2.7
2.1
-1.9
0.1
0.0
-1.9

-0.7

-1.5

-1.5
-0.4
0.0

0.6
-0.3

8.7
6.7
24.0
1.1
2.8
2.5
2.1
-1.4
0.6
0.0
-1.4

0.0

-1.4

-1.4
0.1
-0.2

0.7
0.1

0.39

0.39

0.39

-0.14

-0.14

-0.14

-0.14

n.a.

Change: 
2012-2017

SP
0.1

0.6
1.9
-0.9
-1.4
-2.4

-2.6

-1.0
-0.8
0.0
-0.2
-0.6
0.0
0.2
2.7
2.8
0.0
2.7

2.6

1.2

1.2
-
-

1.4
-

-

5

-0.9

-2.2

-3.1

0.4

0.2

-1.5

0.0

n.a.

 (% GDP)

Deviation
Two-year average deviation (% GDP)
Notes:
1On a no-policy-change basis.
2Output gap (in % of potential GDP) and cyclically-adjusted balance according to the programme as recalculated by Commission services 
on the basis of the programme scenario using the commonly agreed methodology.
3Structural (primary) balance = cyclically-adjusted (primary) balance excluding one-off and other temporary measures.

-3.3

-0.9

-1.5

-0.9

-1.4

-0.7

-0.7

n.a.

-
-

4 Reference medium-term rate of potential GDP growth. The (standard) reference rate applies from year t+1, if the country has reached its 
M TO in year t. A lower  rate applies as long as the country is adjusting towards its M TO, including in year t.The reference rates applicable 
to 2014 onwards have been updated in 2013. 
5 Deviation of the growth rate of public expenditure net of discretionary revenue measures and revenue increases mandated by law from the 
applicable reference rate. The expenditure aggregate used for the expenditure benchmark is obtained following the commonly agreed 
methodology. A positive sign implies that expenditure growth exceeds the applicable reference rate. 

Source :
Stability programme (SP); Commission services’ 2013 spring forecasts (COM); Commission services’ calculations.

34 

 
 
Table IV. Debt dynamics 

(% of GDP)

1
Gross debt ratio
Change in the ratio
Contributions 2 :

1. Primary balance

2. “Snow-ball” effect

Of which:

Interest expenditure

Growth effect

Inflation effect

3. Stock-flow adjustment

Of which:

Cash/accruals diff.

Acc. financial assets

Privatisation

Val. effect & residual

Gap to the debt benchmark5,6
Structural adjustment7
To be compared to:
Required adjustment8
Notes:

Average
2007-2011

58.6

3.6

0.8

1.1

2.1

-0.4

-0.6

1.8

2012

71.2

5.7

2.2

2.1

1.9

0.6

-0.5

1.5

1.7

1.4

1.9

0.6

-1.0

0.2

2013

2014

COM

74.6

3.4

SP

74.0

2.8

COM

75.8

1.2

SP

75.0

1.0

2015
SP

71.4

-3.6

2016
SP

71.4

0.0

2017
SP

70.8

-0.6

1.3

1.2

2.0

0.3

-1.1

0.4

0.0

0.2

-0.8

4

SP

n.r.

n.r.

n.r.

1.7

0.0

1.9

-0.7

-1.2

-0.5

1.6

0.0

1.9

-0.8

-1.1

-0.6

0.0

-0.4

0.1

0.1

1.9

-1.2

-0.6

-3.8

-0.1

-0.3

-0.1

0.3

2.0

-1.1

-0.6

-0.2

-0.1

-0.3

-0.6

0.3

2.0

-1.1

-0.6

-0.3

0.0

-0.3

-1.9

-1.7

-1.7

-1.8

2014

2015

2016

2017

COM / 
SP3
n.r.

n.r.

n.r.

4

SP

n.r.

n.r.

SP

n.r.
0.5

SP

n.r.

-0.4

SP

n.r.

0.1

n.r.

0.0

-0.4

-0.4

2013

2012

n.r.

n.r.

COM / 
SP3
n.r.

n.r.

n.r.

n.r.

1End of period.
2The snow-ball effect captures the impact of interest expenditure on accumulated debt, as well as the impact of real GDP growth and 
inflation on the debt ratio (through the denominator). The stock-flow adjustment includes differences in cash and accrual accounting, 
accumulation of financial assets and valuation and other residual effects. 

