COMMISSION STAFF WORKING DOCUMENT Country Report The Netherlands 2018 Including an In-Depth Review on the prevention and correction of macroeconomic imbalances Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2018 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011
Date: 2018-03-07
Institutions: European Commission, Secretariat-General
Subjects: Netherlands, economic situation, education, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 7.3.2018 SWD(2018) 217 final  COMMISSION STAFF WORKING DOCUMENT Country Report The Netherlands 2018 Including an In-Depth Review on the prevention and correction of macroeconomic imbalances  Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2018 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2018) 120 final}   
 
 
CONTENTS 

Executive summary 

1.  Economic situation and outlook 

2.  Progress with country-specific recommendations 

3.  Summary of the main findings from the Macroeconomic Imbalance Procedure 

in-depth review 

3.1. 

Imbalances and their gravity 

3.2.  Evolution, prospects and policy responses 

3.3.  Overall assessment 

4.  Reform priorities 

4.1.  Public finances and taxation 

4.2.  Financial sector 

4.3.  Labour market, education and social policies 

4.4. 

Investment* 

4.5.   Sectoral policies 

Annex A: Overview table 

Annex B: Macroeconomic Imbalance Procedure Scoreboard 

Annex C: Standard tables 

References 

LIST OF TABLES 

Table 1.1: 

Key economic and financial indicators 

Table 2.1: 

CSR progress 

Table 3.1: 

MIP assessment matrix (*) – the Netherlands 

Table 4.1.1: 

Total public funding for R&D and innovation, 2015-2017 

Table 4.2.1: 

Financial soundness indicators 

Table 4.4.1: 

Investment by sector NL and euro area (% of GDP) 

Table 4.4.2:  Non-financial corporate sector income sheet 

Table 4.5.1: 

Total productivity growth, 1995-2015 (%) 

Table B.1: 

The MIP scoreboard for the Netherlands (AMR 2018) 

Table C.1: 

Financial market indicators 

1 

5 

10 

14 

14 

15 

15 

19 

19 

22 

31 

40 

47 

53 

56 

57 

63 

9 

12 

16 

22 

23 

40 

42 

47 

56 

57 

 
 
 
 
Table C.2: 

Headline Social Scoreboard indicators 

Table C.3: 

Labour market and education indicators 

Table C.4: 

Social inclusion and health indicators 

Table C.5: 

Product market performance and policy indicators 

Table C.6: 

Green growth 

LIST OF GRAPHS 

Graph 1.1:  GDP per capita (volume, index 2010=100) 

Graph 1.2:  GDP volume and pre-crisis trend 

Graph 1.3:  GDP Growth and contributions 

Graph 1.4: 

Labour market developments 

Graph 1.5:  Wage growth: actual and predicted based on economic fundamentals 

Source: European Commission (see Kiss and Arpaia, 2011) 

Graph 1.6: 

Trends in labour costs and its components 

Graph 1.7: 

Average annual real income gain/loss compared to previous generation* 

Graph 1.8: 

Net wealth by age 

Graph 2.1:  Overall multiannual implementation of 2011-2017 CSRs to date 

Graph 4.1.1:  Average headline budget balance in different states of the economy 

Graph 4.2.1:  Size of the financial intermediaries and of the debt securities market 

Graph 4.2.2:  House price developments 

Graph 4.2.3:  House price valuation 

Graph 4.2.4:  Private debt 

Graph 4.2.5:  Debt of large non-financial corporations 

Graph 4.2.6: 

Intra-group-to-total debt 

Graph 4.2.7: 

Interest paid and received by multinationals 

Graph 4.2.8:  Compulsory payment wedge (2016) 

Graph 4.3.1:  Main labour market developments 

Graph 4.3.2:  Relationship between unemployment and nominal wage growth (2001-2016) 

Graph 4.3.3:  Share of part-time work with and without children (2016) 

Graph 4.3.4:  Female labour market participation (with child) 

Graph 4.3.5:  Employment (20-64 year) by type (y-o-y changes) 

Graph 4.3.6:  Self-employed by sector ( % of total employment in the sector) 

Graph 4.3.7: 

Transition rate from temporary to permanent employment by quarter 

Graph 4.4.1: 

Investment by asset 

Graph 4.4.2:  Domestic and foreign investment 

Graph 4.4.3:  Net lending/borrowing by sector 

Graph 4.4.4:  Non-financial corporate sector saving and investment 

Graph 4.4.5:  Gross savings by non-financial corporations 

Graph 4.4.6:  Gross operating surplus and components 

Graph 4.4.7:  Net operating surplus by sector 

58 

59 

60 

61 

62 

5 

5 

6 

6 

6 

6 

7 

7 

8 

10 

21 

23 

24 

25 

27 

27 

28 

28 

29 

31 

31 

33 

33 

35 

35 

36 

40 

40 

41 

41 

41 

42 

42 

 
 
 
Graph 4.4.8:  Net distributed income ratios 

Graph 4.4.9:  Corporate savings by firm size 

Graph 4.4.10:  Current account 

Graph 4.4.11:  Trade balance goods by product group (2016) 

Graph 4.4.12:  Trade balance services by product group (2016) 

Graph 4.4.13:  NIIP and cumulative current account surplus 

Graph 4.4.14:  Euro area output and aggregate demand 

Graph 4.5.1:  Contributions to changes in growth of real value added 

Graph 4.5.2:  Productivity development by sector 

Graph 4.5.3:  Productivity growth by firm productivity level (leaders/laggards) 

Graph 4.5.4:  R&D intensity in manufacturing 

LIST OF BOXES 

Box 2.1: Tangible results delivered through EU support to structural change in the Netherlands 

Box 3.1: Euro area spillovers 

Box 4.3.1: Monitoring performance in light of the European Pillar of Social Rights 

Box 4.3.1: Implications of temporary employment on income 

Box 4.4.1: Investment challenges and reforms in the Netherlands 

Box 4.5.1: Policy highlight: Public procurement expertise centre in the Netherlands 

43 

43 

44 

44 

44 

45 

45 

47 

47 

48 

49 

13 

18 

32 

39 

46 

51 

 
 
 
 
 
EXECUTIVE SUMMARY 

The  Netherlands’  economic  expansion  remains 
strong  and  offers  a  window  of  opportunity  to 
boost  the  reform  momentum.  In  its  coalition 
the  new  government 
agreement  2018-2021, 
announced  a  number  of  measures  in  the  field  of 
fiscal  policy,  housing  market,  labour  market  and 
pensions. Ensuring that these measures are swiftly 
implemented would improve domestic demand and 
support  potential  growth.  While  measures  have 
been  announced  to  reduce  the  debt  bias  for 
households,  incentives  to  incur  debt  remain.  The 
labour  market  continued  its  recovery  in  2017  and 
performed  well  across  the  board,  although  the 
challenges  in  the  field  of  pensions  and  labour 
market segmentation remain.(1) 

Economic growth accelerated to 3.1 % in 2017, 
the  fastest  in  a  decade.  The  solid  economic 
performance  in  2017  was  broad  based,  with  both 
domestic  demand  and  net  exports  making  a 
positive  contribution  to  growth.  The  European 
Commission’s 
forecast 
projects  economic  growth  of  2.9 %  for  2018  and 
2.5 %  for  2019,  with  the  domestic  economy’s 
strong  performance  expected  to  continue.  The 
growth  contribution  from  net  exports  is  expected 
to be fairly limited given strong domestic demand, 
which drives up imports.  

Interim  Winter  2018 

The  investment  rate  has  returned  to  its  long-
term  average.  Residential  investment  volumes  in 
particular  have  been  highly  cyclical,  dropping 
sharply  after  the  crisis  and  experiencing  double-
digit growth in recent years. Corporate investment 
in  equipment  grew  in  line  with  GDP  and  is 
expected  to  accelerate  on  the  back  of  rising 
capacity  utilisation  rates.  Public  and  private 
investment  in  R&D  increased  to  2.0 %  in  2016, 
falling short of the Europe 2020 target of 2.5 % of 
GDP.  While  barriers  to  private  investment  appear 
to  be  minor,  procedures  for  obtaining  building 

(1)  This report assesses the economy of the Netherlands in the 
light  of  the  European  Commission’s  Annual  Growth 
Survey published on 22 November 2017. In the survey, the 
Commission  calls  on  EU  Member  States  to  implement 
reforms  to  make  the  European  economy  more  productive, 
resilient and inclusive. In so doing, Member States should 
focus  their  efforts  on  the  three  elements  of  the  virtuous 
triangle  of  economic  policy  –  boosting 
investment, 
pursuing structural reforms and ensuring responsible fiscal 
policies.  At  the  same  time,  the  Commission  published  the 
Alert  Mechanism  Report (AMR) that  initiated  the  seventh 
round  of  the  macroeconomic  imbalance  procedure.  The 
AMR  found  that  the  Netherlands  warranted  an  in  depth 
review which is presented in this report. 

permits  are  lengthy  compared  to  other  Member 
States. 

A  buoyant  housing  market  boosts  household 
assets, but may also lead to further imbalances. 
Driven  by  low  interest  rates,  house  prices  and 
transaction  volumes  have  increased  sharply  in 
recent  years.  Rising  house  prices  have  positive 
wealth  effects  and  gradually 
lift  affected 
households  out  of  negative  housing  equity.  At 
national  level,  house  price  valuation  indicators  do 
not  point  to  overvaluation.  However,  there  are 
signs  that  house  price  increases  in  some  regions 
cannot be explained by fundamental factors alone. 
Nominal  debt  levels  have  started  to  rise  again, 
albeit much slower than house price growth, which 
limits financial vulnerabilities. 

Wage  growth  remained  moderate  despite  a 
tightening labour market. In 2016, wage growth 
outpaced  productivity  gains,  resulting  in  a  small 
increase in the nominal unit labour cost. However, 
taken  over  a  longer  period  wage  growth  has  been 
below  the  level  that  could  be  expected  based  on 
fundamental  drivers  such  as  unemployment, 
productivity and inflation. In the next years, wage 
growth is expected to increase in line with further 
labour market tightening. 

defence, 

benefits), 

education 

The  new  government  announced  a 
large 
discretionary  fiscal  stimulus  package  for  2018-
2021.  The  budget  surplus  is  expected  to  have 
increased  to  0.7 %  in  2017,  while  the  general 
government debt-to-GDP ratio fell below the 60 % 
threshold.  The  government  announced  increased 
spending  on  social  affairs  (in  particular  child-
related 
and 
innovation.  The  budgetary  framework  has  been 
amended 
to  exclude  a  number  of  cyclical 
expenditures  from  its  fixed  budgetary  ceilings. 
This  improves  its  stabilisation  function  on  the 
expenditure  side,  while  increasing  the  cyclicality 
of  the  budget.  Fiscal  sustainability  has  improved 
thanks  to  headline  budget  surpluses,  higher  GDP 
growth  and  a  favourable  public  debt  trajectory. 
This has led to the Netherlands being designated as 
‘low  risk’  based  on  the  Commission’s  baseline 
medium-term projections. 

Some  indicators  suggest  that  the  Netherlands' 
tax rules are used by multinationals engaged in 
aggressive 
structures.  The 
Netherlands  has  taken  steps  to  amend  certain 

tax  planning 

1 

 
 
                                                           
Executive summary 

However, certain issues merit attention such as low 
but slightly increasing income inequality and good 
but  weakening  impact  of  social  transfers  in 
reducing poverty.  

findings  of 

The  main 
review 
contained  in  this  report,  and  the  related  policy 
challenges, are as follows: 

in-depth 

the 

  Housing  market 

the  crisis, 

institutions 

have 
contributed  to  high  household  debt  levels, 
and  inefficiencies  remain.  Owner-occupancy 
rates  are  high  and  have  been  strengthened  by 
the  generous  tax  relief  on  mortgage  interest 
payments.  Before 
interest-only 
mortgages  and  very  high  loan-to-value  ratios 
drove  up  household  indebtedness  to  around 
120 %  of  GDP  in  2009.  Although  it  is  falling 
gradually,  the  household  debt-to-GDP  ratio  is 
still 
the  euro  area  average.  While 
mortgage  tax  relief  is  being  cut  gradually,  the 
effective 
debt-financed 
subsidy 
homeownership remains substantial.  

twice 

to 

  The 

financial  attractiveness  of  owner-
occupancy  and 
social  housing  partly 
accounts  for  the  underdeveloped  private 
rental  market.  The  social  housing  and  rent-
controlled  sector  is  large  compared  to  other 
Member States. The private rental market is the 
only  non-subsidised  housing 
sector  and 
remains  underdeveloped.  The  lack  of  a  well-
functioning  middle  segment  on  the  rental 
market  encourages  households  to  buy  rather 
than rent, leading to high debt-to-income ratios 
and financial vulnerability at a young age. 

  The  current  account  continues  to  show  a 
marked  surplus.  The  Netherlands  has  had  a 
current  account  surplus  of  6 %  of  GDP  on 
average for the last 30 years. This high level is 
mostly  accounted  for  by  the  non-financial 
corporate (NFC) sector. A comparatively large 
corporate  savings  surplus 
in  a 
relatively high operating surplus, together with 
high foreign investment income and low levels 
of  profit  distribution  by  multinationals.  After 
the  crisis,  household  debt  reduction  together 
with  fiscal  consolidation  saw 
the  current 
account  surplus  peak  at  10.3 %  of  GDP  in 
2012,  after  which  it  declined  to  9 %  in  2016. 
The  European  Commission’s  Autumn  2017 

is  rooted 

the  absence  of  withholding 

aspects  of  its  tax  system  that  may  facilitate 
aggressive  tax  planning,  and  the  government  has 
announced  a  reform  agenda  to  further  amend 
certain  aspects  of  the  tax  system.  For  the  time 
taxes  on 
being, 
dividend 
the 
by 
possibility for hybrid mismatches using the limited 
partnership  (CV)  and  the  absence  of  withholding 
taxes on royalties and interest payments, combined 
with  the  lack  of  some  anti-abuse  rules,  may 
facilitate aggressive tax planning. 

co-operatives, 

payments 

the 

2017 

The  Netherlands  has  made  some  progress  in 
addressing 
country-specific 
recommendations  (CSRs).  Substantial  progress 
has been made in supporting potential growth and 
domestic demand; some progress has been made in 
R&D investment. The government announced that 
it  will  speed  up  the  cut  in  tax  relief  on  mortgage 
interest  payments,  and  included  it  in  the  coalition 
agreement.  However,  only  some  steps  were  taken 
to  reduce  remaining  distortions  in  the  housing 
market,  leading  to  some  progress  overall  on 
CSR 1. The Netherlands has made limited progress 
in  tackling  remaining  barriers  to  hiring  staff  on 
permanent  contracts.  No  concrete  measures  have 
been  taken  yet  to  reduce  distortive  tax  incentives 
that  favour  self-employment  or  to  increase  the 
social  protection  coverage  for  the  self-employed. 
The government reaffirmed its intention to reform 
the  second  pension  pillar,  although  no  new 
measures  have  been  taken  since  the  CSRs  were 
adopted..  Limited  progress  has  been  made  in 
creating  conditions  to  promote  higher  real  wage 
growth while respecting the role of social partners, 
leading to limited progress overall on CSR 2. 

On progress in reaching the national targets under 
the  Europe 2020 Strategy  (see  also  Annex A),  the 
Netherlands 
is  doing  well  on  employment, 
greenhouse gas emissions, energy efficiency, early 
school  leaving  and  tertiary  education  attainment. 
is  needed  on  R&D 
However,  more  effort 
investment, 
and  poverty 
energy 
renewable 
reduction. 

The Netherlands performs relatively well on the 
indicators  of  the  Social  Scoreboard  supporting 
the European Pillar of Social Rights. The labour 
market performance and social outcomes are good 
and inequality is low. Few young people are not in 
employment,  education  or  training.  The  share  of 
people at risk of poverty or social exclusion is low. 

2 

 
 
Executive summary 

  The labour market continued its recovery in 
2017  and  performed  well  in  terms  of  job 
creation,  although  the  challenges  of  labour 
market  segmentation  and  integration  of 
people  with  a  migrant  background  remain. 
Total  employment  rose  steadily,  while  the 
unemployment  rate  continued  to  fall  in  2017. 
Flexible  employment  constitutes  a  relatively 
large and increasing share of the labour market. 
The  self-employed  are  not  obliged  to  be 
insured  against  labour-related  risks  such  as 
accidents  at  work,  unemployment  and  old  age 
the 
(second  pillar);  which  could  affect 
sustainability  of  the  social  security  system  in 
the  long  run.  The  new  government  announced 
several  measures 
addressing 
segmentation, but the  specifics,  timeframe  and 
possible  impact  remain  unclear.  Finally,  there 
is  still  untapped  labour  potential  in  the  high 
number  of  women  working  part-time  and  also 
people  born  outside  the  EU  given  that  their 
employment rate lags behind that of those born 
in the Netherlands. 

potentially 

  School education outcomes are above the EU 
average,  but  have  worsened  since  2012.  In 
the  2015  Programme  for  International  Student 
Assessment  (PISA),  the  proportion  of  low 
achievers  increased  in  all  three  core  fields. 
Differences  between  schools  have  one  of  the 
biggest impact on pupils’ performance, and are 
strongly  linked  to  the  different  educational 
tracks they offer. 

  According 

is 

to  worldwide  rankings, 

the 
Netherlands has an efficient and productive 
R&D  sector,  but  growth-friendly  public 
lower  than  that  of  top 
expenditure 
performers.  The  country’s  high-performing 
education system and scientific base provide a 
sound basis for boosting innovation and growth 
capacity through education and R&D activities. 
Although substantial additional investment has 
been announced, public R&D intensity is set to 
decline. 

the 

share  of 

  The reduction of CO2 emissions is on track, 
energy 
but 
production 
is 
expected  to  miss  its  national  target  of  14 % 
renewable energy production by 2020, with the 

renewable 
low.  The  Netherlands 

is 

forecast  projects  a  gradual  decline  in  the 
current  account  balance  following  buoyant 
domestic  demand.  Simulations  in  this  report 
show  that  an  increase  in  public  investment 
would reduce the trade surplus and would also 
be passed on to the euro area through potential 
spillover  effects,  leading  to  higher  economic 
growth of the other euro area countries. 

shaping  household 
in 

  The second pillar pension system plays a key 
finances, 
role 
in 
especially 
combination  with  high 
mortgage  debt.  While  the  pension  system 
performs  well  on  pension  adequacy  and  fiscal 
sustainability,  it  holds  drawbacks  in  terms  of 
intergenerational  fairness, 
transparency  and 
flexibility.  Moreover,  second  pillar  pension 
contributions  are high  and  fluctuate depending 
on the financial performance of pension funds. 
As such, it may affect household spending in a 
pro-cyclical  way,  with  risks  seemingly  to 
weigh on young age groups as lower indexation 
and higher pension contributions have been the 
primary  means  of  adjustment.  Importantly, 
households  combine  substantial  housing  and 
pension  wealth  with  high  mortgage  debt. 
However,  the  former  are  highly  illiquid  and 
unevenly  distributed  across  generations.  This 
makes  households  vulnerable  to  economic 
shocks  and  accentuates 
the  pro-cyclical 
dynamics of household finances. 

