Recommendation for a COUNCIL RECOMMENDATION on the Netherlands’ 2013 national reform programme and delivering a Council opinion on the Netherlands’ stability programme for 2012-2017
Date: 2013-05-29
Institutions: European Commission
Subjects: Netherlands, banking system, budget deficit, budgetary equilibrium, job creation, pension scheme, property market, stability programme

EUROPEAN 
COMMISSION 

Brussels, 29.5.2013  
COM(2013) 369 final 

Recommendation for a 

COUNCIL RECOMMENDATION 

on the Netherlands’ 2013 national reform programme  

and delivering a Council opinion on the Netherlands’ stability programme for 2012-2017

{SWD(2013) 369 final} 

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Recommendation for a 

COUNCIL RECOMMENDATION 

on the Netherlands’ 2013 national reform programme  

and delivering a Council opinion on the Netherlands’ stability programme for 2012-2017 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 5(2) thereof, 

Having  regard  to  Regulation  (EU)  No  1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16  November  2011  on  the  prevention  and  correction  of  macroeconomic 
imbalances2, and in particular Article 6(1) thereof, 
Having regard to the recommendation of the European Commission3, 
Having regard to the resolutions of the European Parliament4, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

After consulting the Economic and Financial Committee, 

Whereas: 

(1) 

(2) 

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

On 13 July 2010, on the basis of the Commission's proposals, the Council adopted a 
recommendation  on  the  broad  guidelines  for  the  economic  policies  of  the  Member 
States and the Union (2010 to 2014) and, on 21 October 2010, adopted a decision on 
guidelines  for  the  employment  policies  of  the  Member  States5,  which  together  form 
the  ‘integrated  guidelines’.  Member  States  were  invited  to  take  the  integrated 
guidelines into account in their national economic and employment policies. 

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OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 
COM(2013) 369 final . 
P7_TA(2013)0052 and P7_TA(2013)0053. 
Council Decision 2013/208/EU of 22 April 2013. 

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(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

On  29  June  2012,  Heads  of  State  or  Government  decided  on  a  Compact  for  Growth 
and  Jobs,  providing  a  coherent  framework  for  action  at  national,  EU  and  euro  area 
levels using all possible levers, instruments and policies. They decided on action to be 
taken  at  the  level  of  the  Member  States,  in  particular  expressing  full  commitment  to 
achieving the objectives of the Europe 2020 Strategy and to implementing the country-
specific recommendations. 

On 6 July 2012, the Council adopted a recommendation on the Netherlands’ national 
reform  programme  for  2012  and  delivered  its  opinion  on  the  Netherlands’  updated 
stability programme for 2011-2015. 
On  28  November  2012,  the  Commission  adopted  the  Annual  Growth  Survey6, 
marking  the  start  of  the  2013  European  Semester  for  economic  policy  coordination. 
Also  on  28  November  2012,  the  Commission,  on  the  basis  of  Regulation  (EU)  No 
1176/2011  on  the  prevention  and  correction  of  macroeconomic  imbalances,  adopted 
the  Alert  Mechanism  Report7,  in  which  it  identified  the  Netherlands  as  one  of  the 
Member States for which an in-depth review would be carried out. 

On  14  March  2013,  the  European  Council  endorsed  the  priorities  for  ensuring 
financial stability, fiscal consolidation and action to foster growth. It underscored the 
need  to  pursue  differentiated,  growth-friendly  fiscal  consolidation,  to  restore  normal 
lending conditions to the economy, to promote growth and competitiveness, to tackle 
unemployment  and  the  social  consequences  of  the  crisis,  and  to  modernise  public 
administration. 
On 10 April 2013, the Commission published the results of its in-depth review8 for the 
Netherlands,  under  Article  5  of  Regulation  (EU)  No  1176/2011.  The  Commission’s 
analysis  leads  it  to  conclude  that  the  Netherlands  is  experiencing  macroeconomic 
imbalances, although these are not excessive. 

On  29  April  2013,  the  Netherlands  submitted  its  2013  stability  programme  covering 
the  period  2012-2017  and  its  2013  national  reform  programme.  In  order  to  take 
account  of  their  interlinkages,  the  two  programmes  have  been  assessed  at  the  same 
time. 

Based  on  the  assessment  of  the  2013  stability  programme  pursuant  to  Council 
Regulation  (EC)  No  1466/97,  the  Council  is  of  the  opinion  that  the  Netherlands 
implemented sizeable consolidation measures over 2011-2013, but that the fiscal effort 
is likely not to be sufficient to correct the excessive deficit by 2013, mainly in light of 
worse 
than  expected  economic  developments.  The  macroeconomic  scenario 
underpinning  the  budgetary  projections  in  the  programme  is broadly  plausible.  For 
2013 and 2014, the Stability Programme projects real economic growth of -0.4% and 
1.1%, respectively, which is fairly close to the Commission's Spring 2013 forecast of -
0.8% and 0.9%. The stated objective of the programme is to reduce the headline deficit 
to  below  3%  of  GDP  from  2014  in  a  sustainable  manner.  The  programme  does  not 
contain an explicit reference to the medium-term objective (MTO), suggesting that the 
MTO of -0.5%, as communicated in last year's Stability Programme, is confirmed. The 
MTO  is  in  line  with  the  requirements  of  the  Stability  and  Growth  Pact.  In  addition, 
whilst in 2015 the programme plans a reduction in the structural balance  of 0.5% of 
GDP  in  structural  terms,  in  line  with  the  minimum  annual  structural  requirement,  in 

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COM(2012) 750 final. 
COM(2012) 751 final. 
SWD(2013) 121 final. 