3 Assessment of the consolidation path set in SP assuming growth follows the COM  forecasts.
4Assessment of the consolidation path set in the SP assuming growth follows the SP projections.
5Not relevant for M ember Sates that were subject to an EDP procedure in November 2011 and for a period of three years following the 
correction of the excessive deficit.
6Shows the difference between the debt-to-GDP ratio and the debt benchmark. If positive, projected gross debt-to-GDP ratio does not 
comply with the debt reduction benchmark.
7Applicable only during the transition period of three years from the correction of the excessive deficit for EDP that were ongoing in 
November 2011.

8Defines the remaining annual structural adjustment over the transition period which ensures that - if followed – M ember State will 
comply with the debt reduction benchmark at the end of the transition period, assuming that COM  (SP) budgetary projections for the 
previous years are achieved.

Source :

Stability programme (SP); Commission services’ spring 2013 forecasts (COM); Commission services’ calculations.

35 

 
 
Table V. Sustainability indicators 

S2

of which:

Initial budgetary position (IBP)

Long-term cost of ageing (CoA)

of which:

Pensions

Health care

Long-term care

Others

S1 (required adjustment)*

of which:

Initial budgetary position (IBP)

Debt requirement (DR)

Long-term cost of ageing (CoA)

S0 (risk for fiscal stress)**

Debt,  % of GDP (2012)

Age-related expenditure, % of GDP (2012)

NL

EU27

No-policy 
change 
scenario 

Programme 
(SCP) 
scenario

No-policy 
change 
scenario 

Programme 
(SCP) 
scenario

6.5

2.6

4.0

1.0

0.8

2.7

-0.5

3.1

1.1

1.0

1.0

5.7

1.9

3.8

0.9

0.7

2.6

-0.4

1.9

-0.1

0.8

1.2

3.0

0.8

2.2

1.0

0.9

0.6

-0.4

2.2

0.0

1.9

0.3

0.15

71.2

24.4

:

87.0

25.8

1.3

-0.9

2.2

1.1

0.8

0.6

-0.3

0.5

-1.8

1.9

0.4

Note: 
The 'No-policy change' scenario depicts the sustainability gap under the assumption that the budgetary position evolves 
according to the Commissions' spring 2013 forecast until 2014. The 'Programme (SCP)' scenario depicts the sustainability gap 
under the assumption that the budgetary plans in the programme are fully implemented.
* The required adjustment of the primary balance until 2020 to reach a public debt of 60% of GDP by 2030.              
** The critical threshold for the S0 indicator is 0.44. 

Source : 
Commission services; 2013 stability programme.                                                                                                                               

(% of GDP)

Gross debt as % of GDP - NL - Medium term debt projections

120

100

80

60

40

20

0

0
9
9
1

2
9
9
1

4
9
9
1

6
9
9
1

8
9
9
1

0
0
0
2

2
0
0
2

4
0
0
2

6
0
0
2

8
0
0
2

0
1
0
2

2
1
0
2

4
1
0
2

6
1
0
2

8
1
0
2

0
2
0
2

2
2
0
2

4
2
0
2

6
2
0
2

8
2
0
2

0
3
0
2

COM no-policy change scenario

COM + Shock ( -1p.p. in the short-term/long-term interest rate on maturing and new debt from 2015)

COM + Shock (+1p.p. in the short-term/long-term interest rate on maturing and new debt from 2015)

COM consolidation scenario (0.5% per year on SB) in order to achieve MTO

COM consolidation scenario (1% per year on SB) in order to achieve MTO

SCP scenario

36 

 
 
 
Table VI. Taxation indicators  

Total tax revenues (incl. actual compulsory social contributions, % of GDP)

37.7

39.0

39.2

38.2

38.8

38.4

2002

2006

2008

2009

2010

2011

Breakdown by economic function (% of GDP)1
     Consumption

              of which:

              - VAT

              - excise duties on tobacco and alcohol

             - energy

             - other (residual)

     Labour employed

     Labour non-employed

     Capital and business income

     Stocks of capital/wealth
     p.m.  Environmental taxes 2
3
VAT efficiency
     Actual VAT revenues as % of theoretical revenues at standard rate

Note: 