Other  key  structural  issues  analysed  in  this  report 
which  point  to  particular  challenges  facing  the 
Dutch economy, are as follows: 

income  tax  burden 

  Despite  a  reduction  in  the  tax  burden,  non-
tax  compulsory  payments  are  expected  to 
remain  high.  The  Dutch 
government 
announced  a  tax  reform  for  2019  that  will 
reduce the number of tax brackets from four to 
two  and  lower  the  top  tax  rate  from  52 %  to 
49 %.  The  overall 
is 
to  decline.  However,  non-tax 
expected 
compulsory  payments 
as  pension 
such 
contributions and healthcare premiums drive up 
the total compulsory payment wedge on labour. 
While this may be equitable, it could also give 
rise  to  other  inefficiencies,  especially  in  terms 
between 
the 
of 
compulsory 
and 
household finances. 

above-mentioned 
pension 

link 
contributions 

3 

 
 
Executive summary 

National  Energy  Outlook  2017  estimating  a 
renewable energy share of 12.5 % by 2020. 

4 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

the  new  government’s 
fiscal  plans,  public 
consumption  is  set  to  increase  by  almost  3 %  in 
real terms in 2018 and 2019. Corporate investment 
in  equipment  is  expected  to  grow  as  capacity 
utilisation  rates  have  reached  pre-crisis  levels. 
However,  this  is  partly  offset  by  a  slowdown  in 
residential investment, which has recorded double-
recent  years.  The  growth 
digit  growth 
contribution  from  net  exports  is  expected  to  be 
fairly  limited  given  strong  domestic  demand, 
which drives up imports (see Graph 1.3). 

in 

Graph 1.2:  GDP volume and pre-crisis trend 

GDP growth 

Economic  growth  has  accelerated  to  3.1 %  in 
2017, the highest rate in 10 years. This expansion 
follows on the back of a relatively strong recovery 
in recent years, but it should be seen in the context 
of a prolonged double dip in 2012-2013. While the 
acceleration  of  economic  growth  in  2016  was 
mostly driven by labour utilisation (the number of 
hours  worked),  both 
labour  utilisation  and 
productivity growth contributed to GDP per capita 
growth  in  2017  (by  2  percentage  points  and  1 
percentage point respectively). In per capita terms, 
GDP is 3 % above pre-crisis peaks and is growing 
rapidly  (see  Graph  1.1).  That  said,  under  the 
to 
assumption 
potential  growth  rates  after  2019,  the  permanent 
impact of the crisis is estimated at roughly 4 % of 
GDP (see Graph 1.2) (2). 

that  economic  growth  returns 

Graph 1.1:  GDP per capita (volume, index 2010=100) 

Source: European Commission. The pre-crisis trend is 
approximated by a linear estimate on Q1-2001 to Q4-2007.  

Inflation 

Inflation is picking up. Driven mainly by energy 
prices,  consumer  price  inflation  is  expected  to 
reach 1.3 % in 2017 after remaining muted in 2015 
and  2016.  Looking  ahead,  inflation  is  expected  to 
pick  up  further  based  on  higher  wage  growth, 
which  drives up  prices  in  particular  in  the  service 
sector. In 2019, inflation is expected to increase to 
2.3 %  as  the  planned  increases  in  indirect  taxes 
(VAT and energy taxes) kick in. 

Source: European Commission (Eurostat) 

As 
the  business  cycle  matures,  private 
consumption is expected to be the main growth 
driver.  According  to  the  European  Commission’s 
Winter 2018 Interim Economic Forecast, real GDP 
is  projected  to  increase  by  2.9 %  in  2018  and 
2.5 %  in  2019.  Private  consumption  is  set  to  pick 
up  as  wage  and  employment  growth  improve 
household  disposable  income,  while  rising  house 
prices lead to positive wealth effects. As a result of 

(2)  Based  on  the  European  Commission  Winter  2018  Interim 
forecast and under the assumption that the economy grows 
according to trend after 2019.  

5 

9294969810010210410610811005Q307Q108Q310Q111Q313Q114Q316Q117Q3Index, 2010=100NetherlandsGermanyBelgiumUnited KingdomFrance10011012013014015016017018019020001Q102Q203Q304Q406Q107Q208Q309Q411Q112Q213Q314Q416Q117Q218Q319Q4Billion EURGDPpre-crisis trend 
 
 
                                                           
 
1. Economic situation and outlook 

market, this is expected to result in an acceleration 
of  nominal  wage  growth  over  the  coming  years. 
Nevertheless,  wage  growth 
in 
comparison  with  fundamental  drivers  (see  Graph 
1.5). 

remains 

low 

Graph 1.4: 

Labour market developments 

Source: European Commission (Statistics Netherlands; 
seasonally adjusted data) 

Graph 1.5:  Wage growth: actual and predicted based on 

economic fundamentals 

Source: European Commission (see Kiss and Arpaia, 2011) 

Unit labour costs are expected to increase in the 
coming  years.  In  2016,  real  compensation  per 
employee  increased by  0.6 %,  which resulted  in  a 
labour  costs  (0.3 %). 
slight 
However,  in  2017  and  2018,  a  tightening  of  the 
labour  market  is  expected  to  push  up  real  wage 

increase 

in  unit 

Graph 1.3:  GDP Growth and contributions 

Source: European Commission (Winter 2018 Interi,m 
Economic forecast) 

Labour market 

Employment  growth  accelerated  further  in 
2017.  Employment  growth  increased  from  1 % 
year-on-year  in  2015  and  early  2016,  to  2.1 %  in 
2017.  The  increase  in  the  number  of  employed 
persons is mainly due to an increase in temporary 
and  self-employment,  although  the  number  of 
permanent contracts has also increased in the final 
quarters of 2017 after a period of negative growth. 
The unemployment rate fell to 4.9 % of the labour 
force in 2017, down from 6.0 % in 2016 and well 
below the EU average. Long-term unemployment, 
which increased substantially since 2009, declined 
for all age groups. In Q3-2017 it reached 1.9 % of 
the labour force, down from 2.4 % in Q3-2016 (see 
labour  market 
Section  4.3).  While  overall 
participation  remains  high,  an  untapped  potential 
remains, 
part-time 
employment  of  women  and  for  people  with  a 
migrant background.  

especially 

related 

to 

Wage  growth  has  been  moderate  in  the  recent 
years, but is expected to pick up as a result of a 
tightening  labour  market.  In  2017,  nominal 
compensation  per  employee  is  expected  to  have 
increased  moderately  by  1.7 %.  This  is  below  the 
level that could be expected based on the level of 
the economic fundamentals. For 2018, trade unions 
substantially  higher  wage 
have 
demands  compared 
In 
to  previous  years. 
combination  with  a  tightening  of  the  labour 

formulated 

6 

-3-2-112341011121314151617*18*19*pps.Net exportsInventoriesPrivate consumpt.Public consumpt.InvestmentReal GDP (y-o-y%)01234567878008000820084008600880090009200Jan 15Apr 15Jul 15Oct 15Jan 16Apr 16Jul 16Oct 16Jan 17Apr 17Jul 17Oct 17% of labour forcethousand personslabour forceemploymentunemployment rate (rhs)-1012345699010305070911131517%Prediction based on inflation, productivity andunemploymentActual nominal wage growth 
 
 
 
1. Economic situation and outlook 

shows  the  average  income  difference  with  the 
previous birth cohort). For most birth cohorts, this 
income  gain  is  roughly  EUR 3 000  per  year. 
Although there are increasingly few data points, it 
is  striking  that  very  young  income  earners  on 
average  earn  less  than  previous  generations.  This 
could be a consequence of the economic downturn 
during the years after 2008. 

Graph 1.7:  Average annual real income gain/loss 

compared to previous generation* 

the 

growth.  In  combination  with  low  productivity 
growth,  this  is  expected  to  result  in  a  stronger 
increase in unit labour costs (1.8 % in 2018). This 
level  is  above  the  average  in  the  euro  area, 
in 
indicating 
slight 
risk  of  a 
competitiveness.  However,  from  a 
long  run 
perspective cost competiveness in the Netherlands 
evolved  broadly  in  line  with  the  euro  area  as  the 
accumulated  increase  in  unit  labour  cost  in  the 
period  2002-2016  was  very  similar 
the 
Netherlands (24.5 %) as compared to the euro area 
(25.4 %) (see Graph 1.6). 

loss 

in 

Graph 1.6: 

Trends in labour costs and its components 

Source: European Commission (Statistics Netherlands, 
household income data). *) 5 year birth cohort. 

Inequality  in  net  wealth  is  partly  explained  by 
household  debt  and  life  cycle  patterns.  The 
relatively high inequality in net wealth is to a large 
extent driven by high mortgage debt and negative 
net  housing  equity  ('underwater  mortgages',  see 
Section  4.2.4).  Excluding  households  with 
negative  wealth,  inequality  in  net  wealth  is  much 
lower  and  more  in  line  with  other  EU  countries. 
Life  cycle  patterns  are  also  important.  As  wealth 
represents  cumulated  savings  over  the  years,  a 
large proportion of total net wealth is concentrated 
among  relatively  old  households.  Median  net 
wealth  grows  until  the  age  of  65  where  it  peaks 
around  EUR 100 000,  after  which  it  starts  to 
decline  (see  Graph  1.8).  Net  wealth  inequality 
tends  to  be  smaller  within  age  groups  than 
between, which implies that the distribution is less 
skewed from a life cycle perspective. 

Source: European Commission (Eurostat) 

Social developments 

Income inequality is relatively low compared to 
the  EU  average.  The  Netherlands  displays 
comparatively  good  outcomes  with  respect  to 
social  protection  and  inclusion.  By  international 
standards  poverty  is  low,  and  taxes  and  transfers 
are  effective  in  reducing  income  inequality  and 
poverty.  However,  the  capacity  of  the  social 
system 
reduce  poverty  shows  signs  of 
weakening (see Section 4.3). 

to 

There  are  signs  that  intergenerational  income 
inequality is increasing. In theory, young cohorts 
typically  earn  more  than  older  generations  at  the 
same  age  as  economic  growth  translates  into  real 
income  gains  over  time.  This  is  also  largely 
supported  by  income  data  for  Dutch  households: 
for any given age, younger birth cohorts earn more 
than  previous  birth  cohorts  (see  Graph  1.7  which 

7 

-3-2-1012345602030405060708091011121314151617*18*19*% yoyInflation (GDP deflator growth)Real Compensation per EmployeeProductivity Contribution (negative sign)Nominal unit labour costULC in Euro Area-4-3-2-1012345born 1985-1990born 1980-1985born 1975-1980born 1970-1975born 1965-1970born 1960-1965born 1955-1960born 1950-1955born 1945-1950Thousand EUR 
 
 
 
 
1. Economic situation and outlook 

expenditure  growth  below  the  level  of  nominal 
GDP growth. The structural budget balance, which 
is  the  nominal  budget  balance  corrected  for  the 
the  economic  cycle  and  one-off 
impact  of 
measures,  is  expected  to  have  reached  0.3 %  of 
GDP in 2017, and set to decline to -0.2 % in 2018 
and  -0.1 %  in  2019.  The  debt-to-GDP  ratio  fell 
below  60 %  during  the  course  of  2017.  This  was 
mainly  due  to  sizable  stock-flow  adjustments 
resulting  from  the  reprivatisation  of  financial 
institutions, and strong nominal GDP growth. Debt 
is  expected  to  continue  to  decline  to  51.5 %  of 
GDP in 2019. 

Graph 1.8:  Net wealth by age 

Source: European Commission (based on Statistics 
Netherlands wealth data for 2014) 

External position 

The large current account surplus is expected to 
have  increased  in  2017,  and  to  decline  only 
slowly  in  the  next  years.  Following  muted 
domestic  demand  (see  European  Commission 
2017b,  Section  1.2)  and  a  sharp  recovery  in 
international  trade  after  the  crisis,  the  current 
account surplus peaked at more than 10 % of GDP 
in  2012.  Largely  as  a  result  of  declining  net 
primary incomes, in particular lower income from 
foreign  direct  investment,  the  current  account 
surplus  fell  to  9 %  of  GDP  in  2016.  However, 
increased  profitability  of  the  foreign  activities  of 
Dutch  multinationals  led  to  an  increase  in  the 
balance  of  primary  incomes  in  early  2017,  which 
improved  the  overall  current  account  balance. 
Looking  ahead,  the  trade  surplus  is  projected  to 
continue  to  decline,  albeit  slowly  as  buoyant 
domestic  demand  coincides  with  growth  in  world 
trade, which is set to continue to fuel Dutch export 
growth. 

Public finances 

Despite  the  new  government  announcing  a 
substantial  fiscal  stimulus  package,  the  budget 
is  expected  to  remain  in  surplus  over  the 
coming years. The headline government surplus is 
set to fall from 0.7 % of GDP in 2017 to 0.5 % in 
2018,  and  to  rebound  to  0.9 %  in  2019  based  on 
government 
growth 
robust 

revenue 

and 

8 

-50050100150200250300<2525-3030-3535-4040-4545-5050-5555-6060-6565-7070-75over 75Thousand EUR75th percentilemeanmedian25th percentile 
 
1. Economic situation and outlook 

Table 1.1: 

Key economic and financial indicators 

(1)  NIIP excluding direct investment and portfolio equity shares  
(2) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches. 
Source: Eurostat and ECB as of 30 Jan 2018, where available; European Commission for forecast figures (Winter 2018 Interim 
forecast for real GDP and HICP, Autumn forecast 2017 otherwise)                                                                                                    

9 

2004-072008-122013-1420152016201720182019Real GDP (y-o-y)2.80.00.62.32.23.22.92.5Potential growth (y-o-y)1.70.90.51.21.61.81.91.9Private consumption (y-o-y)0.7-0.4-0.42.01.6...Public consumption (y-o-y)3.41.50.1-0.21.2...Gross fixed capital formation (y-o-y)4.2-2.6-1.011.05.3...Exports of goods and services (y-o-y)6.82.13.36.54.3...Imports of goods and services (y-o-y) 6.41.92.68.44.1...Contribution to GDP growth:Domestic demand (y-o-y)2.0-0.4-0.32.82.0...Inventories (y-o-y)0.10.00.10.1-0.4...Net exports (y-o-y)0.70.40.8-0.70.6...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.40.20.10.60.80.80.80.7Capital accumulation (y-o-y)0.70.50.20.40.50.60.70.7Total factor productivity (y-o-y)0.70.20.20.30.30.40.40.5Output gap-0.4-1.4-3.1-1.8-1.20.21.01.6Unemployment rate5.24.87.46.96.04.84.03.5GDP deflator (y-o-y)2.01.10.80.80.61.11.42.1Harmonised index of consumer prices (HICP, y-o-y)1.51.91.40.20.11.31.62.3Nominal compensation per employee (y-o-y)2.42.41.9-0.31.21.72.73.1Labour productivity (real, person employed, y-o-y)1.7-0.21.21.31.1...Unit labour costs (ULC, whole economy, y-o-y)0.72.40.6-1.50.30.61.82.5Real unit labour costs (y-o-y)-1.31.4-0.1-2.2-0.3-0.40.40.4Real effective exchange rate (ULC, y-o-y)-0.10.20.7-4.90.20.71.70.8Real effective exchange rate (HICP, y-o-y)-0.5-0.71.3-3.11.10.31.2.Savings rate of households (net saving as percentage of net disposable income)3.75.77.66.56.4...Private credit flow, consolidated (% of GDP)10.95.2-0.1-0.81.5...Private sector debt, consolidated (% of GDP)214.5224.3224.6225.1221.5...of which household debt, consolidated (% of GDP)107.0116.0112.6109.6107.5...of which non-financial corporate debt, consolidated (% of GDP)107.6108.3112.0115.5114.0...Gross non-performing debt (% of total debt instruments and total loans and advances) (2).2.42.82.42.2...Corporations, net lending (+) or net borrowing (-) (% of GDP)9.410.18.53.77.27.17.16.5Corporations, gross operating surplus (% of GDP)27.528.428.028.928.228.227.927.2Households, net lending (+) or net borrowing (-) (% of GDP)-2.00.93.21.70.90.70.50.5Deflated house price index (y-o-y)2.4-3.7-4.23.44.4...Residential investment (% of GDP)6.14.83.03.54.0...Current account balance (% of GDP), balance of payments7.77.39.28.78.59.18.78.4Trade balance (% of GDP), balance of payments8.58.510.810.611.0...Terms of trade of goods and services (y-o-y)0.0-0.50.11.20.6-0.7-0.3-0.1Capital account balance (% of GDP)-0.4-0.30.0-5.0-0.2...Net international investment position (% of GDP)-5.510.439.855.167.7...Net marketable external debt (% of GDP) (1)-64.9-74.1-57.0-44.2-35.8...Gross marketable external debt (% of GDP) (1)329.4391.6411.3422.3416.7...Export performance vs. advanced countries (% change over 5 years)6.90.8-4.7-5.1-2.7...Export market share, goods and services (y-o-y)-1.5-2.60.9-2.03.2...Net FDI flows (% of GDP)4.75.95.211.812.8...General government balance (% of GDP)-0.4-3.7-2.3-2.10.40.70.50.9Structural budget balance (% of GDP).-3.0-0.6-0.90.90.3-0.2-0.1General government gross debt (% of GDP)46.659.767.964.661.857.754.951.5Tax-to-GDP ratio (%)36.436.537.537.839.339.639.639.7Tax rate for a single person earning the average wage (%)32.532.132.330.430.5...Tax rate for a single person earning 50% of the average wage (%)23.321.420.619.216.1...forecast 
 
 
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

the 

the 

introduction  of 

implementation  of 

Progress  with 
the 
recommendations addressed to the Netherlands 
in  2017(3)  has  to  be  seen  in  a  longer-term 
the 
perspective  since 
European  Semester  in  2011.  Looking  at  the 
multi-annual  assessment  of  the  implementation  of 
the  CSRs  since  these  were  first  adopted,  78 %  of 
all  the  CSRs  addressed  to  Netherlands  have 
recorded  at  least  'some  progress'.  22 %  of  these 
CSRs  recorded  'limited'  or  'no  progress'  (see 
Graph 2.1).  Substantial 
full 
implementation  have  been  achieved  in  several 
areas of the labour market, for instance increasing 
the  statutory  retirement  age  and  enhancing  the 
participation  of  older  workers,  people  with 
disabilities  and  migrants.  Other  areas  with 
substantial  progress  have  been  the  reform  of  the 
long-term  care  as  well  as  the  protection  of 
expenditure  directly  relevant  for  growth  such  as 
education, innovation and research. 

progress 

and 

Graph 2.1:  Overall multiannual implementation of 2011-

2017 CSRs to date 

* The overall assessment of the country-specific 
recommendations related to fiscal policy excludes 
compliance with the Stability and Growth Pact.  
** 2011-2012: Different CSR assessment categories.  
*** The multiannual CSR assessment looks at the 
implementation since the CSRs were first adopted until the 
2018 Country Report. 
Source: European Commission 

excessive  deficit.  From  2009-2013,  a  significant 
consolidation  effort  led  to  the  abrogation  of  the 
excessive  deficit  procedure  in  2013  and  has 
ensured continuous improvement in the budgetary 
situation  ever  since.  In  2017,  the  Netherlands  are 
expected  to  have  reached  a  government  budget 
surplus of 0.7 % of GDP and a debt-to-GDP ratio 
below  the  60 %  threshold  for  the  first  time  since 
2011.  During  the  fiscal  consolidation  period, 
public  funding  to  research  and  innovation  has 
stabilised  at  around  0.9 %  of  GDP.  This  fully 
to  protect  such 
meets 
investments.  Nevertheless,  at  2.0 %  of  GDP,  the 
total R&D intensity has stagnated below the target 
of  2.5 %.  This  underachievement  is  mostly  the 
result  of  low  private  R&D  spending  (1.2 %  of 
GDP  in  2016).  While  the  figure  is  only  slightly 
below  the  euro  area  average  (1.4 %  of  GDP)  it  is 
considerably  lower  than  in  other  Member  States 
with  similar  levels  of  educational  attainment  and 
economic  development  (e.g.  Sweden  2.3 %  of 
GDP, and Germany 2 % of GDP). 

recommendation 

the 

In  recent  years,  the  Netherlands  has  taken 
substantial  measures  reforming  the  long-term 
care  and  retirement  age,  and  announced  plans 
to  reform  the  second  pillar  of  the  pension 
system. A major reform has been implemented to 
decentralise  long-term  care,  aimed  at  achieving 
efficiency gains and providing tailor-made support. 
Nevertheless,  expenditure  in  this  sector  is  still 
projected  to  increase  relatively  fast  compared  to 
the 
the  EU  average,  among  others  due 
implementation  of  a  framework  to  improve  the 
quality  of 
(‘Kwaliteitskader 
Verpleeghuiszorg’).  The  statutory  retirement  age 
in  the  first  pillar  is  being  increased  in  steps  to  67 
by 2021 and is linked to life expectancy thereafter. 
The government announced that it plans to reform 
the  second  pillar  of  the  pension  system  based  on 
the  previously  started  dialogue  with  social 
partners. Specific measures and the exact timeline 
have not yet been specified.  

long-term  care 

to 

The  Netherlands  has  secured  a  timely  and 
its  excessive  deficit. 
durable  correction  of 
Following  the  house  price  correction  and  the 
financial  crisis,  the  Netherlands  went  through  a 
period marked by an increasing debt-to-GDP ratio 
and  a  worsening  budget  balance,  leading  to  an 

(3)  For  the  assessment  of  other  reforms  implemented  in  the 

past, see in particular section 4.1, 4.2, 4.3 and 4.5, 

Important  reforms  in  the  housing  market  have 
been  taken,  but  distortions  remain.  In  line  with 
2017  CSR  1,  the  government  has  decided  to 
accelerate  the reduction  of  the  generous  mortgage 
interest  tax  deductibility  (MID)  from  currently 
0.5 pp  to  3 pps  per  year  from  2020  onwards  until 
the  MID  reaches  37 %  in  2023.  A  requirement  to 
repay the mortgage principal in order to qualify for 

10 

9%13%30%17%30%No ProgressLimited ProgressSome ProgressSubstantial ProgressFull Implementation 
 
 
                                                           
2. Progress with country-specific recommendations 

segmentation.  Concrete  measures  have  not  yet 
been  revealed.  Wage  growth  is  slowly  increasing, 
with  limited  progress  made  on  promoting  higher 
real  wage  growth.  No  progress  has  been  made  on 
reforming the second pillar of the pension system; 
while  the  government  announced  its  intention,  no 
details have been communicated.  