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2016 the structural balance is expected to deteriorate by 0.4% of GDP and to improve 
by 0.1% of GDP in 2017, thereby falling short from the appropriate adjustment path. 
Based on the Commission Spring forecast, the average annual fiscal effort of around 
0.7% of GDP over the period 2010-2013 is in line with the structural effort of ¾% of 
GDP recommended by the Council. The budgetary adjustment in 2011 and 2012 was 
predominantly  geared  to  the  expenditure  side,  yet  in  2013  relied  largely  on  revenue 
measures.  The  planned  headline  deficit  set  by  the  Stability  Programme  is  consistent 
with a correction of the excessive deficit by 2014, one year after the deadline set by 
the Council under the excessive deficit procedure in late 2009. The Council considers 
that  the  fiscal  effort  envisaged  by  the  authorities  is  not  compatible  with  an  actual 
correction of the excessive deficit by 2014. Possible additional consolidation measures 
specified in the Stability Programme have been temporarily withdrawn and at any rate 
would not be sufficient. The Netherlands needs to define additional measures to bring 
the headline general government deficit below the 3% of GDP threshold in 2014 in a 
sustainable  manner.  According  to  the  2013  Stability  Programme,  the  debt-to-GDP 
ratio is expected to rise further in 2013, to 74% of GDP and to increase slightly further 
to 75% of GDP in 2014. The debt ratio is thus projected to remain well above the 60% 
reference value. For 2015, the programme expects the debt ratio to decline to 71.4% of 
GDP  and  to  decline  slightly  thereafter,  reaching  70.8%  in  2017.  This  decline  in  the 
debt ratio after 2014, however, is insufficiently underpinned by policy measures. 

In order to enhance the future growth potential of the Netherlands, it is of paramount 
importance  that  the  required  consolidation,  to  ensure  a  sustainable  correction  of  the 
excessive  deficit  and  achieving  the  MTO  in  the  short  to  medium-term,  safeguards 
growth-enhancing  expenditure.  In  particular,  efforts  to  promote  innovation  and 
research,  including  fundamental  research,  education  and  training,  will  be  key  to  a 
balanced adjustment. This would not only help to support the economic recovery, but 
could  also  help  buttress  innovation  and  human  capital,  improve  competitiveness  and 
the medium- and long-term growth prospects. 

(10) 

(11)  A key challenge lies in the housing market, where rigidities and distortive incentives 
have built up over decades to shape house financing and sectoral savings patterns. The 
tendency of households to leverage up gross mortgage debt against housing wealth to 
a  large  extent  reflects  long-standing  fiscal  incentives,  notably  full  mortgage  interest 
tax  deductibility.  Since  April  2012,  a  series  of  measures  have  been  partly 
implemented. Some of these concern adjusting the fiscal treatment of housing finance. 
The  gradual  move  to  limit  mortgage  interest  tax  deductibility  and  increase  the 
incentive  to  amortise  is  warranted,  but  the  phasing-in  of  this  measure  is  too  slow  to 
significantly  influence  amortising  behaviour.  The  rental  market  is  restrained  by 
regulation and the presence of a very large social housing sector that also has to cope 
with long waiting lists. The recent introduction of some differentiation of rents in the 
social housing sector based on income is a step in the right direction, but its impact is 
limited.  Therefore,  while  the  measures  proposed  are  steps  in  the  right  direction,  the 
overall pace of reforms is slow in addressing underlying problems and thus needs to be 
stepped  up,  whilst  at  the  same  time  continuing  to  ensure  that  social  housing  is 
available  to  disadvantaged  citizens,  who  are  unable  to  obtain  housing  at  market 
conditions, including in high demand locations. 

(12)  The long-term sustainability of the pension system has been strengthened through the 
gradual increase in the statutory retirement age from 65 years in 2012 to 67 in 2023. 
Hence, the Netherlands has fully addressed that part of the 2012 recommendation on 
increasing  the  statutory  retirement  age  and  linking  it  to  life  expectancy,  for  both  the 

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first and the second pension pillar. Remaining challenges include an appropriate intra- 
and  inter-generational  division  of  costs  and  risks.  Moreover,  an  overhaul  of  the 
governance  of  the  second-pillar  pension  funds  is  overdue  in  order  to  help  underpin 
resilience to ageing. 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 
maintained at an adequate level. 