11.7

12.2

12.0

11.7

12.0

11.7

7.2

0.5

1.8

2.2

7.4

0.5

2.0

2.4

7.3

0.5

1.9

2.3

7.0

0.5

2.0

2.2

7.2

0.5

2.0

2.3

6.9

0.5

2.0

2.3

16.2

17.2

18.3

18.7

18.9

19.1

2.6

5.0

2.3

3.7

2.8

4.7

2.0

4.0

2.4

4.6

1.9

3.9

2.4

3.5

1.8

4.0

2.4

3.7

1.8

4.0

2.5

3.5

1.6

3.9

56.9

59.9

59.9

54.7

57.3

55.1

1 Tax revenues are broken down by economic function, i.e. according to whether taxes are raised on consumption, labour or capital. See European Commission 
(2013) Taxation trends in the European Union, for a more detailed explanation.

2 This category comprises taxes on energy, transport and pollution and resources included in taxes on consumption and capital.

3 The VAT efficiency is measured via the VAT revenue ratio. The VAT revenue ratio is defined as the ratio between the actual VAT revenue collected and the 
revenue that would theoretically be raised if VAT was applied at the standard rate to all final consumption. A low ratio can indicate a reduction of the tax base due 
to large exemptions or the application of reduced rates to a wide range of goods and services ('policy gap') or a failure to collect all tax due to e.g. fraud ('collection 
gap'). See European Commission (2012), Tax reforms in EU M ember States, European Economy 6/2012 and Taxation Papers 34/2012 for a more detailed 
explanation.

Source: Commission

37 

 
Table VII. Financial market indicators  

Total assets of the banking sector (% of GDP)

375.4

388.2

384.2

403.1

414.7

2008

2009

2010

2011

2012

Share of assets of the five largest banks (% of total assets)

Foreign ownership of banking system (% of total assets)
Financial soundness indicators:
              - non-performing loans (% of total loans)1)
              - capital adequacy ratio (%) 1)
              - return on equity (%) 1), 2)
Bank loans to the private sector (year-on-year % change)

Lending for house purchase (year-on-year % change)

Loan to deposit ratio

CB liquidity as % of liabilities
Banks' exposure to countries receiving official financial assistance  (% of GDP)3)
Private debt (% of GDP)
Gross external debt (% of GDP)4)
            - Public
            - Private

Long term interest rates spread versus Bund (basis points)*

Credit default swap spreads for sovereign securities (5-year)*
Notes: 

1) Latest data (September 2012).
2) After extraordinary items and taxes.
3) Covered countries are CY, EL, ES, LV, HU, IE, PT and RO.
4) Latest data 2012Q3.

* M easured in basis points.
Source :

86.8

5.7

1.7
11.9

-12.5

3.9

-0.9

85.0

5.3

3.2
14.9

-0.4

1.8

0.8

84.4

…

2.8
13.9

7.1

4.0

5.5

83.6

…

2.7
13.5

5.4

4.1

3.3

…

…

3.1
14.3

10.1

4.1

4.2

121.4

124.6

119.3

119.4

119.0

2.5

24.8

2.0

23.2

0.4

15.1

0.4

13.5

1.1

12.0

172.5

191.9

181.6

185.0

193.9

40.9
88.8

0.2

36.9

43.2
83.1

0.5

56.0

40.2
83.8

0.2

44.7

38.8
87.3

0.4

66.0

38.3
90.3

0.4

86.7

Bank for International Settlements and Eurostat (exposure to macro-financially vulnerable countries), IMF (financial soundness indicators), 
Commission (long-term interest rates), World Bank (gross external debt) and ECB (all other indicators).

38 

 
 
2007

2008

2009

2010

2011

2012

77.8

78.9

78.8

76.8

77.0

77.2

Table VIII. Labour market and social indicators 

Labour market indicators
Employment rate
(% of population aged 20-64)
Employment growth 
(% change from previous year)
Employment rate of women
(% of female population aged 20-64)
Employment rate of men 
(% of male population aged 20-64)
Employment rate of older workers 
(% of population aged 55-64)
Part-time employment (% of total employment, 
15 years and more)
Part-time employment of women  (% of women employment, 15 
years and more)
Part-time employment of men  (% of men employment, 15 years 
and more)
Fixed term employment (% of employees with a fixed term 
contract, 15 years and more)
Transitions from temporary 
to permanent employment
Unemployment rate1 (% of labour force, 
age group 15-74)
Long-term unemployment rate2 (% of labour force)
Youth unemployment rate 
(% of youth labour force aged 15-24)
Youth NEET rate (% of population aged 15-24)