ESI  Funds  address  key  challenges  to  inclusive 
growth and convergence. In the Netherlands, this 
is  done  notably  by  stimulating  investments  in 
R&D  in  the  private  sector  for  experimental 
development of new products, the set-up of living 
labs  and  the  stimulation  of  cooperation  between 
SMEs  and  research  institutions.  ESI  Funds  also 
invest  in  coaching  people  who  are  at  a  distance 
from  the  labour  market  and  in  measures  that  help 
improve the job prospects of older workers. 

rents  and  higher 

tax  relief  had  previously  been  introduced  as  well. 
On the rental sector, some progress has been made 
by  implementing  a  point  system  that  allows  for 
rent 
more  market-oriented 
increases in the regulated sector for tenants with an 
income  above  a  certain  threshold.  By  introducing 
short-term 
the  government 
provides  scope  for  a  more  flexible  rental  market, 
but  it  is  too  early  to  assess  the  impact  of  these 
reforms. Despite the reforms, distortions remain in 
the  housing  market,  creating  a  debt  bias  and 
influencing the decision to buy or rent. 

rental  contracts, 

Substantial  progress  has  been  made  on 
improving  participation  in  the  labour  market, 
although 
important  challenges  remain  on 
labour market segmentation. In recent years, the 
Dutch  government  has  taken  several  measures 
such as the Participation Act (‘Participatiewet’) or 
the Action Plan 50+ (‘Actieplan 50+’) to improve 
the  employability  of  people  at  the  margin  of  the 
labour  market, 
including  disabled  and  older 
workers.  Reforms  were  also  carried  out  on 
unemployment 
employment 
force  mobility. 
to 
benefits 
Nevertheless, labour market segmentation remains 
a concern, as reflected by the absolute and relative 
increase in flexible employment contracts. 

protection 
increase 

and 
labour 

the 

The Netherlands has made some progress (4) in 
addressing 
country-specific 
2017 
recommendations.  Substantial  progress  has  been 
made  on  the  fiscal-structural  part  of  CSR  1,  with 
the  government  set  to  implement  additional  fiscal 
measures in 2018 that support domestic demand, in 
particular  increasing  expenditure  on  security  and 
on  teachers’  salaries.  From  2018  onwards,  R&D 
investment  will  be  increased.  On  the  housing 
market,  some  progress  has  been  made.  The 
government  has  taken  some  measures  to  support 
the  development  of  the  middle  segment  rental 
the 
market.  For 
government  announced  that  it  will  speed  up  the 
MID reduction from 2020 onwards until it reaches 
37 %  in  2023,  which  is  still  relatively  high.  For 
CSR  2,  limited  progress  has  been  made  as  the 
government  has  only  announced  its  intention  to 
labour  market 
address 

the  owner-occupied  market, 

problem 

the 

of 

(4)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  advice  in  each  respective  subpart  of  a 
CSR is presented in the Overview Table in the Annex. This 
overall  assessment  does  not  include  an  assessment  of 
compliance with the Stability and Growth Pact. 

11 

 
                                                           
2. Progress with country-specific recommendations 

Table 2.1: 

CSR progress 

(1) This does not include an assessment of compliance with the Stability and Growth Pact. 
Source: European Commission 

12 

The Netherlands  Overall assessment of progress with 2017 CSRs: some progress CSR1: While respecting the medium-term objective, use fiscal and structural policies to support potential growth and domestic demand,  including investment in research and development.  Take measures to reduce the remaining distortions in the housing market and the debt bias for households, in particular by decreasing mortgage interest tax deductibility. The Netherlands has made some progress in addressing the structural part of CSR1(1):  Substantial progress has been made in using fiscal policies to support potential growth and domestic demand.  Some progress has been made in increasing investment in research and development.  Some progress has been made on the housing market recommendation. CSR 2: Tackle remaining barriers to hiring staff on permanent contracts.  Address the high increase in the self-employed without employees, including by reducing tax distortions favouring self-employment, without compromising entrepreneurship, and by promoting access of the self-employed to affordable social protection.  Based on the broad preparatory process already launched, make the second pillar of the pension system more transparent, inter-generationally fairer and more resilient to shocks.  Create conditions to promote higher real wage growth, respecting the role of the social partners. The Netherlands has made limited progress in addressing CSR2:  Limited progress has been made in tackling labour market segmentation, as the government has announced its intention to take measures.  Limited progress has been made in addressing the high increase in the self-employed without employees, as the government announced a minimum hourly rate for the self-employed.  No progress has been made on reforming the second pillar of the pension system, but the government has confirmed its intention to carry out the reform during its term.  Limited progress. The government has acknowledged the need for higher real wage growth. The coalition agreement includes an increase in expenditure on teachers’ salaries.   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2. Progress with country-specific recommendations 

Box 2.1: Tangible results delivered through EU support to structural change in the 
Netherlands 

The Netherlands is a beneficiary of European Structural and Investment Funds (ESI Funds) support and can 
receive up to EUR 1.9 billion until 2020. This represents around 1 % of public investment(1) annually over 
the period 2014-2018. By 31 December 2017, an estimated EUR 1.2 billion (62 % of the total) was allocated 
to projects on the ground. These investments helped 309 enterprises to cooperate with research institutions 
and 1 100 SMEs to introduce new products to the market. Furthermore, 212 000 people had benefited from 
actions fostering social inclusion and 5 200 enterprises received support to adapt the working environment 
to  prolonged  working  lives.  Out  of  the  EU  financing,  EUR 97 million  will  be  invested  through  financial 
instruments.  

ESI  Funds  help  address  structural  policy  challenges  and  implement  country-specific  recommendations. 
Investments in  research and  development  in  the private  sector  are  stimulated,  among others,  by  providing 
loans, grants or guarantees for experimental development of new products, by setting-up living labs or by 
facilitating and  stimulating  cooperation  between SMEs  and  research  institutions. The  Funds  also invest  in 
coaching  for  people  with  a  distance  to  the  labour  market  which  in  turn  helps  enhance  the  overall  labour 
market participation. Furthermore, specific measures are supported which improve the job prospects of older 
workers. 

In addition, as a precondition for ESI Funds support(2), the Dutch regions developed Smart Specialisation 
Strategies for research and innovation which help focus the resources and efforts on product specialisation 
with a strong market potential. 

The Netherlands is also advancing the take up of the European Fund for Strategic Investments (EFSI). As of 
December  2017,  overall  financing  volume  of  operations  approved  under  the  EFSI  amounted  to 
EUR 2.2 billion,  which  is  expected  to  trigger  total  private  and  public  investment  of  EUR 8 billion.  More 
specifically, 17 projects involving the Netherlands have been approved so far under the Infrastructure and 
Innovation  Window  (including  4  multi-country  projects),  amounting  to  EUR 2.1 billion  in  EIB  financing 
under the EFSI. This is expected to trigger about EUR 7.5 billion in investments. Under the SME Window, 7 
agreements with  financial  intermediaries have  been  approved  so  far. European  Investment  Fund  financing 
enabled by the EFSI amounts to EUR 135 million, which is expected to mobilise approximatively EUR 515 
million  in  total  investment.  Over  1 100  smaller  companies  or  start-ups  will  benefit  from  this  support. 
Transport ranks first in terms of operations and volume approved, followed by energy and SMEs.  

Funding  under  Horizon  2020,  the  Connecting  Europe  Facility  and  other  directly  managed  EU  funds  is 
additional  to  the  ESI  Funds.  By  the  end  of  2017,  the  Netherlands  has  signed  agreements  for 
EUR 357 million  for  projects  under  the  Connecting  Europe  Facility.  For  more  information,  see 
https://cohesiondata.ec.europa.eu/countries/NL 

(1)  Public investment is defined as gross fixed capital formation + investment grants + national expenditure on agriculture 

and fisheries. 

(2)  Before  programmes  are  adopted,  Member  States  are  required  to  comply  with  a  number  of  so-called  ex-ante 

conditionalities, which aim at improving conditions for the majority of public investments areas. 

13 

 
 
 
 
3.  SUMMARY OF THE MAIN FINDINGS FROM THE 

MACROECONOMIC IMBALANCE PROCEDURE IN-DEPTH 
REVIEW 

as 

identified 

The  in-depth  review  for  the  Dutch  economy  is 
presented  in  this  report.  In  spring  2017,  the 
Netherlands  were 
having 
macroeconomic  imbalances,  in  particular  relating 
to  a  high  current  account  surplus  (reflecting  a 
saving and investment balance) and a high private 
debt  level,  in  particular  household  mortgages  and 
non-financial  corporation 
(NFC)  debt.  The 
Commission's  2018  Alert  Mechanism  Report 
concluded  that  a  new  in-depth  review  should  be 
undertaken 
to  assess 
developments  relating  to  identified  imbalances. 
Analyses  relevant  for  the  in-depth  review  can  be 
found  in  the  following  sections:  the  tax  and 
regulatory  framework  in  Section  4.1;  private 
indebtedness in Section 4.2; wage developments in 
4.3;  and  saving  and  investment  imbalances  in 
Section  4.4.  Potential  effects  of  a  public 
investment  shock  on 
trade  balance  are 
discussed in Box 3.1. 

the  Netherlands 

the 

for 

3.1. 

IMBALANCES AND THEIR GRAVITY 

The  Netherlands  has  recorded  persistent 
current  account  surpluses  for  more  than  three 
decades.  In  2016,  the  three-year  average  for  the 
current account surplus was 8.8 % of GDP, higher 
than  any  other  EU  country  (see  Section  4.4).  As 
such,  the  Dutch  surplus  contributed  0.6  pp  to  the 
euro  area  surplus  in  2016  (by  comparison,  the 
German  contribution  was  2.4 pps).  From  a  real 
trade  perspective,  the  main  driver  of  the  current 
account remains the strong trade surplus in goods. 

A  savings-investment  approach  points  to  the 
non-financial  corporate  (NFC)  sector  as  main 
driver  of  the  surplus.  The  net  lending  is  mostly 
explained  by  the  strong  net  lending  position  of 
NFCs,  which  have  increased  their  excess  savings 
since  2 000.  The  high  savings  are  also  due  to  a 
sharp increase in savings by multinationals, which 
distribute only a low share of their profits, thereby 
generating  a  statistical  upward  effect  on  the 
external  net  lending  position.  In  recent  years,  the 
household sector reduced its saving surplus, while 
the  government  recorded  a  small  surplus  in  2016 
for  the  first  time  in  eight  years  (see  Section  4.4). 
Pension funds hold the largest share of household 

savings and invest mainly in securities and mostly 
abroad,  which  further  increases  the  surplus.  Total 
assets  held  by  pension  funds have  reached  almost 
200 % of GDP in 2016, of which 17 % is invested 
in the Netherlands (see Section 4.2.5). The saving-
investment imbalance peaked in 2012, at the midst 
of the prolonged second dip in the Dutch economy, 
partly  driven  by  pro-cyclical  pension  institutions. 
This  may  point  to  a  suboptimal  allocation  of 
resources,  leaving  room  for  increased  growth  and 
welfare. 

Private  sector  debt  remains  high.  In  2016,  it 
stood  at  222 %  of  GDP,  with  NFCs  contributing 
slightly  more  (114 %  of  GDP)  than  households 
(108 %  of  GDP).  While  NFC  debt  has  roughly 
remained  constant  in  terms  of  GDP,  household 
debt  has  increased  considerably  over  the  past  20 
years.  The  build-up of household  debt  was driven 
by  the  regulatory  framework,  tax  incentives  and 
large increases in both house prices and associated 
mortgage  lending.  While  household  liabilities  are 
high, in particular mortgage debt, they coexist with 
large illiquid assets in the form of housing wealth 
and pension wealth. 

can 

linked 

largely  be 

NFC  debt 
to 
multinationals,  which  hold  more  than  two 
thirds  of  total  NFC  debt.  Foreign  large  NFCs 
hold  mostly  intra-group  debt,  on  which  interest  is 
being  charged  by  one  group  company  to  another. 
This  suggests  that  debt  is  being  used  for  tax 
reasons,  as  MNEs  can  use  debt  shifting  to  lower 
their tax burden via increased interest payments to 
other group companies.  

The medium-to-large size of the Dutch economy 
allows  for  moderate  outward  spillovers  for 
other  Member  States via  the  trade  channel,  with 
the  exception  of  Belgium,  where  they  can  be 
relatively  large.  As  a  result  of  close  financial 
interlinkages with neighbouring countries, outward 
financial  spillovers  are  potentially  more  relevant 
for  a  wider  set  of  countries,  including  France  and 
the UK. Conversely, the high degree of economic 
and  financial  openness  of  the  Dutch  economy 
inward 
significant 
it 
expose 
spillovers, 
from  neighbouring 
Member  States  and  from  the  US,  along  trade, 

to  potentially 
in  particular 

14 

 
 
3. Summary of the main findings from the MIP in-depth review 

to buying. NFC debt is expected to remain high. In 
2019, the government will implement the EU Anti-
Tax  Avoidance  Directive  (ATAD),  which  aims 
to  discourage  companies  from 
among  others 
creating  artificial  debt  arrangements  designed  to 
minimise taxes.  

3.3.  OVERALL ASSESSMENT 

The  Netherlands  is  experiencing  imbalances 
due to its large current account surplus and the 
high  private  debt  level.  The  current  account 
surplus  is driven by  comparatively  low household 
disposable income(6), large foreign investments by 
domestic  pension  funds  and  capital  flows  of 
multinationals.  The  high  level  of  private  debt 
mainly  consists  of  household  mortgage  debt  and 
(intra-group) NFC debt; both are influenced by tax 
incentives.  While  high  mortgage  debt  makes 
households vulnerable to financial shocks, this risk 
is  limited  in  the  case  of  intra-group  debt  of  NFC 
debt,  as  this  is  most  likely  being  used  for  tax 
optimisation purposes. 

Both  the  private  debt  and  the  external  surplus 
are expected to remain at very high levels, with 
a small reduction in the current account surplus 
in  the  coming  years.  The  positive  economic 
outlook, the government’s fiscal stimulus package 
and  expected  higher  wage  growth  are  likely  to 
boost  domestic  demand  and  have  a  dampening 
the  current  account  balance.  The 
effect  on 
budgetary  stance  will  be  less  restrictive  in  2018 
and  therefore  less  of  a  drag  on  domestic  demand 
than in the immediate aftermath of the crisis, with 
positive  effects  on  domestic  demand  and  thus  on 
the rebalancing of the current account. Private debt 
levels are expected to remain high as nominal debt 
is increasing again. The observed deleveraging has 
been  passive,  due  to  buoyant  nominal  GDP 
growth. 

(6)  See  European  Commission  (2017b)  and  see  Section  4.2.4 
for the particularly high compulsory payment wedge.  

financial and banking channels. Box 3.1 illustrates 
how  a  boost  to  government  investment  in  the 
Netherlands  can  produce  both  positive  domestic 
and cross-border effects. The simulation presented 
therein  follows 
the  euro  area 
the  spirit  of 
recommendation  1(5),  in  particular  as  regards 
improving 
fostering 
investment  in  Member  States  with  large  external 
surpluses. 

potential 

growth 

and 

3.2. 

EVOLUTION, PROSPECTS AND POLICY 
RESPONSES 

is  mostly  due 

The surplus position is projected to continue. It 
is expected to reach 9 % in 2017, before slowing to 
8.7 % in 2018 and 8.4 % in 2019, according to the 
European Commission Autumn 2017 forecast. The 
expected  decline 
to  buoyant 
domestic  demand  (see  Section  1).  In  the  coming 
years, wage growth is expected to increase on the 
back  of  significantly  higher  wage  demands  by 
trade unions and a further tightening of the labour 
market. In addition, the government has announced 
a  fiscal  stimulus  package,  which  is  expected  to 
have  a  dampening  effect  on  the  current  account 
balance.  Key  measures  include  an  increase  in 
defence  and  security  spending  (EUR 1.3 billion), 
social  transfers  (EUR 0.6 billion)  and  salaries  of 
primary school teachers (EUR 0.3 billion). 

Private  sector  debt  is  expected  to  remain  high. 
Household  debt  (mainly  mortgages)  has  increased 
again,  which  can  partly  be  attributed  to  rising 
house  prices,  even  though  credit  growth  remains 
well  below  house  price  increases.  At  the  same 
time,  rising  house  prices  have  positive  wealth 
effects  and  will  gradually  lift  affected  households 
out  of  negative  housing  equity.  In  relative  terms, 
the  private  debt-to-GDP  ratio  is  expected  to 
decrease,  due  to  positive  GDP  growth  (passive 
deleveraging).  