(13)  The labour market reforms proposed by the government aim to increase labour market 
participation  and mobility.  The Participation Act reform is ambitious and relevant to 
boost labour market participation. However, the reforms are not yet enshrined in law 
and the time span for implementation seems rather short. In addition, further measures 
are needed to improve the employability of people at the margin of the labour market, 
including women, people with a migrant background, people with a disability and the 
elderly. The Netherlands has announced reforms to the unemployment benefit scheme 
and  its  relatively  strict  employment  protection  legislation.  These  reforms,  in 
combination  with  a  mobility  tax  credit  (‘mobiliteitsbonus’)  for  employers  to  hire 
social  security  beneficiaries  aged  50  or  above  or  people  with  a  labour  disability,  are 
well targeted at the lower participation end of the labour market. However, while these 
measures  point  in  the  right  direction,  they  can  only  be  fully  assessed  once  adopted. 
Finally,  accelerating  the  removal  of  remaining  disincentives  for  second  earners  to 
increase  the  number  of  hours  worked  would  have  the  potential  of  further  alleviating 
future labour supply shortages.  

(14)  Substantial  progress  has  been  made  on  the  2012  recommendation  on  innovation  and 
science/business  links.  The  enterprise  policy  ‘To  the  Top’,  including  its  sectoral 
approach  for  public-private  partnerships  in  the  area  of  research,  innovation  and 
education  (‘top  sector’)  is  now  in  the  implementation  phase.  Apart  from  sectoral 
innovation  policies,  it  is  important  to  pursue  horizontal  research  and  innovation 
policies  and  to  preserve  an  adequate  level  of  public  funding  for  not-earmarked 
fundamental research.  

(15) 

(16) 

(17) 

In  the  context  of  the  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  the  Netherlands’  economic  policy.  It  has  assessed  the 
stability  programme  and  national  reform  programme,  and  presented  an  in-depth 
review.  It  has  taken  into  account  not  only  their  relevance  for  sustainable  fiscal  and 
socio-economic policy in the Netherlands but also their compliance with EU rules and 
guidance,  given  the  need  to  reinforce  the  overall  economic  governance  of  the 
European  Union  by  providing  EU-level  input  into  future  national  decisions.  Its 
recommendations under the European Semester are reflected in recommendations (1) 
to (4) below. 

In  the  light  of  this  assessment,  the  Council  has  examined  the  Netherlands’  stability 
programme, and its opinion9 is reflected in particular in recommendation (1) below. 

In the light of the Commission’s in-depth review and this assessment, the Council has 
examined  the  Netherlands’  national  reform  programme  and  the  stability  programme. 
Its  recommendations  under  Article  6  of  Regulation  (EU)  No  1176/2011  on  the 
prevention  and  correction  of  macroeconomic 
in 
recommendation (2) below. 

imbalances  are 

reflected 

9 

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

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(18) 

In  the  context  of  the  European  Semester  the  Commission  has  also  carried  out  an 
analysis of the economic policy of the euro area as a whole. On this basis the Council 
has issued specific recommendations addressed to the Member States whose currency 
is the euro. The Netherlands also should ensure the full and timely implementation of 
these recommendations, 

HEREBY RECOMMENDS that the Netherlands should take action within the period 2013-
2014 to: 

1. 

2. 

3. 

4. 

Reinforce and implement the budgetary strategy, supported by sufficiently specified 
measures,  for  the  year  2014  and  beyond  to  ensure  a  timely  correction  of  the 
excessive  deficit  by  2014  in  a  sustainable  manner  and  achieve  the  structural 
adjustment effort specified in the Council recommendations under the EDP. Protect 
expenditure  in  areas  directly  relevant  for  growth  such  as  education,  innovation  and 
research.  After  the  correction  of  the  excessive  deficit,  pursue  the  structural 
adjustment  effort  that  will  enable  the  Netherlands  reaching  the  medium-term 
objective by 2015. 

Step  up  efforts  to  gradually  reform  the housing market by accelerating the planned 
reduction in mortgage interest tax deductibility and by providing for a more market-
oriented  pricing  mechanism  in  the  rental  market,  and  by  further  relating  rents  to 
household income in the social housing sector. Refocus social housing corporations 
to support households most in need.  

Adjust  the  second  pension  pillar,  in  consultation  with  social  partners,  to  ensure  an 
appropriate  intra-  and  inter-generational  division  of  costs  and  risks.  Underpin  the 
gradual  increase  of  the  statutory  retirement  age  with  measures  to  increase  the 
employability of older workers. Implement the planned reform of the long-term care 
system  to  ensure  its  cost-effectiveness  and  complement  it  with  further  measures  to 
contain the increase in costs, with a view to ensure sustainability. 

Take further measures to enhance participation in the labour market, particularly of 
people  at  the  margin  of  the  labour  market.  Continue  to  reduce  tax  disincentives  on 
labour,  including  by  a  faster  phasing-out  of  transferable  tax  credits  for  second 
income earners. Foster labour market transitions and address labour market rigidities, 
including  by  accelerating  the  reform  of  employment  protection  legislation  and  the 
unemployment benefit system. 

Done at Brussels,  

For the Council 
The President 

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