2.5

70.7

84.8

50.9

46.8

75.0

23.6

18.1

2.5

3.6

1.4

7.0

3.5

1.5

72.2

85.5

53.0

47.3

75.3

23.9

18.2

3.1

3.1

1.1

6.3

3.4

-0.7

72.7

84.9

55.1

48.3

75.8

24.9

18.2

2.2

3.7

0.9

7.7

4.1

-0.4

70.8

82.8

53.7

48.9

76.5

25.4

18.5

3.0

4.5

1.2

8.7

4.3

Early leavers from education and training (% of pop. 18-24 with at 
most lower sec. educ. and not in further education or training)

11.7

11.4

10.9

10.0

Tertiary educational attainment (% of population 30-34 having 
successfully completed tertiary education)
Formal childcare (from 1 to 29 hours; % over the population less 
than 3 years)
Formal childcare (30 hours or over; % over the population less 
than 3 year)
Labour productivity per person employed (annual % change)

Hours worked per person employed  (annual % change)
Labour productivity per hour worked (annual % change; constant 
prices)

Compensation per employee (annual % change; constant prices)

Nominal unit labour cost growth (annual % change)

Real unit labour cost growth (annual % change)

36.4

39.0

4.0

1.7

-0.2

1.6

1.6

1.6

-0.2

40.2

41.0

6.0

0.3

0.2

0.1

1.1

3.0

0.9

40.5

43.0

6.0

-2.6

-0.6

-2.4

2.4

5.3

5.2

41.4

44.0

6.0

2.2

-0.2

2.2

0.4

-0.8

-1.8

0.7

71.4

82.6

56.1

49.1

76.7

25.4

18.4

:

4.4

1.5

7.6

3.8

9.1

41.1

46.0

6.0

0.5

0.0

0.2

0.5

1.2

0.0

-0.1

71.9

82.5

58.6

49.9

77.0

26.4

19.5

:

5.3

1.8

9.5

4.3

8.8

42.3

:

:

-0.2

0.4

-1.1

0.6

2.0

1.2

Notes:
1 Unemployed persons are all persons who were not employed, had actively sought work and were ready to begin working immediately or within 
two weeks. The labour force is the total number of people employed and unemployed.

2 Long-term unemployed are unemployed persons for at least 12 months.

Sources: 
Commission (EU Labour Force Survey and European National Accounts) 

39 

 
 
Expenditure on social protection benefits (% of 
GDP)
Sickness/Health care

Invalidity

Old age and survivors

Family/Children

Unemployment

Housing and Social exclusion n.e.c.

Total

of which:  means tested benefits
Social inclusion indicators
At-risk-of-poverty or social exclusion1 
(% of total population)
At-risk-of-poverty or social exclusion of children 
(% of people aged 0-17)
At-risk-of-poverty or social exclusion of elderly 
(% of people aged 65+)
At-Risk-of-Poverty rate2 (% of total population)
Severe Material Deprivation3  (% of total population)
Share of people living in low work intensity households 4 (% of 
people aged 0-59)
In-work at-risk-of poverty rate (% of persons employed)
Impact of social transfers (excluding pensions) on reducing 
poverty
Poverty thresholds, expressed in national currency at constant 
prices5
Gross disposable income (households)
Relative median poverty risk gap (60% of median equivalised 
income, age: total)

Notes:

2006

2007

2008

2009

2010

8.82

2.36

10.94

1.47

1.36

0.38

27.00

3.40

8.64

2.41

10.89

1.56

1.14

0.38

26.69

3.71

9.39

2.37

10.86

1.18

1.04

0.36

26.95

3.91

10.41

2.50

11.64

1.29

1.44

0.38

29.69

4.50

10.64

2.47

11.84

1.24

1.57

0.38

30.19

0.00

2007

2008

2009

2010

2011

15.7

17.2

9.8

10.2

1.7

9.5

4.6

14.9

15.5

9.7

10.5

1.5

8.1

4.8

15.1

17.5

8.1

11.1

1.4

8.3

5.0

15.1

16.9

6.2

10.3

2.2

8.2

5.1

15.7

18.0

6.9

11.0

2.5

8.7

5.5

50.5

47.2

45.9

51.2

47.4

10946

11530

11648

11613

11516

280802

283487

280226

283909

288855

17.0

14.9

16.5

16.2

15.5

1 People at-risk-of poverty or social exclusion (AROPE): individuals who are at-risk-of poverty (AROP) and/or suffering from severe 
material deprivation (SM D) and/or living in household with zero or very low work intensity (LWI).