The  tax  system  currently  treats  mortgage  and 
NFC  debt  favourably.  Though  the  government 
has  announced  to  accelerate  the  reduction  in 
mortgage interest deductibility, large tax incentives 
to buy houses remain. The underdeveloped private 
rental market does not offer sufficient alternatives 

(5)  European  Commission  recommendation  for  a  Council 
recommendation  on  the  economic  policy  of  the  euro  area 
(22.11.2017) 

15 

 
                                                           
                                                           
3. Summary of the main findings from the MIP in-depth review 

Table 3.1: 

MIP assessment matrix (*) – the Netherlands 

(Continued on the next page) 

16 

 Gravity of the challenge Evolution and prospects Policy response Imbalances (unsustainable trends, vulnerabilities and associated risk) Current account balance The current account balances stood at 9 % of GDP in 2016. The high net lending to the rest of the world is mainly linked to the high savings by non-financial corporations (7 % of GDP). The household sector and government each contributed less than 1 % of GDP. The Netherlands has recorded surpluses on the current account for more than three decades (see Section 4.4). A persistent current account surplus points to an imbalance in domestic savings and investments, with possible adverse consequences for the allocation of resources and thus growth and welfare.  An analysis of saving and investment by institutional sector points to a statistical upward effect of large cross-border capital flows, related to the presence of multinational enterprises (see Section 4.4). In addition, the large pension savings compared to the size of the domestic economy are projected to continue having an upward effect on the lending position (see Section 4.2). During 2016 and 2017, the current account surplus increased somewhat, likely exceeding 9% of GDP in 2017. This was due to trade balance effects. Supported by the new government's fiscal stimulus package and a forecast of increasing wages, the robust growth of domestic demand is likely to reduce the current account surplus. Nevertheless, a surplus position linked to structural reasons is expected to persist going forward.   The government has announced a fiscal stimulus package for the years 2018-2021. In 2018, government expenditure increases on defence and security, social transfers and salaries of primary school teachers. The government also foresees a large income tax package reducing the burden on labour and thereby supporting domestic demand. Most measures will be implemented from 2019 onwards (see Section 4.1.1). In the coalition agreement, the government has reaffirmed its intention to reform the second pillar pension system. However, no concrete measures have been proposed so far. The government has also announced to repeal the dividend withholding tax, except in abuse situations and for payments to low tax countries, and to introduce a withholding tax for interest and royalties in abuse situations and payments to low tax countries; the impact on the current account balance remains to be seen.    
 
 
 
 
3. Summary of the main findings from the MIP in-depth review 

Table (continued) 

(*) The first column summarises ‘gravity’ issues which aim at providing an order of magnitude of the level of imbalances. The 
second column reports findings concerning the ‘evolution and prospects’ of imbalances. The third column reports recent and 
planned relevant measures to address these. Findings are reported for each source of imbalance and adjustment issue. The 
final three paragraphs of the matrix summarise the overall challenges in terms of their gravity, developments and prospects, 
policy response. 
Source: European Commission 

17 

Private debt Private sector debt stood at 222 % of GDP in 2016, which is linked to the high stock of household debt (108 % of GDP) and structurally high NFC debt that remains close to its 1996-2016 average (114 % of GDP). While household liabilities are large they go alongside large illiquid assets in the form of housing wealth and pension wealth (see Section 4.2.5). The relatively long household balance sheets, driven by tax incentives and the regulatory framework, increase the financial vulnerability of households. The high level of NFC debt can largely be attributed to internal debt financing of MNEs, mainly for tax optimisation reasons (see Section 4.2.4). After a short period of active deleveraging in 2012-2014, nominal household debt, especially mortgage debt, has been increasing again, driven by the recovery of the housing market. Yet during 2016, both household and corporate debt continued to deleverage passively, as nominal growth helped to reduce their debt ratios relative to GDP. Going forward, private debt in terms of GDP is expected to remain high. The previous government had introduced measures to limit household debt, such as the MID reduction, LTV and LTI restrictions. The new government has announced to accelerate the MID reduction from 2020 onwards, which may dampen household indebtedness in the long term. Nevertheless, the MID level will remain high and other distortions in the rental market persist, keeping a significant bias towards the owner-occupied market.  The implementation of the Anti-Tax Avoidance Directive could have an impact on NFC debt as it discourages companies from creating artificial debt arrangements designed to minimise taxes. The implementation is foreseen for 2019. Conclusions from the IDR analysis  The Netherlands displays the largest current account surplus in terms of GDP among EU countries. The surplus implies a suboptimal allocation of resources, leaving opportunities for increased growth and welfare. The disposable income of households is hampered by a high compulsory payment wedge. Private debt is high, specifically the stock of household mortgage-and debt. The long household balance sheets increase the vulnerability to financial shocks.  The current account surplus is likely to have increased somewhat in 2017, reaching more than 9 % of GDP, yet it remains below its 10.2 % peak in 2013.  The surplus is expected to narrow going forward based on a continued decline of the primary income balance, improved cyclical conditions and recovering domestic demand growth. At the same time, nominal household debt is increasing again, as the ongoing recovery of the housing market is driving up nominal mortgage debt levels.  Domestic demand is supported by the fiscal stimulus package and income tax package of the new government. Moreover, measures have been taken to support household deleveraging and to prevent excessive build-up of mortgage debt. The phase-out of the MID will be accelerated, which may reduce mortgage debt in the longer term. Finally, the government has confirmed its intention to reform the second pension pillar; however no concrete measures have been announced yet.   
 
 
 
 
3. Summary of the main findings from the MIP in-depth review 

Box 3.1: Euro area spillovers 

The new government's fiscal plans include a discretionary public spending impulse of almost 1 % of GDP in 
2019 compared to a zero policy baseline. These measures are likely to yield a positive impact on economic 
growth  in  the  Netherlands.  High  trade  openness  of  the  Dutch  economy  suggests  potentially  important 
spillovers to the rest of the euro area (REA), which is balanced, however, by the limited economic size of 
the  Netherlands  compared  to  the  EA  aggregate  (see  also  European  Commission,  2016a).  To  illustrate  the 
size  of  potential  GDP  spillovers,  this  box  describes  the  impact  of  a  permanent  debt-financed  increase  in 
productive public investment by 1 % of GDP on the Dutch GDP level, the REA GDP level and the Dutch 
trade  balance.  A  public  investment  impulse  could  be  motivated  by  a  favourable  debt  trajectory,  low 
borrowing costs and monetary policy constrained by a zero lower bound for interest rates. In essence, such a 
scenario would undo the fall in public investment since 2009. 

Simulations with the European Commission's QUEST model(1) show a positive impact on the level of Dutch 
real GDP of around 0.5 % in the first year, increasing to 0.9 % after five years. The trade surplus is reduced 
by around 0.1 % of GDP from the first year onwards. The spillover of the domestic investment impulse via 
the  trade  channel  is  positive.  In  particular,  a  1 %  of  GDP  fiscal  expansion  via  public  investment  in  the 
Netherlands raises real GDP in the REA by circa 0.1 %.  

Graph 1:  Domestic impact and spillover of permanent public investment impulse (of 1 % of GDP) 

Source: European Commission 

Detailed information on the QUEST model and applications is available at: 

(1) 
http://ec.europa.eu/economy_finance/research/macroeconomic_models_en.htm. In this simulation, monetary policy rates 
in the euro area are assumed to remain unchanged during the first two years. 

18 

-0.2-0.100.10.20.30.40.50.60.70.80.9112345GDP REAGDP NLNL Trade balance (% GDP) 
 
 
 
 
4.  REFORM PRIORITIES 

4.1.  PUBLIC FINANCES AND TAXATION 

4.1.1. TAXATION* (7) 

to 

taxes 

reduce 

income 

New fiscal measures will reduce the tax burden 
on labour. The new government has announced a 
by 
package 
EUR 0.5 billion  (0.1 %  of  GDP)  in  2018,  which 
will  increase  gradually  to  EUR 6.2 billion  (0.9 % 
of GDP) in 2021. The measures are targeted at all 
income  groups.  The  tax  burden  on  labour  will  be 
reduced  by  lowering  the  income  tax,  which  is 
primarily achieved by reducing the number of tax 
brackets  from  four  to  two,  with  a  base  rate  of 
36.95 %  in  the  lower  bracket  and  a  top  rate  of 
49.5 %  (for  income  above  EUR 68 600).  Another 
important measure is the increase in the general tax 
credit  and  labour  tax  credit,  which  will  be 
increased  in  total  by  EUR 1.5 billion  (0.2 %  of 
GDP) in 2019, EUR 3.3 billion (0.5 % of GDP) in 
2020  and  permanently  to  EUR 4.7 billion  (0.7 % 
of  GDP)  from  2021  onwards.  Child  benefits  and 
childcare  allowances  will  be 
increased  by 
EUR 0.5 billion  (0.1 %  of  GDP)  in  2019  and  by 
around EUR 1 billion from 2020 onwards.  

At  the  same  time,  some  tax  measures  will  be 
introduced to mitigate the drop in tax revenue. 
The  energy  tax  for  households  will  be  increased, 
generating  EUR 0.5 billion  in  2018  and  an  extra 
EUR 1 billion  from  2021  onwards.  The  reduced 
VAT  rate  will  rise  from  6 %  to  9 %,  which  is 
expected  to  generate  an  extra  EUR 2.6 billion  per 
year  from  2019  onwards.  In  general,  the  income 
tax package implies a tax shift away from labour to 
sources of revenue less detrimental to growth. 

To  strengthen  the  fiscal  investment  climate  for 
companies,  the  corporate  tax  rate  will  be 
gradually  reduced  from  25 %  to  ultimately 
21 % (24 % in 2019, 22.5 % in 2020 and 21 % in 
2021). The low rate (in 2017 for taxable profit up 
to EUR 200 000) will be reduced in the same way 
from 20 % to 16 %. 

Some  indicators  continue  to  suggest  that  the 
country’s  corporate  tax  rules  are  used  by 
companies  engaged  in  aggressive  tax  planning 

(7)  An asterisk (*) indicates that the analysis in the section 
contributes to the in-depth review under the MIP (see 
section 3 for an overall summary of main findings) 

(ATP).  As  shown  in  a  study  (IHS,  2018),  the 
Netherlands'  high  inward  and  outward  foreign 
direct  investment  (FDI)  stocks(8)  can  only  be 
explained in part by real economic activities taking 
place  in  the  Netherlands.  The  high  level  of 
dividend,  royalty  and  interest  payments  made  via 
the  Netherlands(9)  (see  Section  4.4)  continue  to 
suggest  that  the  country’s  tax  rules  are  used  by 
companies  that  engage  in  ATP.  A  large  share  of 
these  FDI  stocks  is  held  by  so-called  ‘special 
purpose  entities’  (SPE)(10).  The  absence  of  broad 
withholding  taxes  on  dividend  payments  by  co-
operatives,  the  possibility  for  hybrid  mismatches 
by  using  the  limited  partnership  (CV)  and  the 
absence  of  withholding  taxes  on  royalties  and 
interest  payments  (which  may  lead  to  those 
payments  escaping  tax  altogether,  if  they  are  also 
not  subject  to  tax  in  the  recipient  jurisdiction),, 
combined  with  the  lack  of  some  anti-abuse  rules, 
may  facilitate  ATP.  The  possibility  for  hybrid 
mismatches, using the CV will cease to exist with 
the  implementation  of  the  EU  directive  on  hybrid 
mismatches,  on  the  first  of  January  2020  at  the 
latest. 

A reform agenda has been announced to tackle 
certain  aspects  of  the  Dutch  tax  system  that 
may facilitate ATP. Withholding taxes on interest 
and  royalty  payments  will  be  introduced  for 
payments  to  low  tax  jurisdictions  and  in  cases  of 
abuse.  While  the  withholding  tax  on  dividends, 
which  is  currently  15 %,  will  be  abolished  in 
principle, it will remain in abuse situations and for 
payments  to  low  tax  jurisdictions.  The  timeframe 
for  these  reforms  as  well  as  for  introducing 
withholding  taxes  on  royalties  and  interests  is  not 
yet clear. These plans will not affect the proposed 
introduction  of  a  dividend  withholding  tax  on 
payments  by  cooperatives  that  largely  operate  as 

(8)  Inward FDIs stock 551 % of GDP and outward FDIs stock 

688 % of GDP in 2016. 

(9)  The flows of dividends paid and received (calculated as net 
income on FDI) amounted to 16.9 % and 23.2 % of GDP in 
2016 (respectively 4th and 2nd highest in the EU and 1st in 
value). The flows of interests paid and received (calculated 
as  net  income  on  FDI)  amounted  to  2.2 %  and  4.7 %  of 
GDP.  The  royalties  paid  and  received  in  2016  amounted 
respectively  to  6.5 %  of  GDP  and  5.6 %  of  GDP  (among 
the three highest of the EU). 

(10)  The  share  of  inward  and  outward  FDI  stock  held  by  SPE 

amounted respectively to 80 % and 73 % of GDP in 2016. 

19 

 
 
                                                           
                                                           
4.2. Financial sector 

tax  authorities  will  be  strengthened.  In  addition, 
the  provisions  of 
the  Anti-Tax  Avoidance 
Directives must be transposed into national law by 
the  end  of  2018  and  2019.  It  will  be  important  to 
assess  to  what  extent  new  measures,  whether 
announced  or  legislated,  in  conjunction  with  the 
effect of the transposition of the directive, limit the 
scope for ATP in the Netherlands. 

The  tax  rate  on 
income  from  substantial 
shareholdings will increase. It will gradually rise 
from  25 %  to  28.5 %  by  2021  to  maintain  the 
balance  between  self-employed  persons  subject  to 
income tax and self-employed persons who operate 
via  a  company  subject  to  corporate  tax.  The 
exemption  per  person  from  the  investment  yield 
tax will increase from EUR 25 000 to EUR 30 000. 
The  expected  yield  will  follow  real  interest  rates 
on savings more closely. 

4.1.2  LONG-TERM  SUSTAINABILITY  OF  PUBLIC 
FINANCE 

The government debt-to-GDP ratio is declining 
faster  than  expected.  In  2017,  the  debt  ratio  is 
expected  to  have  reached  57.7 %  of  GDP,  having 
fallen  below  the  60 %  threshold  for  the  first  time 
since 2011. The debt trajectory is more favourable 
than expected due to higher GDP growth as well as 
stock-flow  adjustments,  which  include  the  sale  of 
shares  of  state-owned  financial  institutions.  The 
sustainability  analysis(13) 
Commission’s  debt 
projects  a  further  decrease  to  38.6 %  of  GDP  in 
2028  (final  projection  year)  assuming  no  policy 
change,  driven  mainly  by  primary  surpluses,  but 
also  nominal  GDP  growth  and  low  interest  rate 
expenditure.  With  its  favourable  government  debt 
trend the Netherlands remains 'low risk', based on 
the 
baseline  medium-term 
projections.  

Commission's 

The  retirement  age  is  linked  to  life  expectancy 
in 2022. Following reforms in 2012, the retirement 
age  will  gradually  rise  to  67  years  in  2021.  From 
2022  onwards,  the  retirement  age  is  linked  to  life 
expectancy  and  is  currently  set  at  67  years  and  3 
months. Due to stagnating life expectancies in the 
latest  projections,  the  retirement  age  will  not 

(13)  EC  (2018).  This  is  a  mechanical  projection  based  on  the 
current  primary  balance  and  assumptions  on  nominal 
growth and interest rates. Subsequently an equilibrium debt 
level and equilibrium interest services can be calculated. 

holding/financing companies, which will enter into 
force  on  1 January 2018.  The  definitions  of 
"abuse" and "low-tax jurisdiction" in the context of 
the partial abolition of dividend withholding taxes 
and  the  introduction  of  withholding  taxes  on 
interest  and  royalties  will  be  important.  The 
interest  deduction  restriction  of  the  Anti-Tax 
Avoidance Directive (ATAD) will be introduced in 
the shape of an earnings stripping measure. At the 
same  time  several  existing  interest  deduction 
restrictions will be abolished, but it is not yet clear 
which.  Section  10a  of  the  Corporation  Tax  Act, 
which  provides  for  a  base  erosion  rule,  will  be 
retained.  A  generic  minimum  capital  requirement 
will  be  introduced  (thin  cap  rule)  that  limits 
interest  deduction  on  loan  capital  in  excess  of 
92 %  of  the  commercial  balance  sheet  total. 
(Foreign) investors investing via fiscal investment 
institutions 
beleggingsinstellingen’) 
exempt  from  corporate  tax  were  taxed  on  their 
property by means of the dividend withholding tax. 
Now that the dividend withholding tax is set to be 
abolished 
investment 
institutions will no longer be able to invest directly 
in  property.  This  is  intended  to  prevent  such 
investments  from  avoiding both  corporate  tax  and 
dividend withholding tax. 

principle, 

(‘fiscale 

fiscal 

in 

The  Netherlands  has taken  measures to amend 
aspects of its tax system that facilitate ATP. The 
Code  of  Conduct  Group  (Business  Taxation)(11) 
has  approved  the  amended Dutch patent box.  The 
old  system  is  subject  to  a  grandfathering  clause 
that  runs  until  June  2021.  Under 
the  new 
system(12) there will be a stronger link between the 
intellectual property (IP) that can benefit from the 
system  and  the  R&D  that  created  this  IP.  The 
effective  tax  rate  of  the  patent  box  has  been 
increased  from  5 %  to  7 %  in  2018.  While 
economic  evidence  on  the  effectiveness  of  patent 
boxes  as  a  means  to  encourage  R&D  remains 
limited, they may be used as tax competition tools. 
The rules for the trust sector will be tightened. The 
powers  of  the  supervisory  authority  for  the  trust 
sector (De Nederlandsche Bank) will be extended. 
In response to the Panama Papers the information 
position  and  the  abuse  detection  capability  of  the 

(11)  http://www.consilium.europa.eu/en/council-eu/preparatory-

bodies/code-conduct-group/ 

(12)  The Dutch innovation box regime, a beneficial intellectual 
property  regime,  currently  allows  qualifying  research  and 
development  profits  to  be  taxed  at  an  effective  tax  rate of 
5 %. The effective tax rate will be increased to 7 %. 

20 

 
                                                           
                                                           
4.2. Financial sector 

The  government  has  followed  this  advice  and 
removed  some  cyclical  components  from  the 
expenditure ceiling, namely the non-discretionary, 
cyclical changes in expenditure on unemployment 
and  social  assistance.  At  the  same  time,  interest 
expenditure  and 
impact  of  discretionary 
decisions  on  natural  gas  production  are  included. 
the 
this  would 
While 
macroeconomic  stabilisation 
the 
budgetary  framework,  this  would  also  make  the 
budget  more  sensitive  to  the  economic  cycle, 
further  stressing  the  need  for  fiscal  prudence  in 
economic good times. 

improve 
function  of 

further 

the 

Graph 4.1.1:  Average headline budget balance in different 

states of the economy 

Source: Afman and Deroose (2016); 1996-2015 average. 

While  the  Dutch  fiscal  framework  recognises 
the EU fiscal rules as the anchor to fiscal policy, 
further  efficiency  gains  could  be  made.  This 
could  be  achieved  through  further  alignment,  for 
instance  when  assessing  fiscal  sustainability  or 
operationalising 
the  medium-term  budgetary 
objective  within  the  national  context  (Vierke  and 
Masselink,  2017).  There  are  also  some  options 
available  to  improve  flexibility  in  the  framework 
while  being  careful  not  to  hinder  responsible 
budgeting; for example, the application of ‘rolling 
expenditure 
mechanisms’  with  multi-annual 
ceilings  updated  on  an  annual  basis  according  to 
predefined  drivers  (e.g.  an  update  of  macro 
conditions). 

increase in 2023, which will be the first time since 
2013. 

4.1.3 FISCAL FRAMEWORK 

of 

the 

framework 

The  Netherlands  has  a  well-established  fiscal 
framework, which has been in place since 1994. 
The main principles are embodied in a specific law 
and  the  new  government  has  reiterated  the  main 
principles 
framework.  The  main 
characteristics  of  this  multi-annual  trend-based 
fiscal 
(i) the  use  of 
include: 
macroeconomic 
derived 
independently 
assumptions;  (ii) the  use  of  inflation-adjusted(14) 
expenditure ceilings, which are predetermined and 
cover  the  government’s  entire  term  of  office; 
(iii) the use of automatic stabilisers on the revenue 
side, and (iv) a well-defined budgetary process for 
decision-making  and  the  clear  distribution  of 
responsibilities,  including  the  tasks  of  the  Bureau 
for  Economic  Policy  Analysis  (CPB)  and  the 
Council  of  State  (Advisory  Division).  The  CPB 
carries  out  the  independent  fiscal  forecast  while 
the  Council  of  State  is  tasked  with  monitoring 
compliance with numerical fiscal rules. Moreover, 
the commitment to comply with EU fiscal rules is 
embedded 
the 
legal 
Netherlands. 

framework  of 

the 

in 

increasing 

The  government  aims  at 
the 
stabilising  effect  of  its  budget.  Dutch  public 
finances have a suboptimal track record in terms of 
their  stabilisation  function.  During  booms,  very 
small  budget  surpluses  are  generated  in  general, 
which  often  leads  to  pro-cyclical  measures  in 
subsequent  recessions.  Although  this  applies  to 
more  euro  area  countries,  it  contrasts  with  the 
experience of other countries, such as Sweden and 
Denmark  (see  Graph  4.1.1)  (Afman  and  Deroose, 
2016). Last year’s report by the advisory group on 
budgetary  issues(15),  which  gives  general  advice 
the  budgetary  guidelines  before  a  new 
on 
government  term,  recommended  increasing  the 
stabilising  effect  of  the  budget.  In  the  report,  the 
group 
cyclical 
expenditure  items  such  as  unemployment  benefit 
expenditure  from 
including 
interest  expenditure  and  natural  gas  production. 

the  ceilings,  but 

recommended 

excluding 

(14)  From  2018  onwards,  expenditure  ceilings  will  be  indexed 
by  wage  and  price  developments,  not  by  the  deflator  of 
domestic demand (prijs nationale bestedingen). 

(15)  http://www.rijksbegroting.nl/beleidsevaluaties/studiegroep-

begrotingsruimte  

21 

1.91.70.2-1.1-1.8-1.0-1.6-2.7-2.4-3.7-5-4-3-2-1012SwedenDenmarkNetherlandsGermanyEuro area-12% of GDPoutput gap > 0output gap < 0 
                                                           
 
4.2. Financial sector 

insurance  and  pension  sectors,  they  amount  to 
70 %  and  184 %  of  GDP  respectively  whereas 
investment  funds  hold  assets  equivalent  to  113 % 
of GDP (Graph 4.2.1). The Dutch banking market 
has  one  of  the  highest  concentration  levels  in  the 
EU,  with  the  five  largest  banks  holding  85 %  of 
assets in 2017, compared to a euro area average of 

Table 4.1.1: 

Total public funding for R&D and innovation, 
2015-2017 

Note: GBAORD refers to government budget appropriations 
or outlays for research and development. Fiscal incentives 
exclude the innovation box. 
Source: Vennekens and Van Steen, 2017 

48 %  (ECB,  2017).  Given  the  systemic  relevance 
of  those  five  banks,  the  Dutch  Central  Bank  has 
ordered  them  to  gradually  build  up  extra  capital 
buffers  in  2016-2019.  The  government  plans  to 
continue the reprivatisation of ABN AMRO. 

4.2.  FINANCIAL SECTOR 

4.1.4 QUALITY OF PUBLIC FINANCE 

Growth-friendly  public  expenditure  increased 
slightly  in  2015-2016,  but  remains  lower  than 
that  of  other  ‘innovation  leaders’(16).  Public 
spending in growth-enhancing areas is of particular 
importance  to  unlock  investment  in  knowledge-
based  capital  and  sustain  long-term  growth  and 
the 
employment.  Public  R&D 
Netherlands  gradually  increased  to  0.9 %  of  GDP 
in 2013, close to the average of the most advanced 
EU  peers  (1 %).  Total  budget  appropriations  for 
R&D amounted to 0.72 % of GDP in 2015, below 
those  of  the  most  advanced  EU  peers.  Direct 
public  funding  for  R&D  is  projected  to  decline 
until 2020 (see Section 4.5.1). 

intensity 

in 

Public investment remains strong, but spending 
on education is increasing rather slowly. Public 
gross  fixed  capital  formation  accounted  for  3.5 % 
of  GDP  in  2016,  above  the  EU  average  of  2.9 % 
(EA  2.7 %),  but  below  that  of  other  ‘innovation 
leaders’,  notably  Sweden  (4.4 %),  Finland  (4 %) 
and  Denmark  (3.7 %).  While  the  Dutch  education 
system  provides  a  sound  basis  for  upgrading 
human capital, innovation and growth, spending on 
education is still below that of top performers such 
as  the  Nordic  countries.  In  2015,  the  Netherlands 
spent  5.4 %  of  GDP  on  education,  above  the  EU 
and  euro  area  averages  but  less  than  the  top-
performing  peer  countries  such  as  Denmark 
(7.0 %),  Sweden 
(6.4 %), 
Finland  (6.2 %)  and  the  Baltic  countries.  The 
efficiency  of  public  spending  on  education  in  the 
Netherlands  is  relatively  high,  which  is  also 
illustrated  by  the  comparatively  good  educational 
attainment (EC, 2017f). According to the coalition 
agreement,  the  government  plans  to  increase  its 
expenditure  on  growth-enhancing  areas  such  as 
R&D by EUR 600 million in 2018-2019. 

(6.5 %),  Belgium 

4.2.1. BANKING SECTOR 

The  Dutch  banking  sector  remains  one  of  the 
largest in the EU in terms of GDP and is highly 
concentrated.  Its  assets  accounted  for  around 
370 % of the country’s GDP in 2017 (compared to 
530 % in 2007) (DNB, 2017b). Assets in the total 
financial  system  are  close  to  eight times  the  GDP 
at  the  end  of  2016.  As  for  the  assets  of  the 

(16)  As  defined  in  the  European  Innovation  Scoreboard: 

http://ec.europa.eu/growth/industry/innovation/facts-
figures/scoreboards_en 

22 

201520162017PublicfundingtoR&D(GBAORD), in EUR million4880.75022.14887.3PublicfundingtoInnovation(notR&D), in EUR million241.9324.0281.7FiscalincentivesforR&Dandinnovation, in EUR million1009.81153.81215.8TotalfinancialsupportforR&Dand innovation, in EUR million6132.46499.86384.7Expenditure on R&D, as % GDP0.720.720.69Expenditureoninnovation,notR&D, as % GDP0.040.050.04FiscalincentivesforR&Dandinnovation, as % GDP0.150.170.17TotalsupportforR&Dandinnovation, as % GDP0.910.930.90 
                                                           
 
 
 
4.2. Financial sector 

rise 

funding  costs  could 

The  share  of  wholesale  funding  in  the  banking 
sector  remains  high.  Deposits  account  for  only 
47 % of total funding which is well below the euro 
area  average  of  56 %  (August  2017).  In  a  stress 
scenario, 
sharply 
impacting profitability and the net interest income 
of Dutch banks. On a positive note, since the crisis 
funding  has  been 
the  maturity  of  market 
lengthened to prevent imminent liquidity risk. The 
deposit  share  has  also  been  growing  over  time, 
which  has  a  positive  effect  on  the  loan-to-deposit 
ratio  which  further  decreased  to  110.6 %  in 
September 2016. This ratio and the banks' reliance 
on  wholesale  funding  are  likely  to  be  further 
reduced  following  the  increasing  role  of  pension 
funds  and  insurance  companies  in  the  mortgage 
credit  market.  Their  market  share  in  mortgages 
increased from 8 % (2010) to 11 % (2016) (DNB, 
2016). 

low 

The  profitability  of  the  banking  sector  –  while 
remaining  solid  –  might  still  be  affected  by 
prolonged 
rates,  non-bank 
interest 
competitors  and  upcoming  regulatory  changes. 
Past  loans  priced  at  high  fixed  interest  rates  – 
mostly mortgages – will gradually mature over the 
next  two  decades,  and  new  loans  are  likely  to  be 
repriced  at  less  profitable  rates.  Banks'  margins 
and credit volumes on the mortgage credit market 
are  coming  under  pressure  due  to  increasing 
competition  from  pension  funds  and  insurance 
companies  –  these  were  responsible  for  20 %  of 
new  mortgages  in  2016  (DNB,  2016).  In  other 
traditional  banking  domains  – 
instance 
payments  –  banks  face  growing  competition  from 
fintech companies following further opening of the 
market  as  a result  of  the  adoption  of  the  Payment 
Services  Directive 2.  The  package  on  prudential 
rules recently endorsed by the Basel Committee on 
Banking  Supervision  –  applicable  over  the  next 
few  years  –  will  also  have  implications  for  the 
their 
Dutch 
considerable exposure to mortgages, the new rules 
mean  that they  would have  to  set  aside  additional 
capital, which is likely to reduce the sector's return 
on  equity.  Dutch  banks  are  making  additional 
efforts  to  improve  their  efficiency  by  further 
switching  from  branch  offices  to  digital  services. 
Since 2007, they have already reduced the number 
of offices across the country by more than 50 % to 
1 764 offices in 2015. 

profitability.  Given 

banks’ 

for 

Graph 4.2.1:  Size of the financial intermediaries and of the 

debt securities market 

Source: ECB, European Commission 

Financial  soundness  indicators  of  Dutch  credit 
institutions  do  not  give  rise 
to  stability 
concerns. The banks did not suffer major losses on 
their loan portfolios during the crisis, and the ratio 
of non-performing loans did not exceed 3 % in the 
last  few  years  amounting  to  just  2.2 %  in  2016. 
The  banks  maintain  adequate  financial  resilience 
and  sound  solvency  positions  with  capital 
standards  well  above  the  regulatory  requirements. 
At sector level, the capital adequacy ratio stood at 
a  solid  23.1 %  and  the  Tier  1  capital  ratio  at 
18.3 %  compared  to  the  euro  area  average  of 
17.6 %  and  15 %  respectively  in  Q2-2017  (see 
Table  4.2.1).  The  leverage  of  Dutch  lenders  – 
although lower than during the crisis – stands at a 
modest  4.7 %  at  sector  level  (DNB,  2017b), 
compared to the euro area average of 5.1 % (ECB).  

Table 4.2.1: 

Financial soundness indicators 

*ECB aggregated balance sheet: loans excl. to government 
and MFI / deposits excl. from government and MFI 
**For comparability only annual values are presented 
Source: ECB, CBD 

23 

NFCMFIsOtherInsurance and pensionGGMFIsInv.fundsInsurance (2015)Pen. Funds (2015)050100150200250300350400Debt securities; 2016Intermediary assets; 2016% of GDP(%)201020122014201520162017Q2Non-performing debt2.32.73.02.42.22.1Non-performing loans--3.42.72.42.3Non-performing loans NFC--6.35.35.35.2Non-performing loans HH--2.11.71.31.2Coverage ratio36.537.637.837.835.633.7Loan-to-deposit ratio*120.3119.2114.1113.4110.6109.3Tier 1 ratio11.812.315.416.617.918.3Capital adequacy ratio14.114.518.420.622.423.1Return on equity**7.54.13.37.07.3-Return on assets**0.30.20.20.40.4-Financial soundness indicators, all banks in Netherlands 
 
 
 
 
4.2. Financial sector 

expected  to  have  reached  94 %  of  the  2008  level. 
While  annual  house  price  growth  nationally  was 
around 6 % in 2017, it was much higher in the four 
largest  cities:  Amsterdam  recorded  house  price 
growth  of  13 %  in  2017,  Rotterdam  and  Utrecht 
11 % and The Hague 9 %. The rise in house prices 
in  the  four  largest  cities  is  not  accompanied  by 
increasing credit to households. Since 2016, credit 
growth  in  these  cities  has  been  decoupled  from 
house  price  growth,  falling  to  roughly  0 %  year-
on-year by the end of 2016, suggesting that house 
purchases  are  financed  by  savings  rather  than 
credit (DNB, 2017a). 

House  price  valuation  indicators  nationally  do 
not  point  to  overvaluation.  Long-term  values  of 
price-to-income  and  price-to-rent  ratios  are  below 
their 
long-term  averages  (see  Graph  4.2.3). 
Estimates suggest that house prices are broadly in 
line with fundamental values. Yet, for Amsterdam, 
recent  research  reveals  that  the  upsurge  in  house 
prices cannot be explained by fundamental factors 
such  as  the  (improved)  quality  of  dwellings,  the 
interest  rate,  income  growth  or  rental  prices 
(Houben, Dröes and Lamoen, 2017). 

Graph 4.2.2:  House price developments 

Source: Statistics Netherlands 

transactions 

The housing market recovery is also reflected in 
increasing transaction volumes. In Q3-2017, the 
number  of 
existing 
dwellings  increased  to  the  highest  level  recorded 
since 1995. In the same quarter, the total value of 
transactions involving existing dwellings reached a 
record  high  of  EUR 16 billion,  which  is  almost 

involving 

4.2.2. ACCESS TO FINANCE * 

to 

SME 

Finance 

The  perception  of  bank  loan  availability  has 
further  improved,  and  a  majority  of  policy 
measures  have  been  implemented  under  the 
Additional 
Action 
Plan (Aanvullend  Actieplan  Mkb-financiering). 
Equity funding and business angel funding for new 
and  growing  firms  is  satisfactory  (EC,  2017j). 
Companies  valued  access 
finance  more 
positively  while increasingly using  channels  other 
than traditional bank lending. These improvements 
reflect  in  part  the  decrease  in  loan  requests  by 
SMEs and the net decline of 13 % in bank lending 
rates. Among the main reasons for this decline are: 
increased financial buffers of SMEs due to a return 
to  sustained  profits;  increased  solvency  ratios  and 
liquidity  and  an  increase  in  leasing  as  a  financial 
instrument 
(DNB,  2016).  The  Netherlands 
Investment  Agency  (NIA)  and  the  Netherlands 
Investment  Institution  (NLII)  contribute  to  the 
improved access to finance(17). 

New forms of finance have emerged, backed by 
new  regulations  and  alternative  providers  for 
SME  finance.  The  scheme  ‘New  providers  of 
SME-finance’  (Nieuwe  aanbieders  van  MKB-
financiering)  marked  the  start  of  several  funds 
which offer alternative SME finance (e.g. FundIQ 
and DBS2 Factoring) backed by a guarantee from 
the  Ministry  of  Economic  Affairs.  A  new  scheme 
‘Co-Investment Facility for Business Angels’ (Co-
Investeringsfaciliteit  voor  Business  Angels)  was 
launched in 2017 under the existing SEED capital 
scheme. 

4.2.3. HOUSING MARKET * (18)  

The  housing  market  continues  to  recover  with 
increasing  regional  differences.  At  the  national 
level,  house  prices  are  gradually  moving  towards 
the  pre-crisis  peak  in  2008  (see  Graph  4.2.2).  At 
the end of 2017, the national house price index is 

(17)  The NIA provides a single contact centre for entrepreneurs 
seeking risk capital, guarantees, export credit insurance and 
international  finance  programmes  and  offers  additional 
venture  capital  and  improved  access  to  EU  financing  for 
start-ups  and  scale-ups,  notably  for  innovative  and  high-
risk  activities  in  transition  areas.  The  NLII  enables 
institutional  investors  to  invest  directly  in  the  Dutch 
economy  through  direct  lending  to  SMEs  as  well  as 
dedicated  funds  in  the  areas  of  climate  change,  healthcare 
and education. 

(18)  Unless  indicated  otherwise,  all  data  in  this  section  was 

retrieved from Statistics Netherlands (CBS). 

24 

7080901001101201302008200920102011201220132014201520162017*AmsterdamUtrechtRotterdamThe HagueNL (incl. the 4 cities) 
                                                           
 
4.2. Financial sector 

2017. This share has decreased by only 0.8 % over 
the past 5 years and is expected to slowly decrease 
given  that  fewer  construction  permits  have  been 
issued  for  the  social  housing  sector  than  for  the 
private  rental  and  owner-occupied  sectors.  In 
Amsterdam  and  Rotterdam, 
social  housing 
corporations  dominate  the  housing  market  with 
shares  of  42 %  and  44 %  respectively.  An 
important  share  of  the  social  dwellings  in  the 
Netherlands  is  occupied  by  'scheefhuurders'(19). 
Over  the  past  years,  the  share  of  scheefhuurders 
(18 %  of  total  social  housing  tenants)  has  slightly 
decreased  but  is  still  above  400 000  nationally 
(WoON  2015).  Because  the  social  housing  sector 
is  so  large,  its  inefficiencies  prevent  a  more 
efficient  functioning  of  the  whole  housing  market 
putting  price  pressure  on  the  remaining  market 
segments. 

and 

sector 

issued, 

The  private  rental  market  is  the  only  non-
remains 
subsidised  housing 
underdeveloped.  Its  share  in  total  dwellings  is 
advancing very slowly: only 13 % of housing units 
were  rented  out  privately  in  2016.  Looking  at  the 
this 
number  of  construction  permits 
situation is unlikely to change, as most permits are 
not  issued  for  rental  dwellings.  The  government 
has  not  announced  new  measures  to  support  the 
provision of rental dwellings. In 2016, only 16 000 
permits  were  issued  to  build  rental  dwellings, 
compared  to  35 000  permits  issued  to  future 
homeowners.  Part  of 
that 
municipalities  can  receive  a  higher  price  for  land 
used 
for  building  owner-occupied  dwellings 
instead of rental flats, which is due to the subsidies 
in  the  owner-occupied  market  (DNB,  2017a).  To 
increase  land  availability  for  the  private  rental 
market,  the  Law  on  Spatial  Planning(20)  was 
amended  in  2017,  allowing  municipalities  to  set 
aside  zones  specifically  for  building  middle 
segment  rental  dwellings.  While  the  government 
announced  its  intention  to  support  the  supply  of 
affordable  housing  on  the  private  rental  market, 
more  details  on  such  support  have  not  been 
communicated yet. 

the  problem 

is 

Social  housing  corporations 
increase  rents 
hesitantly. While rents in the private rental sector 

EUR 3 billion  above  the  previous  peak  in  Q4-
2007. 

is 

2007 

issued 

recorded 
in 

likely  to 
The  housing  market  recovery 
continue  in  the  near  future.  The  value  of 
building  permits 
for  new  dwellings 
increased  from  EUR 3.4 billion  in  2013  (26 000 
dwellings)  to  EUR 6.5 billion  in  2016  (51 000 
dwellings),  which  is  still  some  way  below  the 
(for 88 000 
in 
EUR 12 bn 
dwellings).  As 
the  majority  of 
the  past, 
dwellings  (around  60 %)  are  being  built  by 
construction  companies  and  investors.  However, 
the  absolute  number  of  permits  issued  fell  from 
7 000 to 4 000. Housing corporations and the state 
greatly  reduced  their  share  in  new  permits,  from 
23 % in 2007 (3 000 permits) to 8 % in 2016 (500 
permits).  Individuals  have  considerably  increased 
their share over time from around 19 % in 2007 to 
31 % in 2016. This is mostly due to the decreasing 
number  of  permits  of  other  builders,  as  their  total 
share was around 2 000 permits in both years. 