2 At-risk-of poverty rate (AROP): share of people with an equivalised disposable income below 60% of the national equivalised median 
income. 

3 Share of people who experience at least 4 out of 9 deprivations: people cannot afford to i) pay their rent or utility bills, ii) keep their 
home adequately warm, iii) face unexpected expenses, iv) eat meat, fish, or a protein equivalent every second day, v) enjoy a week of 
holiday away from home once a year, vi) have a car, vii) have a washing machine, viii) have a colour tv, or ix) have a telephone.

4 People living in households with very low work intensity: share of people aged 0-59 living in households where the adults (excluding 
dependent children) work less than 20% of their total work-time potential during the previous 12 months.

5 For EE, CY, M T, SI, SK, thresholds in nominal values in Euros; HICP -  index 100 in 2006 (2007 survey refers to 2006 incomes)

Sources: 
For expenditure for social protection benefits ESSPROS; for social inclusion EU-SILC.

40 

 
 
Table IX. Product markets performance and policy indicators  

Performance indicators

Labour productivity1 total economy (annual 
growth in %)
Labour productivity1 in manufacturing (annual 
growth in %)
Labour productivity1 in electricity, gas, steam and 
air conditioning supply (annual growth in %)
Labour productivity1 in the construction sector 
(annual growth in %)
Total number of patent2 applications per million of 
labour force

2003-
2007

1.9

5.1

3.9

1.7

2008

2009

2010

2011

2012

0.3

-3.0

2.0

-2.3

-6.8

10.1

0.3

4.5

-0.8

0.1

-0.5

3.2

0.6

-9.2

n.a.

1.4

-3.7

-8.9

6.4

-6.4

409.8

382.0

375.4

369.4

n.a.

n.a.

Policy indicators

Enforcing contracts 3 (days)
Time to start a business 3 (days)
R&D expenditure (% of GDP)
Tertiary educational attainment 
(% of 30-34 years old population)
Total public expenditure on education 
(% of GDP)

Product market regulation4, Overall
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Retail
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Network Industries 5
(Index; 0=not regulated; 6=most regulated)

2003-
2007

514

9

1.9

34.5

5.42

2007

n.a.

n.a.

2008

2009

2010

2011

2012

514

8

1.8

40.2

514

8

1.8

514

8

1.9

514

8

2.0

514

5
n.a.

40.5

41.4

41.1

42.0

5.48

2008

5.94

2009

n.a.

2010

n.a.

2011

n.a.

2012

1.0

2.1

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

1.7

n.a.

n.a.

n.a.

n.a.

n.a.

Notes:
1 Labour productivity is defined as gross value added (in constant prices) divided by the number of persons employed.
2 Total number of patent applications to the European Patent Office (EPO) per million of labour force
3 The methodologies, including the assumptions, for this indicator are presented in detail on the website 
http://www.doingbusiness.org/methodology. 
4 The methodologies of the product market regulation indicators are presented in detail on the website 
http://www.oecd.org/document/1/0,3746,en_2649_34323_2367297_1_1_1_1,00.html. The latest available product market 
regulation indicators refer to 2003 and 2008, except for Network Industries.
5 Aggregate Energy, Transport and Communications Regulation (ETCR).
*figure for 2007.

Source :
Commission, World Bank - Doing Business  (for enforcing contracts and time to start a business) and OECD (for the 
product market regulation indicators). 