Graph 4.2.3:  House price valuation 

Valuation gap estimated as an average of the 
price/income, price/rent and fundamental model valuation 
gaps. Long-term values for the price-to-income and price-
to-rent ratios were computed over 1995-2016. For the model 
based valuation gaps, a Vector Error Correction model was 
estimated for a panel of 21 EU countries, using a system of 
five fundamental variable:; the relative house price, total 
population, real housing investment, real disposable income 
per capita and real long-term interest rate. 
Source: European Commission 

The strong presence of the social housing sector 
may increase the pressure on house prices. The 
social housing sector is one of the largest in the EU 
with  a  29 %  share  of  total  dwellings  nationally  in 

(19)  Scheefhuurders  (literally  translated  ‘skew  tenants’)  are 
those  tenants  who  earn  above  the  income  threshold  for 
social  housing,  but  occupy  social  housing  because  they 
were once eligible for it. 

(20)  https://zoek.officielebekendmakingen.nl/stb-2017-172.html  

25 

-40-30-20-1001020309698000204060810121416Model-based valuations gapPrice-to-income vs. hist. avg.Price-to-rent vs. hist. avg. 
 
                                                           
increased  by  2.3 %,  rents  in  the  social  sector 
increased by only 1.1 % in 2017. This is less than 
what  corporations  are  legally  allowed  to  increase 
rents by. According to the 'rental price method'(21), 
housing corporations could have increased rents by 
1.3 % in total in 2017, with maximum increases of 
2.8 %  for  lower-income  tenants  (with  a  yearly 
income  of  up  to  EUR  40 349)  and  4.3 %  for 
higher-income tenants. Data from 2016 shows that 
only 24 % of high-income households received the 
maximum  rent  increase.  Excluding  rent  increases 
due to new rental agreements, existing rents in the 
social  housing  sector  actually  increased  by  only 
0.6 %  in  total  in  2017  (CBS,  2016).  This  implies 
that  half  of  the  rent  increase  was  borne  by  new 
tenants,  which 
low-income 
households  because  housing  corporations  have  to 
allocate  at  least  80 %  of  dwellings  to  this  target 
group.  

typically 

are 

High-income  households  stay  in  social  housing. 
Recent  survey  data  shows 
that  high-income 
households have little financial incentives to move 
out of their social housing: 84 % of tenants with an 
income above EUR 40 349 state that rent increases 
did  not  influence  their  decision  to  move  out  of 
social  housing  (ING,  2017).  Most  scheefhuurders 
are  more  than  65  years old  (ING,  2017)  and  their 
potential  rent  increase  is  limited  by  law  (BZK, 
2017).  

Social  housing  corporations  face  a  trade-off 
when  increasing  rents.  On  the  one  hand,  it  is 
profitable  for  them  to  increase  rents  and  with  it 
their  revenue.  On  the  other  hand,  if  they  increase 
rents  too  much,  they  run  the  risk  of  seeing  their 
most  profitable  tenants  (those  with  high  incomes) 
leave.  Once  those  dwellings  are  vacant,  the 
majority of those must be allocated to low-income 
households again. Swapping a high-income tenant 
for a low-income one implies that the corporation 
will  get  less  revenue  for  the  same  dwelling.  A 
recent 
third  of 
corporations  do  not  plan  on  carrying  out  income-
dependent rent increases (RIGO, 2016). 

that  one 

showed 

survey 

(21)  This method (huursombenadering) has been in place since 
1 January 2017.  It  limits  the  total  amount  by  which  social 
housing  rents  can  be  increased.  The  idea  is  to  limit  the 
differences  between  rents  in  social  housing;  however,  it 
hinders the faster adjustment of rents for scheefhuurders. 

4.2. Financial sector 

4.2.4. PRIVATE DEBT * 

split 

between 

households 

Private  debt  continues  to  remain  high  in  the 
Netherlands. It stood at 221.5 % of GPD in 2016, 
(mainly 
evenly 
mortgages)  and  non-financial  corporations (NFC). 
Over the past 20 years, the NFC debt-to-GDP has 
roughly stayed stable, whereas household debt has 
increased considerably from 63 % of GDP in 1995 
to  118 %  of  GDP  in  2009  during  the  house  price 
peak,  before  falling  to  108 %  of  GDP  again  (see 
Graph  4.2.4).  Both  household  and  NFC  debt 
level  suggested  by 
the 
considerably  exceed 
prudential 
suggested  by 
considerations, 
Commission  calculations(22).  Note,  however,  that 
corporate  debt  is  mostly  driven  by  multinational 
operations  and  the  prevalence  of  cross-border 
intra-company  loans,  whereas  the  indebtedness  of 
the  remaining  resident  NFCs  is  in  line  with 
prudential levels. 

as 

Household  debt  consists  mainly  of  mortgage 
loans  and  has  been  identified  as  an  important 
vulnerability  by  the  European  Systemic  Risk 
Board (ESRB, 2016). The high level of mortgage 
debt is driven by strong distortions in the housing 
market:  the  generous  tax  treatment  of  owner-
occupied  housing, 
regulation 
favouring high LTV ratios and interest-only loans, 
the inefficient and subsidised social housing sector 
and  underdeveloped  private  rental  market.  While 
tax  relief  on  mortgage 
is 
gradually being reduced (see discussion below), it 
will still be the highest in the EU. 

interest  payments 

legacy  of 

the 

Nominal household debt is rising. Following the 
burst  of  the  housing  bubble,  nominal  household 
debt  peaked  at  EUR 758 billion  in  2012.  After  a 
small dip in the following two years, nominal debt 
stood  at  the  previous  peak  level  again  in  2016. 
However,  the  household  debt-to-GDP  ratio  has 
been decreasing since the 2012 peak, due to rising 
nominal  GDP.  While 
the  government  has 
implemented  measures  in  the  past  –  in  particular 
the MID reduction, compulsory repayment in order 
to  be  eligible  for  the  MID  and  loan-to-value  and 
loan-to-income  limits  –  these  do  not  tackle  the 
high level of debt directly and may only impact the 
debt level in the long run.  

(22)  Prudential  thresholds  represent  the  debt  threshold  beyond 
which 
is  high, 
the  probability  of  a  banking  crisis 
minimising the probability of missed crisis and that of false 
alerts. See also EC (2017h). 

26 

 
                                                           
                                                           
4.2. Financial sector 

from 2020 onwards, reaching 37 % in 2023. While 
this is a considerable increase in MID reduction, a 
rate of 37 % would still be the highest in the EU. 
this  reduction  will  only  affect 
In  addition, 
taxpayers  in  the  top  tax  bracket;  the  measure  will 
not  affect  those  in  the  lowest  tax  brackets(25).  A 
strong subsidy on debt creation therefore remains. 
Recent quasi-experimental research has questioned 
the justification of mortgage interest deduction and 
has  shown  that  MID  induces  households  to 
become  more  indebted  with  higher  MID  regimes 
(Gruber, 
and  Kleven,  2017).  The 
government has also decided to phase out – over a 
period of 30 years starting in 2019 – the so-called 
Hillen Act and gradually lower the imputed rent by 
0.15 pp per year from the current 0.75 % to 0.6 % 
from  2020  onwards.  Based  on  new  rules,  the  tax 
on the notional rental value will have to be paid on 
the  owner-occupied  property 
the 
mortgage  has  been  almost  or  fully  repaid.  So  far, 
the  Hillen  Act  allowed  in  such  cases  that  the  tax 
liability of the notional rental value be reduced to 
zero. 

for  which 

Jensen 

Graph 4.2.5:  Debt of large non-financial corporations 

Source: Statistics Netherlands 

be 

attributed 

The  debt  of  non-financial  corporations  can 
largely 
to  multinational 
enterprises (MNEs). The MNE share of total NFC 
debt  increased  considerably  over  the  years  from 
52 %  of  GDP  in  2007  to  90 %  in  2015,  which 

(25)  The coalition agreement envisages the introduction of a tax 

system with two instead of four tax brackets. 

Graph 4.2.4:  Private debt 

Source: Statistics Netherlands 

The  number  of  underwater  mortgages  has 
decreased(23).  The  most  recent  loan  level  data 
from the Dutch central bank shows that the number 
of underwater mortgages has decreased from 36 % 
of total loans in Q1-2013 to 14 % in the Q2-2017. 
Much  of  this  is  due  to  the  recovering  housing 
market.  Those  most  affected  are  aged  30  to  40. 
This  group  consists  mainly  of  first-time  buyers 
who  bought  their  homes  in  the  years  immediately 
before  the  housing  market  crisis.  It  is  also  the 
group  most  exposed  to  changes  in  market  prices 
given the high loan-to-value ratio. 

The  loan-to-value  (LTV)  and  loan-to-income 
(LTI)  ratios  remain  high.  The  maximum  LTV 
ratio  for  new  mortgages  has  gradually  been 
lowered  to  reach  100 %  by  2018.  While  the  total 
LTV  ratio  for  outstanding  debt  was  at  78 %  in 
2015,  the  30-  to  40-year-old  homeowners  most 
affected  by  underwater  mortgages  had  an  average 
LTV  ratio  of  110 %  in  2015.  The  LTI ratio(24)  of 
that  group  was  at  5.3,  whereas  the  total  LTI  ratio 
stood at 4.2 in 2015. 

The  government  announced  a  faster  reduction 
of mortgage interest tax deductibility. Instead of 
reducing  the  MID  by  0.5 pp  per  year  until  it 
reaches 38 % in 2041, it will be reduced by 3 pps 

(23)  A  mortgage  is  said  to  be  underwater  when  the  balance  of 
the  mortgage  loan  exceeds  the  value  of  the  underlying 
property. 

(24)  Taken  from  Statistics  Netherlands  and  defined  as  average 

mortgage debt to average disposable income. 

27 

0204060801001201400200400600800100012001400160018009597990103050709111315% GDPBillion EURNFC (lhs)HH & NPISH (lhs)NFC (rhs)HH & NPISH (rhs)02040608010012014016000010203040506070809101112131415% of GDPOther NFCs (balance sheet < EUR 40 mln)Foreign large corporateNL large corporateMNEs 
 
                                                           
 
                                                           
4.2. Financial sector 

regulatory 

equals 69 % of the total NFC debt stock(26). Part of 
the  reason  for  this  high  MNE  debt  is  the  taxation 
and 
framework,  which  provides 
incentives  for  large  companies  to  settle  in  the 
Netherlands  and  exploit  regulatory  differences 
across  borders.  Several  regulatory  features  attract 
MNEs  to  the  Netherlands  (e.g.  the  patent  box 
regime,  the  absence  of  withholding  taxes  on 
royalties  and  interest  or  the  common  practice  of 
granting  advance  tax  rulings),  although  not  all  of 
them are directly linked to debt. 

Graph 4.2.6:  Intra-group-to-total debt 

substantially  with  the  large  increase  in  MNE  debt 
(see  Graph  4.2.7).  This  can  also  be  linked  to  a 
Court  of  Justice  of  the  European  Union  (CJEU) 
ruling from 2003 on the deductibility of interest on 
loans  for  foreign  participations  (Jansen  and 
Ligthart, 2014). The CJEU(27) decided that, similar 
to domestic participations, interest on loans for the 
acquisition of foreign participations should also be 
tax  deductible  in  the  Netherlands.  As  NFC  intra-
group debt is most likely used for tax optimisation 
purposes,  it  does  not  point  to  an  immediate 
macroeconomic risk. 

Graph 4.2.7:  Interest paid and received by multinationals 

Source: Statistics Netherlands 

Foreign NFCs account for at least 43 % of total 
NFC  debt,  which  is  mostly  intra-group.  The 
large  share  of  foreign  NFC  debt  could  imply  the 
use  of  debt  for  fiscal  reasons.  This  seems  to  be 
even  more  plausible  given  that  60 %  of  foreign 
large  NFC  debt  was  intra-group,  so  loans  are 
provided  across  the  group,  mostly  with  interest 
charged (see Graph 4.2.6). The intra-group debt of 
domestic  NFCs  without  international  subsidiaries 
is indeed much lower (below 5 % in 2015). Intra-
group  debt  shifting  is  typically  used  by  MNEs  to 
lower  their  tax  burden  via  increased  interest 
payments  to  other  group  companies  outside  the 
Netherlands.  The  data  on  interest  paid  by  MNEs 
confirm  this  finding,  as  the  gap  between  the 
interest  paid  and  received  by  MNEs  has  widened 

Source: Statistics Netherlands 

4.2.5. PENSIONS * 

The  three-pillar  pension  system  scores  well  on 
pension  adequacy  and  fiscal  sustainability.  The 
first  pillar  is  the  pay-as-you-go  public  pension, 
funded by a specific premium and general income 
taxes.  To  ensure  its  fiscal  sustainability,  the 
statutory  retirement  age  has  been  linked  to  life 
expectancy (see Section 4.1)(28). The second pillar 
is  organised  at  the  industry  level  and  capital 
funded. At the request of the representative social 
partners  in  the  industry participation  can  be  made 
compulsory,  and  pension  contributions  and 
revenues  depend  on  work  experience.  Although 
there  is  a  shift  towards  defined  contribution 

(26)  The  data  in  this  paragraph  have  been  taken  from  the 
Statistics  Netherlands  website  and  are  based  on  corporate 
financial  accounts.  They  do  not  fully  match  NFC  data 
provided  by  Eurostat,  which  are  based  on  national 
accounts. 

(27)  Bosal, case C-168/01. 
(28)  Although recently some discussion has risen about the link 
to  life  expectancy,  see  De  Beer,  van  Dalen  and  Henkens 
(2017).  

28 

01020304050607000010203040506070809101112131415% to total group debtForeign MNEForeign large corporatesNL MNENL large corporates0246810121416182000010203040506070809101112131415% of GVAreceivedpaid 
 
                                                           
 
                                                           
schemes(29), some 90 % of workers still fall under 
a  defined  benefit  schemes.  The  third  pillar  is 
formed  by 
individual  pension  products,  and 
basically  only  consists  of  a  tax  exemption  for 
premiums  paid  on  such  products.  The  first  and 
second pillar aim to provide a replacement rate at 
75 % of the average salary at the age of retirement. 

structural 

labour  market 

The  second  pillar  has  drawbacks  in  terms  of 
coverage,  transparency  and  flexibility  over  the 
life  cycle.  It  was  developed  in  the  mid-twentieth 
century  and  is  not  well  equipped  to  deal  with  the 
trends 
current 
(individualisation, flexibility, job mobility between 
to 
sectors,  ageing).  The  government  aims 
modernise 
the 
the  pension  system  following 
contours  outlined  by  the  Social  and  Economic 
Council  (SER).  The  government  wishes  to  move, 
together with the social partners, towards a system 
that addresses the vulnerabilities while maintaining 
its  strengths:  compulsory  participation,  collective 
implementation,  risk  sharing  and  supportive  tax 
rules(30). 

The  second  pension  pillar  is  pro-cyclical  and 
expensive  when  interest  rates  are  low.  The  past 
few  years  have  exposed  the  vulnerabilities  of  the 
second  pension  pillar.  Low  interest  rates  but  also 
population  ageing  and  the  sharp  increase  in  life 
expectancy  have  created  a  situation  of  ‘under-
coverage’  in  many  pension  funds.  To  keep  the 
system  sustainable,  indexation  has  been  foregone 
in  recent  years,  and  pension  contributions  have 
been  increased  to  around  EUR 30 billion,  almost 
5 % of GDP. Nowadays, salaried employees work 
roughly  one  day a  week  for their  pension. This  is 
an 
the  compulsory 
payment  wedge,  which  is  comparatively  high  in 
(see  Graph  4.2.8;  pension 
the  Netherlands 

important  contributor 

to 

schemes 

institutions 

(29)  While  rendering  the  pension  system  less  foreseeable  for 
contributors compared to defined-benefit schemes, defined-
contribution  systems  imply  greater  transparency  and  limit 
the  risk  of  significant  transfers  between  generations.  In 
addition,  defined-contribution 
are  usually 
actuarially fair. 
(30)  Current  policy 

the  possibility  for 
consumption  smoothening  over  a  person’s  lifetime.  The 
pressure on disposable income for those in the early years 
of working life comes from two sides: the housing market 
where  households  are  pushed  into  buying  a  house,  taking 
up  a  large  mortgage  and  repaying  on  the  principal,  and 
from  high  pension  contributions.  This  contrasts  with  the 
perspective  at  old age, where households  on  average have 
large  pension  incomes  and  little  or  no  housing  or  child-
related expenses. 

limit 

4.2. Financial sector 

contributions explain roughly 70 % of the non-tax 
compulsory  payment  wedge).  Total  pension  fund 
assets  increased  from  EUR 778.5 billion  in  2009 
(127 %  of  GDP)  to  EUR 1 378 billion  in  2016 
(almost  200 %  of  GDP).  However,  overall  this  is 
still insufficient to cover the increase in liabilities. 
The  increase  in  pension  savings  has  weakened 
private  consumption  growth  and  increased  the 
domestic  savings  surplus.  As 
lower  pension 
payouts  are  a  last  resort,  the  balance  of  risks  is 
geared  towards  the  active  and  young  generations. 
In  other  words,  ad  hoc  adjustments  to  indexation 
and pension contributions have led to pro-cyclical 
macroeconomic  shocks  and  could  give  rise  to 
intergenerational transfers at the expense of current 
they  pay  higher 
younger  generations, 
lower  guaranteed 
premiums  for  a  relatively 
pension. 

i.e. 

Graph 4.2.8:  Compulsory payment wedge (2016) 

Source: OECD (2017). Non-tax compulsory payments 
(NTCPs) as an additional burden on labour income in 2016. 
http://www.oecd.org/tax/tax-policy/Non-tax-compuslory-
payments.pdf. The chart gives the average compulsory 
payment wedge and average tax wedge for single 
taxpayers without children at average earnings, 2016. 

Pension  funds  shape  the  country’s  financial 
architecture.  Pension  funds  draw  on  domestic 
household  savings  and 
largely 
overseas to benefit from global diversification and 
respect 
its 
the 
participants(31).  While 
for 
portfolio  efficiency,  questions  could  be  asked 

of 
is  beneficial 

objective 

fiduciary 

invest 

them 

this 

(31)  Pension  funds  have  allocated  17 %  of  their  assets  in  the 
Netherlands (Q3-2017) and have a smaller home bias than 
other institutional investors.  

29 

0102030405060IEUKCAUSJPDKOECDESLUEEELPLPTLVSISECZSKFIATITFRHUNLDEBEaverage tax wedgeaverage compulsory payment wedge 
                                                           
 
                                                           
4.2. Financial sector 

about the impact on the domestic finance base as it 
may  influence  the  relatively  low  deposit-to-total-
funding ratio of  banks (see Section 4.2.1). With a 
high compulsory payment wedge, households have 
difficulties  putting  money  aside  to  buy  a  house, 
and  by  consequence,  need  to  take  up  mortgage 
debt.  Banks  on  the  other  hand  are  financing 
mortgages  on  a  large  scale  with  money  lent  on 
international  capital  markets.  This  creates  a 
dependence on wholesale finance and increases the 
vulnerability  to  financial  turmoil.  Pension  funds 
have  only  recently  started  to  invest  more  in  the 
long side of the Dutch mortgage market. 

initiatives 

While there is general consensus on the need to 
reform  the  pension  system,  concrete  steps  are 
yet  to  be  taken.  In  recent  years,  a  number  of 
incremental policy measures were taken such as an 
increase in the retirement age, a change in the tax 
system  accompanying  this  increase  and  measures 
in the field of financial supervision, allowing for a 
longer  recovery  period  for  pension  funds  with 
under-coverage.  There  are  also 
to 
increase  pension  fund  financing  in  the  domestic 
economy,  which  would  benefit  economic  growth 
in  the  Netherlands.  However,  few  concrete  steps 
have  been  taken  to  address  the  pro-cyclicality  of 
the pension system. The strict promise in particular 
to  deliver  a  predefined  nominal  benefit  level 
carries  a  high  cost;  this  is  ultimately  paid  by  the 
pension fund participants themselves and increases 
the  amplitude  of  the  economic  cycle.  The  reform 
directions  currently  being  discussed  by  the  social 
partners have promising potential: they could lead 
to  lower  and  more  stable  pension  contributions, 
while respecting pension adequacy.  

30 

 
4.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

Section  1).  Low  wage  growth  may  be  further 
explained  by  the  remaining  labour  market  slack, 
i.e.  a  measure  of  underutilisation  of 
labour 
resources(32), estimated at 8.6% in Q3-2017. 

Graph 4.3.2:  Relationship between unemployment and 

nominal wage growth (2001-2016) 

4.3.1.  LABOUR MARKET* 

recovery  gained 

Labour  market 
further 
momentum  in  2017.  In  the  first  half  of  the  year, 
more  than  9  million  people were  employed  in  the 
Netherlands,  which  is  above  the  pre-crisis  level. 
With  77.9 %  in  2017  the  Netherlands  has  one  of 
the highest employment rates in Europe. However, 
the  employment  rate  was  still  slightly  below  the 
pre-crisis  level  due  to  an  increase  in  the  working 
age  population.  The  positive 
labour  market 
developments  also  include  a  sustained  decline  in 
the  unemployment  rate,  which  fell  to  4.9 %  in 
2017. This decline was also reflected in the youth 
and long-term unemployment rates. 

Graph 4.3.1:  Main labour market developments 

Source: European Commission (Eurostat) 

In  addition  to  macro-economic  developments 
and  labour  market  slack,  increased  labour 
market  segmentation  may  also  partly  explain 
low  wage  growth.  The  proportion  of 
the 
temporary employees rose between 2006 and 2014 
from  16 %  to  17.3 %.  The  estimated  aggregate 
wage growth was 11 % lower due to this increase 
temporary 
in 
employees  in  general  receive  a  lower  wage  than 
permanent employees, (33). 

temporary  employment, 

since 

(32)  Labour  market  slack  is  defined  as  the  sum  of  the  persons 
available to work but not seeking work; those seeking work 
but not immediately available; and all involuntary part-time 
employed (see also EC, 2017g).  

(33)  Based on a shift-share analysis of the impact of the change 
in  structure  of  jobs  on  wage  growth  between  2006  and 
2014, using the Structure of Earnings Statistics. 

Source: European Commission (Eurostat) 

low  unemployment  and  high 

Despite 
job 
vacancy  rates,  wage  growth  remains  relatively 
moderate.  Growth  of  nominal  compensation  per 
employee  remained  subdued  at  1.2 %  in  2016. 
While  accelerating  to  1.7 %  in  2017,  it  remains 
below the level which could be expected based on 
the low level of unemployment (See Graph  4.3.2) 
and  based  on  other  fundamental  drivers  such  as 
inflation  and  productivity  (see  Graph  1.5  in 

31 

7273747576777879800246810121401020304050607080910111213141516%%Employment rate 20-64Unemployment rate 15-74 (lhs)Long-term unemployment rate 15-74 (lhs)Youth unemployment rate 15-24 (lhs)NEET rate 15-24 (lhs)2001200220032004200520062007200820092010201120122013201420152016012345345678Nominal wage growth (%)Unemployment rate (%) 
 
 
 
                                                           
4.3. Labour market, education and social policies 

Box 4.3.1: Monitoring performance in light of the European Pillar of Social Rights 

The  European  Pillar  of  Social  Rights,  proclaimed  on  17  November  2017  by  the  European  Parliament,  the 
Council and the European Commission, sets out 20 key principles and rights to benefit citizens in the EU. In 
light  of  the  legacy  of  the  crisis  and  changes  in  our  societies  driven  by  population  ageing,  technological 
change  and  new  ways  of  working,  the  Pillar  serves  as  a  compass  for  a  renewed  process  of  convergence 
towards better working and living conditions. 

The  Netherlands  performs  relatively  well  on 
the  indicators  of  the  Social  Scoreboard (34) 
supporting  the  European  Pillar  of  Social 
Rights.  The  country  displays  an  overall  good 
labour market and social situation. Per capita real 
gross disposable income of households increased 
in 2016 and is almost at pre-crisis levels. Income 
inequality is relatively low, although it increased 
slightly in 2016. Regarding equal opportunities in 
the  labour  market  and  fair  working  conditions, 
the issue of labour market segmentation deserves 
continuing attention. 

in 

imbalance 

The  gender 
labour  market 
participation  has  been  very  slow  to  adjust 
under  the  current  incentives  of  the  work-life 
balance policies. The gender gap in employment 
leads  to  an  important  gender  gap  in  old-age 
pensions  that  raises  a  point  of  concern  with 
respect  to  equal  opportunities  in  the  labour 
market.  The  high  part-time  employment  rate  of 
women  is  a  result  of  a  combination  of  factors. 
One  of  them  is  the  system  of  family-related 
leaves (paternity and parental leave), which does 
not support a gender balanced take-up of leaves, 
leading 
to  an  unequal  sharing  of  caring 
responsibilities between mothers and fathers and 
discourages  first  earners,  often  men,  from  using 
them.  

The  rate  of  youth  not  in  employment,  education  or  training  is  comparatively  low.  In  2016  the 
Netherlands continued policy initiatives to address youth unemployment. The government implements the so 
called  'City  Deal  Aanpak  Jeugdwerkloosheid',  a  policy  programme  and  partnership  between  7  cities  and 
schools (secondary and tertiary), researchers, employers and intermediaries. The focus is to identify solutions 
for  (migrant) youth  in  disadvantaged  neighbourhoods to  improve  their  preparation  for  a  better  transition  to 
work  by  focusing  on  career  guidance  at  their  school.  Within  the  programme  'Matchen  op  Werk'  the  Dutch 
government invests together with municipalities, Public Employment Services (UWV) and their partners in 
sustainable  work  opportunities  for youth.  Together  they aim  at  improving  services  for  employers  -  the  key 
partners in tackling youth unemployment - and improving access to job openings. 

34 The Social Scoreboard includes 14 headline indicators, of which 12 are currently used to compare Member States performance. 
The indicators "participants in active labour market policies per 100 persons wanting to work" and "compensation of employees 
per hour worked (in EUR)" are not used due to technical concerns by Member States. Possible alternatives will be discussed in 
the relevant Committees. Abbreviation: GDHI – gross disposable household income. 

32 

Early leavers from education and training (% of population aged 18-24)On averageGender employment gapOn averageIncome quintile ratio (S80/S20)Better than averageAt risk of poverty or social exclusion (in %)Best performers  Youth NEET (% of total population aged 15-24)Best performers  Employment rate (% population aged 20-64)Best performers  Unemployment rate (% population aged 15-74)Better than averageGDHI per capita growth On averageImpact of social transfers (other than pensions) on poverty reductionGood but to monitorChildren aged less than 3 years in formal childcareBetter than averageSelf-reported unmet need for medical care Better than averageIndividuals' level of digital skillsBest performers  Equal opportunities and access to the labour marketDynamic labour markets and fair working conditionsSocial protection and inclusionNETHERLANDSMembersStates'areclassifiedaccordingtoastatisticalmethodologyagreedwiththeEMCOandSPCCommittees.ThemethodologylooksjointlyatlevelsandchangesoftheindicatorsincomparisonwiththerespectiveEUaverages,andclassifiesMemberStatesinsevencategories(from"bestperformers"to"criticalsituations").Forinstance,acountrycanbeflaggedas"betterthanaverage"iftheleveloftheindicatorisclosetoEUaverage,butitisimprovingfast.Formethodologicaldetails,pleaseconsultthedraftJoint Employment Report 2018, COM (2017) 674 final. NEET:neitherinemploymentnorineducationortraining;GDHI:grossdisposablehousehold income. 
                                                           
in  exchange 

While  in  the  past  years  trade  unions  have 
foregone  wage  demands 
for 
employment  protection,  wage  demands  are  far 
higher  for  2018.  The  Netherlands  Trade  Union 
Confederation  (FNV),  the  Dutch  largest  trade 
union, has called for a minimum wage increase of 
3.5 % in nominal terms in 2018, with up to 5 % for 
low earners. This contrasts with the wage demands 
in  the  past  years  which  were  more  moderate  and 
when 
to  preserve 
employment  and  reduce  the  share  of  temporary 
employment.  The  actual  outcome  remains  to  be 
seen.  

the  main  objective  was 

Female labour market participation  

Despite  the  labour  market  performing  well, 
there  is  still  untapped  labour  potential.  While 
the employment rate of women is high (71.6 % in 
2016),  almost  three  out  of  four  women  (74.8 %) 
work  in  part-time.  As  a  result,  the  full-time 
equivalent  employment  rate  of  women  is  much 
lower  (48.9 %)  and  the  gender  gap  in  full-time 
equivalents  is  one  of  the  highest  in  the  EU  (27.2 
pps).  The  share  of  part-time  employment  rate  is 
particularly  high  among  women  with  caring 
responsibilities (see Graph 4.3.3): in 2016, 86 % of 
the  women  with  at  least  one  child  under  14  years 
worked  part-time,  while  51 %  of  women  without 
children  did.  However,  in  recent  years  the  part-
time employment rate for women with children has 
fallen  and  the  hours  worked  part-time  have 
increased,  while  there  is  no  similar  trend  visible 
for  women  without  children  (see  Graph  4.3.4). 
Having children did not have a major effect on the 
proportion  of  men  working  on  a  part-time  basis. 
However,  it  is  worth  noting  that  the  part-time 
employment  rate  for  men  is  well  above  the  EU 
average  and 
that  of  neighbouring  countries. 
Differences  in  work  intensity  result  in  a  large 
earnings gap (47.5 % in 2014) and later in life in a 
large  gender  pension  gap  later  in  life  (42.5 %  in 
2016) 

Historically speaking, part-time employment of 
women has always been high in the Netherlands 
and  may  therefore  be  slow  to  adjust.  The  high 
share of part-time employment rate is a result of a 
combination  of  multiple  factors  and  institutional 
drivers, such as the design of family-related leaves, 
as well as intermediate cost and availability of full-
time  childcare  and  after  school  care  (Portegijs  et 
al., 2008; Task Force Part-time Plus, 2010). 

Graph 4.3.3:  Share of part-time work with and without 

children (2016) 

(1) The Graph represents the share of part-time employment 
of women and men (aged 30-45) dependent on the 
presence of children under the age of 14 in the household. 
Source: European Commission (Eurostat, Labour Force 
Survey) 

Graph 4.3.4:  Female labour market participation (with 

child) 

Source: European Commission (Eurostat) 

These  may  affect  the  (unequal)  sharing  of  caring 
responsibilities  between  men  and  women.  At  the 
same time, research suggests that the way in which 
work-life  balance  policies  are  designed  and  the 
incentives  that  they  induce  could  have  an  impact 
on 
the 
employment  outcomes  of  women  (OECD,  2017d; 
Eurofound,  2017b).  In  particular,  the  fact  that 
parental  leave  is  often  unpaid  discourages  main 

the  choices  made  and 

therefore  on 

33 

0102030405060708090WomenMenWomenMenWomenMenWomenMenNLDEATBEChildNo child8586878889909192181920212223050607080910111213141516Share part-time workHours workedHours worked (lhs)Share part-time (rhs) 
 
 
 
 
4.3. Labour market, education and social policies 

immigrants from ‘non-Western countries’ (54.2 %) 
largely  because  of  much  higher  unemployment. 
Moreover,  even  after  adjusting  for  skills  (literacy 
score),  age,  gender  and  education  level  (OECD, 
2014,  Table  A.7),  native-born  children  of  two 
immigrant parents had a lower probability of being 
employed  (19.4 pps)  in  2012  than  native-born 
children of two native-born parents. 

is  scope 

to  strengthen 

There 
integration 
programmes.  The  efficiency  of  the  (2012-2014) 
reform of the integration policy for immigrants can 
be  questioned.  It  obliges  them  to  learn  Dutch  and 
take a civic integration test, while putting most of 
the  responsibilities  of  integration  —  in  particular 
language learning (including the financial burden) 
—  on  immigrants  (see  Algemene  Rekenkamer, 
2017).  The  low  success  rate  in  language  tests  and 
the quality of integration courses are also issues of 
concern. The new coalition plans to increase public 
funding on language courses (‘from day 1’) while 
increasing 
language  proficiency 
required.  While  the  current  re-evaluation  of  the 
integration  policy  seems  necessary,  it  is  unclear 
whether  it will  sufficiently  address  the  integration 
needs of newcomers on the labour market. 

level  of 

the 

Segmentation* 

employees 

Flexible  employment  constitutes  a  relatively 
large  and  growing  share  of  the  labour  market. 
Both  temporary  employment  as  well  as  self-
increased 
employment  without 
considerably in the last 10 years in the Netherlands 
(see Graph 4.3.5). Changes in industrial production 
—  with  employment  shifting  towards  sectors  that 
are  more  prone  to  self-employment  or  temporary 
employment — only partly explain the recent shift 
towards  more  flexible  employment.  This  situation 
is  also  affected  by  distinct  institutional  factors, 
including  favourable  tax  treatment  (for  the  self-
employed  without  employees)  and  differences  in 
social  security 
large 
differences  in  applicable  labour  regulations  and 
labour  protection 
for  permanent  and 
temporary contracts (EC, 2017b, p. 30; EC, 2016a, 
pp. 46-49). 

legislation  as  well  as 

rules 

The  recent  upsurge  in  job  creation  is  mainly 
down  to  temporary  employment  and  self-
employment.  This 
further 
increase  in  the  flexibility  of  the  Dutch  labour 
market. Despite the 2015 reforms (see below), the 

trend  suggests  a 

earners  (often  men)  from  using  it;  it  therefore 
strengthens  the  role  of  women  as  primary  carers 
for their children. The fact that only 2 days of paid 
paternity  leave  are  offered  to  men  may  also  be 
acting as a brake on the equal sharing of childcare 
the  new 
responsibilities. 
this 
government 
increasing 
paternity leave from 2 to 5 days in 2019. This is to 
be  extended  as  of  1 July 2020  by  5  weeks  of 
additional  leave,  to  be  taken  within  the  first  6 
months of the birth. 

In 
agreement 

respect, 
proposes 

Labour market integration of migrants 

lower 

in  2016  and 

While the overall participation rate is very high, 
people  with  a  migrant  background  are  lagging 
behind  in  employment.  The  situation  of  those 
born  outside  the  EU  remains  a  key  issue  in 
particular.  The  employment  rate  of  non-EU-born 
is 
migrants  stood  at  58.9 % 
than  for 
20.6 percentage  points  (pps) 
natives,  a  slight  increase  compared  to  2015 
(20.2 pps).  The  gap  is  larger  for  non-EU-born 
women  (23.4 pps  lower  than  native-born  women) 
due to very high inactivity rates among them. Non-
EU-born  migrants 
higher 
also 
unemployment rate (12.1 %) than those born in the 
Netherlands  (5.4 %),  in  particular  those  aged  15-
24.  Differences  in  labour  market  outcomes  for 
non-EU-born  migrants  can  be  explained  only 
partially  by  differences  in  age  and  educational 
achievement. This suggests that other factors such 
as  lack  of  recognition  of  qualifications,  language 
skills, 
or 
professional 
discrimination may play a role (EC, 2017b). 

networks 

limited 

face 

a 

The  labour  market  outcomes  of  the  ‘second-
generation’  (i.e.  native-born  residents  with  a 
migrant  background)  are  also  unfavourable, 
even though they were born and educated in the 
Netherlands.  Looking  at  data  recently  published 
by  Statistics  Netherlands(35),  the  employment  rate 
of native-born residents with a migrant background 
from  ‘non-Western’  countries(36)  aged  15-74  was 
around 60.1 % in 2016, well below the average for 
those  without  a  migrant  background  (67.4 %) 
(CBS, 
Table  Arbeidsparticipatie). 
However,  it  was  higher  than  for  first-generation 

2017a, 

(35)  There  is  no  recent  data  on  native  born  with  a  migrant 
background  in  the  Netherlands  from  the  European  Labour 
Force Survey. 

(36)  At  least  one  parent  born  in  Africa,  Asia  (excl.  Japan  or 

Indonesia) or Latin America. 

34 

 
                                                           
4.3. Labour market, education and social policies 

proportion  of  temporary  employees  (aged  20-64) 
continued to increase, reaching 18.4 % in Q3-2017 
(EU  average:  13.7 %).  The  proportion  of  self-
employed without employees in total employment 
was 12.1 % in Q3-2017 (EU average: 9.9 %). The 
group  of  self-employed  without  employees  is 
highly  diverse,  and  self-employment  without 
employees  has  increased  across  all  sectors  (see 
Graph 4.3.6) and age groups. 

Graph 4.3.5:  Employment (20-64 year) by type (y-o-y 

changes) 

to 

exposed 
temporary  contracts:  44.1 %  of 
employees  under  30  are  on  temporary  contracts 
(EU  average:  32.2 %).  This 
is  a  significant 
increase  compared  to  2005,  when  only  33.0 %  of 
temporary 
employees  under  30  worked  on 
contracts.  The  high  prevalence  of 
temporary 
employment  negatively  affects  the  job  duration 
and career prospects of young people. The average 
job tenure of workers under 30 decreased from 27 
months  in  2005  to  21  months  in  2015.  Estimates 
show  that  around  half  of  this  decline  can  be 
attributed to the increase in temporary contracts for 
young  workers  (EC,  2017f).  There  are  also 
negative  implications  for  their  incomes  given  the 
significant  wage  gap  between  temporary  and 
permanent workers (see Box 4.3.2). 

Graph 4.3.6:  Self-employed by sector ( % of total 

employment in the sector) 

Source: European Commission (Eurostat, non-seasonally 
adjusted data) 

The self-employed are not obliged to be insured 
against labour-related risks such as accidents at 
work,  unemployment  and  old  age  (second 
pillar). They are only entitled to healthcare, long-
term  care,  family  benefits,  a  state  pension  (first 
pillar)  and  survivors’  benefits.  There  are  no 
sickness  benefits  (sick  pay)  for  them  during  the 
first 2 years of long-term sickness. Everyone in the 
Netherlands,  including  the  self-employed,  has 
compulsory  basic  private  health 
insurance. 
However, the majority of the self-employed (57 %) 
indicate that they would feel financially insecure if 
they  were  faced  with  a  serious  long-term  illness 
(EU average: 48 %) (Eurofound, 2017a)(37). 

in 

Around  one 
the 
Netherlands  was  employed  on  a  temporary 
contract  in  2016.  New  entrants  in  particular  are 

five  employees 

in 

(37)  See  also  the  case  study  ‘Access  to  social  protection  for 
self-employed  without  employees  in  the  Netherlands’  by 
Regioplan. 