41 

 
 
Table X. Green Growth 

Green Growth performance

Macroeconomic
Energy intensity 
Carbon intensity 
Resource intensity (reciprocal of resource productivity)
Waste intensity 
Energy balance of trade 
Energy weight in HICP
Difference between change energy price and inflation 
Environmental taxes over labour taxes
Environmental taxes over total taxes

Sectoral 

Industry energy intensity 
Share of energy-intensive industries in the economy
Electricity prices for medium-sized industrial users**
Gas prices for medium-sized industrial users***
Public R&D for energy 
Public R&D for the environment
Recycling rate of municipal waste
Share of GHG emissions covered by ETS*
Transport energy intensity
Transport carbon intensity
Security of energy supply
Energy import dependency
Diversification of oil import sources 
Diversification of energy mix
Share renewable energy in energy mix

kgoe / €
kg / €
kg / €
kg / €
% GDP
%
%
ratio
ratio

kgoe / € 
% GDP
€ / kWh
€ / kWh
% GDP
% GDP
ratio
%
kgoe / €
kg / €

%
HHI
HHI
%

2002-
2006

0.18
0.48
0.41
n.a.
-2.1%
n.a.
n.a.
20.1%
10.1%

0.17
11.1
n.a.
n.a.
n.a.
n.a.
80.2%
n.a.
n.a.
n.a.

n.a.
n.a.
n.a.
n.a.

2007

2008

2009

2010

2011

0.18
0.43
0.39
n.a.
-2.1%
10
2.5
19.2%
9.8%

0.14
11.5
0.10
0.04
0.02%
0.01%
81.7%
39.1%
0.44
0.99

38.9%
0.06
0.36
2.8%

0.17
0.42
0.40
0.20
-2.1%
11
0.8
18.8%
9.9%

0.14
12.5
0.10
0.04
0.02%
0.00%
81.7%
41.1%
0.44
0.99

34.4%
0.08
0.36
3.4%

0.17
0.42
0.40
n.a.
-1.8%
10
-0.1
18.9%
10.4%

0.15
10.8
0.11
0.04
0.02%
0.00%
82.3%
41.0%
0.44
1.00

36.5%
0.08
0.36
3.9%

0.18
0.44
n.a.
0.25
-2.9%
10
-8.8
18.8%
10.3%

0.16
n.a.
0.10
0.03
0.02%
0.00%
83.5%
40.5%
n.a.
n.a.

30.7%
0.08
0.38
3.5%

0.17
n.a.
n.a.
n.a.
-3.8%
11
3.4
n.a.
n.a.

n.a.
n.a.
0.10
0.03
0.02%
0.01%
n.a.
41.1%
n.a.
n.a.

30.4%
n.a.
0.36
4.1%

Country-specific notes: 
The year 2012 is not included in the table due to lack of data.
General explanation of the table items:
Source: Eurostat unless indicated otherwise; ECFIN elaborations indicated below
All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2000 prices)
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)
          Carbon intensity: Greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)
          Resource intensity: Domestic M aterial Consumption (in kg) divided by GDP (in EUR)
          Waste intensity: waste (in kg) divided by GDP (in EUR)
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP  
Energy weight in HICP: the share of the "energy" items in the consumption basket used in the construction of the HICP
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual %-change)
Environmental taxes over labour or total taxes: from DG TAXUD's database "Taxation trends in the European Union"
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2005 EUR) 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP
Electricity and gas prices medium industrial users: consumption band 500  - 2000M Wh and 10000 - 100000 GJ;  figures excl. VAT.
Recycling rate of municipal waste: ratio of municipal waste recycled over total municipal waste
Public R&D for energy or for the environment: government spending on R&D (GBAORD) for these categories as % of GDP
Share of GHG emissions covered by ETS: based on greenhouse gas emissions as reported by M ember States to EEA (excl LULUCF)
Transport energy intensity: final energy consumption of transport activity (kgoe) divided by transp industry gross value added (2005 EUR)
Transport carbon intensity:  greenhouse gas emissions in transport activity divided by gross value added of the transport sector
Energy import dependency: net energy imports divided by gross inland energy consumption incl. energy consumption international bunkers

Diversification of oil import sources: Herfindahl index (HHI), calculated as the sum of the squared market shares of countries of origin 

Diversification of the energy mix: Herfindahl Index over natural gas, total petrol products, nuclear heat, renewable energies and solid fuels

Share renewable energy in energy mix: %-share in  gross inland energy consumption, expressed in tonne oil equivalents

*Provisional data (15 April 213). Commission Services and EEA.

** For 2007 average of S1 & S2 for DE, LU, NL, FI, SE & UK. Other countries only have S2.

*** For 2007 average of S1 & S2 for IT, NL, FI, SE & UK. Other countries only have S2.

42