Source: European Commission (Eurostat) 

that 

In  2015,  the  government  implemented  a  major 
reform  to  reduce  the  differences  between 
temporary  and  permanent  contracts.  This 
reform  was  discussed  in  detail  in  European 
Commission  2016a  and  European  Commission 
2017a.  Given 
the  measures  are  being 
introduced  gradually,  a  formal  evaluation  of  the 
reform  is  only  expected  in  2020.  Preliminary 
evidence  on  the  impact  of  the  changes  introduced 
under the Dutch dismissal and unemployment law 
(Wet  werk  and  zekerheid)  indicates  that  the 
changes,  including  the  decline  in  severance  pay, 
did  not  influence  the  decision  of  employers  to 
dismiss or recruit permanent employees (Heyma et 
al.,  2017).  The  transition  rates  from  temporary  to 

35 

-400-300-200-100010020009Q109Q310Q110Q311Q111Q312Q112Q313Q113Q314Q114Q315Q115Q316Q116Q317Q117Q3Thousend personsPermanent employeesTemporary employeesSelf employmentOverall0%10%20%30%40%50%ManufacturingTransportation and storageFinancial and insurance…Human health and social workWholesale and retail tradeAccommodation & foodEducationTotalAdministration and supportReal estate activitiesICTConstructionScience and techical servicesOther service activitiesArts, entertainmentAgriculture20162008 
 
                                                           
 
permanent contracts have remained fairly constant 
in the last 3 years, ranging from 11 % to 12 % per 
quarter  (see  Graph  4.3.7).  The  enforcement  of  a 
incentives  for 
mechanism  adopted 
employers  to  replace  employees  with  bogus  self-
employment  has  been  suspended  until  at  least  the 
beginning of 2018.  

to  reduce 

In  order  to  modernise  the  labour  market  and 
address  segmentation,  the  new  government 
announced  several  additional  measures,  but 
specifics  and  time  frame  for  adoption  remains 
unclear. The most important are (1) shortening of 
employer-paid sick leave from 2 years to 1 year for 
small  enterprises  (under  25  employees);  (2)  the 
introduction  of  an  additional  ground  for  dismissal 
the 
in  case  of  an  open-ended  contract;  (3) 
introduction  of  a  minimum  hourly  rate  for  self-
employed without employees to reduce bogus self-
employment.  At  the  same  time  (4)  the  total 
duration  that  a  person  can  be  employed  on  a 
temporary  contract  will  be  extended  from  two  to 
three  years (in  line  with  legislation  prior  to  2015) 
but  he/she  will  be  eligible  for  the  transition 
allowance as of the beginning of their employment 
contract  (instead  of  after  2  years  only  as 
previously). In addition, the government suggested 
reflecting  further  on  possible  differentiation  in 
contributions for unemployment insurance per type 
of contract and the qualification of self-employed. 
At  this  point,  the  time  frame  for  adoption  as  well 
as  the  possible  impact  of  these  new  measures  on 
the labour market segmentation remains unclear.  

Social dialogue is an essential feature of the so-
called  Poldermodel  in  the  Netherlands  and 
functions  overall  rather  well.  Social  partners 
were consulted on the intention and possible policy 
options  to  reform  of  the  second  pillar  pension 
system.  The  new  government  equally  intends  to 
involve  them  extensively  in  the  context  of  the 
ambitious agenda to reform the labour market. 

4.3. Labour market, education and social policies 

Graph 4.3.7:  Transition rate from temporary to permanent 

employment by quarter 

Source: European Commission (based on Statistics 
Netherlands) 

Poverty  and 
Netherlands 

social  exclusion 

in 

the 

Even  though  the  Netherlands  has  one  of  the 
lowest  rates  of  at  risk  of  poverty  or  social 
exclusion in the EU, this indicator increased by 
364 000 persons from 2008 to 2016. The poverty-
reducing  impact  of  social  transfers  (excluding 
pensions) has slowed considerably in the last year 
— although it remains at a decent level, above the 
EU  average.  Netherlands  shows  good  results  in 
adequacy  of  the  minimum  income  support  (as  a 
share  of  the  poverty  threshold)  and  the  relative 
poverty  risk  gap.  As  concerns  unemployment 
benefits,  Netherlands  performs  close  to  the  EU 
average  in  terms  of  adequacy,  although  duration 
(for  a  1-year  work  record)  is  comparatively 
low(38).  The  income  benefits  are  combined  with 
incentives  to  (re)integrate  into  the  labour  market, 
as  people  who  receive  social  assistance  are 
required  to  accept  reasonable  offers  of  work.  The 
in-work  at  risk  of  poverty  rate  in  the  Netherlands 
has  increased in 2016 by 6 pps (although  the data 
indicates  a  break  in  series)  and  reached  5.6 % 
which  is  well  below  the  EU  average  (9.5 %  in 
2015).  

(38)  According  to  the  benchmarking  exercise  in  the  area  of 
unemployment  benefits  and  active  labour  market  policies 
conducted  within  the  EMCO  Committee.  See  the  draft 
Joint Employment Report 2018 for details. 

36 

9%10%11%12%13%14%15%05060708091011121314151617 
 
 
                                                           
4.3. Labour market, education and social policies 

performance  of  students  from  an 
immigrant 
background  remains  a  major  challenge  as  it  then 
translates  into  lower  labour  market  performance. 
Non-immigrant  children  perform  significantly 
better  than  immigrant  children  in  all  three  PISA 
areas.  This  difference  also  holds  for  second-
generation  pupils.  Even  after  taking  into  account 
socioeconomic  differences,  pupils  with  a  migrant 
background  (both  first-  and  second-generation) 
score  far  worse  than  those  without  a  migrant 
background,  with  a  41-point  difference  in  reading 
and 31 in mathematics (Meelissen et al., 2012). 

to  provide 

in  September  2016 

The  adult  participation  in  learning  is  high  in 
general  and  well  above  the  EU  average.  The 
participation rate in learning for low-skilled adults 
(9.1 %  in  2016)  is  also  considerably  higher  than 
the  EU  average  (4.2 %).  A  special  commission 
(Commissie  vraagfinanciering  MBO,  2017)  was 
set  up 
the 
government  with  advice  on  ‘vouchers’  in  upper 
secondary  vocational  education  and 
training 
(VET).  As  a  follow-up  to  the  ‘Technology  pact’ 
(Nationaal  Techniekpact)  and 
the  2011-2015 
‘Focus on Craftsmanship’ action plan, experiments 
are taking place between May 2015 and July 2021 
in  upper  secondary  VET  schools  to  integrate  the 
school-based  track  and  dual/apprenticeship  track. 
Students  will  start  in  the  school-based  track  and 
can  switch  to  the  other  track  after  acquiring  the 
relevant 
theoretical  and  practical  skills.  The 
experiment addresses the need of VET schools and 
companies for more flexibility between both tracks 
and  to  stimulate  cooperation  between  them.  The 
new  measures  are  consistent  with  the  Upskilling 
Pathways  Recommendation(39)  on  addressing  the 
low-skilled  adults  in  their  ability  to  acquire  and 
the 
maintain  skills  and  manage  successfully 
transitions in the labour market. 

The Netherlands faces an increasing shortage of 
teachers. In primary education, a shortfall of 4 000 
full-time  equivalents  is  expected  in  2020,  with 
10 000  full-time  equivalents  needed 
in  2025 
(Fontein  et  al.,  2015).  In  secondary  education,  a 
shortage  is  expected  for  certain  subjects  such  as 
mathematics, science and foreign languages. After 
several  years  of  a  drop  in  applications,  initial 
teacher  training  programmes  saw  a  small increase 
of  5 %  in  enrolments  in  2016  (Ministry  of 

(39)  Adopted  by 

the  Council  on  19  December  2016 

(2016/C 484/01). 

The  number  of  people  living  in  low  work 
intensity  households  has  decreased.  When 
setting its Europe 2020 objectives, the Netherlands 
committed itself to reducing the number of people 
living in a household with very low work intensity 
(working less than 20 % of their total potential) by 
100 000 by 2020 compared to 2008. This reduction 
is  aimed  at  the  age  groups  up  to  64  years,  rather 
than  59  years  as  envisaged  in  the  Eurostat 
indicator.  However,  since  2008  figures  have  been 
shifting. As of 2016, 51 000 people were lifted out 
of  low  work  intensity  households.  Thus  the  EU-
2020 objective is reached by half. 

social  exclusion.  Among 
in 

Non-EU-born  people  face  a  higher  risk  of 
poverty  or 
the 
the 
population  aged  18  and  over  born 
Netherlands,  the  proportion  of  people  at  risk  of 
poverty  or  social  exclusion  has  remained  stable 
from  2008  to  2016  at  13.7 %.  Among  non-EU-
born residents, it increased from 31.7 % in 2009 to 
39.6 %  in  2016.  This  is  directly  related  to  the 
vulnerable  labour  market  position  of  many  non-
EU-born migrants as described above. 

4.3.2.  EDUCATION AND SKILLS 

Despite  performing  well  in  general,  there  has 
been some decline in basic skills and an increase 
in  performance  differences  between  schools. 
While the proportion of low achievers in the 2015 
International  Student 
for 
OECD  Programme 
Assessment  (PISA)  was  still  below 
the  EU 
average, it did increase in all three areas (reading, 
mathematics  and  science).  Differences  between 
schools  have 
impact  on  pupils’ 
largest 
performance  of  all  OECD  countries  (OECD, 
2016a),  and  are  strongly  linked  to  the  different 
tracks  offered.  Differences  also  exist  between 
schools with similar student populations (Ministry 
of Education, Culture and Science, 2017a). 

the 

Several new measures aim to close performance 
gaps between students from disadvantaged and 
more  favourable  backgrounds.  The  number  of 
pupils  in  primary  special  education  has  decreased 
by  more  than  6 %  since  the  introduction  of  the 
‘Education that fits’ policy (passend onderwijs) in 
2014-2015.  All  schools  are  now  responsible  for 
placing  each  child,  including  those  with  special 
educational needs, in a suitable educational setting, 
preferably  in  mainstream  education.  The  school 

37 

 
                                                           
4.3. Labour market, education and social policies 

Education,  Culture  and  Science,  2017b).  On 
average,  5.1 %  of  all  classes 
in  secondary 
education were given by staff without professional 
teaching  qualifications  in  2015.  In  line  with  the 
2013-2020 Teachers’ Agenda, measures have been 
implemented  to  improve  the  quality  of  teaching, 
continuing  professional  development  and  career 
prospects. 

Although  the  Netherlands  has  a  large  pool  of 
educated  and  skilled  workers,  the  low  number 
of  STEM  (science,  technology,  engineering  and 
mathematics)  graduates  limits  its  innovation 
capacity.  In  2015,  only  17 %  of  masters  students 
graduated in STEM fields, and only a third of these 
were women. Despite the very open labour market, 
it remains a concern given the pronounced role that 
STEM  profiles  play  in  industry  and  technological 
innovation.  The  proportion  of  STEM graduates  in 
the population is still one of the lowest in the EU, 
although  the  number  is  increasing.  An  apparent 
lack  of  suitable  ICT  professionals(40)  and  skills 
mismatches due to the low use of ICT skills on the 
job  (OECD,  2015)  is  a  major  issue  for  the 
development  of  the  digital  economy  and  digital 
society.  Shortages  are  expected 
to  continue; 
according to the Dutch employee insurance agency 
(Van  der  Aalst  and  Van  den  Beukel,  2017), 
shortages  are  greatest  in  technical  and  ICT  jobs. 
The Human Capital Agenda ICT has been set up to 
meet  the  demand  for  more  ICT  specialists.  The 
initial  results  of  the  Technology  Pact  2020  show 
that  more  students  are  signing  up  for  technical 
studies,  with  an  increase  in  the  number  of  female 
students (monitor Techniekpact, 2017). 

(40)  Statistics  Netherlands  (2017)  reports  that  one  in  four  ICT 
firms had labour shortages in the second quarter of 2017  

38 

 
                                                           
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.3. Labour market, education and social policies 

Box 4.3.1: Implications of temporary employment on income 

This box analyses the implications of temporary employment on income, in particular on hourly 
wages and poverty. It draws upon the analysis of segmentation in the 2018 Labour Market and 
Wage Developments report. 

LU
BE
NL
UK
IT
FI
PL
DE
FR
ES
BG
PT
RO
SK
SI
CZ
MT
LT
EE
CY
LV
HU

Graph 1: Share of temporary employees  
by wage quintile (2014) 

the  wages  of 

In almost all EU countries, the wages 
of  permanent  employees  are  higher 
than 
temporary 
employees.  In  2014  the  gap  in  the 
Netherlands was one of the highest in 
the  EU.  Compared  to  other  Member 
States, the share of temporary workers 
represent  a 
with  a 
income 
low 
relatively  high  share 
(36.5 %  of 
temporary  employees  had  an  hourly 
wage  among  the  lowest  20 %  of  all 
wages) (see Graph 1). 

0%

20%

40%

60%

80%

100%

Quintile 1

Quintile 2

Quintile 3

Quintile 4

Quintile 5

and 

temporary 

The  large  difference  between  wages 
permanent 
of 
employees  can  partly  be  attributed  to 
differences in productivity, which can 
partly  be  explained  by  observable 
individual and job characteristics. For 
example,  in  Netherlands  62 %  of  all 
temporary  workers  (15-64)  in  2016 
are  younger  than  30,  which  may 
explain why their wages are lower as 

compared to permanent employees who are on average older. 

job 

and 

Therefore,  in  a  next  step  the  wage  is 
adjusted by taking into account differences 
in  individual  charasteristics  (age,  gender 
and  educational  attainment)  as  well  as 
differences  in  job  characteristics  (working 
time arrangement, occupation and sector of 
employment).  The  results  indicate  that 
even  after  controlling  for  differences  in 
individual 
characteristics, 
permenant  workers  earn  on  average  more 
than 11 % more than temporary employees 
(see  Graph  2).  The  adjusted  wage  gap  is 
found  to  be  increasing  with  age,  reaching 
the highest level for individual between 40 
and 50 years old (12 %). Nevertheless also 
for young individuals (20 to 29 years old) 
the  wage  gap  is  found  to  be  highly 
significant (7 %). Further, the adjusted wage gap is found to increase with educational attainment, 
ranging between 7 % for those with low-education (ISCED 0-2) and 19 % for those with a master 
degree or above (ISCED 7-8). The precarious income situation is of temporary employees is also 
reflected in a higher at-risk of poverty rate of temporary employees (7.9 % in 2016) as compared 
to permanent employees (3.7 % in 2016).  

39 

-5%0%5%10%15%20%PLLUCYPTSICZNLDEESSKFIHUITFRMTBELTUKBGEEROLV% of hourly wage(temporary emp.)Wage premium for permanent employeesAdjusted gap 2014Adjusted gap 2010 
4.4. INVESTMENT* 

a 

in 

sharp 

pick-up 

With 
residential 
construction,  total  investment  returned  to  its 
long-term  average  of  20 %  of  GDP  in  2016. 
Residential investment increased to 4 % of GDP in 
2016. This is up from 3 % at the end of the crisis, 
but still well below the 6 % of GDP average in the 
decade  before 
investment 
remained stable at around 3.5 % of GDP, which is 
around  1  pp.  higher  than  the  euro  area  average. 
Private  investment  on  the  other  hand  was  1.3 pps 
lower than the euro area average. 

the  crisis.  Public 

towards 
investment has declined (see Graph 4.4.2). 

investment, 

foreign 

as 

domestic 

Graph 4.4.2:  Domestic and foreign investment 

Graph 4.4.1:  Investment by asset 

Source: European Commission (Eurostat) 

The  high  savings  surplus  is  driven  by  non-
financial corporations, but recent changes were 
driven  by  other  domestic  sectors.  A  breakdown 
by  institutional  sector  shows  that  the  savings 
surplus  of  the  non-financial  corporation  sector 
increased  over  time,  from  2-3 %  of  GDP  on 
average  in  1995-2000  to  5-6 %  in  2001-2005  and 
8 % of GDP on average over the last decade. With 
a relatively stable and large NFC surplus, changes 
in  the  net  lending  position  were  driven  by 
households  and  the  general  government  sector. 
Households  were  net  borrowers  in  the  run-up  to 
the  crisis.  However,  they  turned  into  net  savers 
after 
in  household 
investment  and  increasing  pension  savings(41), 
together with deleveraging needs (see Section 4.2). 
The  government  also  turned  from  a  net  borrower 
into  a  net  lender  in  2016,  which  further  increased 
the  total  economy's  net  saving  position  between 
2009 and 2016.  

that,  following  a  decline 

(41)  Net  pension  savings  involve  the  difference  between  the 
annual pay-out of pensions and pension contributions. This 
difference  is  visible  in  the  pension  fund  sector  accounts 
(other  financial  corporations)  but  is  transferred  to  the 
household  sector  in  the  national  accounts  (‘correction  for 
the change in net equity of pension funds’). Employers also 
pay  pension  contributions,  implying  that  higher  pension 
contributions lead to a decline in NFC net savings. 

Source: European Commission (Eurostat) 

Table 4.4.1: 

Investment by sector NL and euro area (% of 
GDP) 

Source: European Commission (Eurostat); pre-crisis average 
covers 2000-2008. 

Domestic investment is low compared with total 
savings,  making  the  Dutch  economy  a  net 
lender to the world. The Dutch economy has been 
running  a  savings  surplus  since  the  early  1980s. 
Total  domestic  savings  are  relatively  stable  in 
terms  of  GDP,  but  are  increasingly  channelled 

40 

0510152025000204060810121416% of GDPresidential constructionother constructionother investmentequipmenteuro area total investmentpre-crisis average2016Netherlandstotal21.619.9private17.616.4public3.93.5euro areatotal22.320.3private19.117.7public3.22.50510152025303569747984899499040914% of GDPdomestic investmentforeign investment 
 
 
 
 
 
 
 
                                                           
4.4. Investment 

Graph 4.4.3:  Net lending/borrowing by sector 

Source: European Commission (Eurostat) 

Non-financial  corporation  (NFC)  savings  are 
exceptionally high. NFC net lending amounted to 
7 %  in  2016,  which  is  five  times  the  euro  area 
average  and  two  times  higher  than  in  Germany. 
Gross NFC sector savings stood at 17.5 % of GDP 
in  2016,  compared  with  a  euro  area  average  of 
13.6 % of GDP. However, NFC sector investments 
equalled  10.3 %  of  GDP  compared  with  the  euro 
area  average  of  12.2 %.  This  implies  that  around 
two thirds of the NL-EA difference in NFC sector 
net  lending/borrowing  is explained on  the savings 
side  of  the  income  sheet,  and  one  third  via  lower 
investments.  

Gross  NFC  savings  are  primarily  driven  by 
high earnings. The operating surplus explains the 
bulk  of  gross  saving  (see  Graph  4.4.5)(42). 
Dividends  received  and  dividends  paid  both 
greatly  increased  in  2005,  which  illustrates  the 
importance of multinationals' headquarter location 
decisions on balance of payments statistics(43). The 

(42)  NFC  gross  savings  consist  of  the  operating  surplus  and 
other  primary  income  such  as  capital  income  (dividends 
and  interest  receipts),  minus  expenditure  on  interest, 
dividends  paid,  corporate 
taxes  and  other 
secondary  incomes.  The  operating  surplus  is  gross  value 
added  less  compensation  of  employees  plus  subsidies 
minus production taxes.  

income 

(43)  In  2005,  energy  company  Royal  Dutch  Shell  moved  its 
headquarters  to  the  Netherlands  ending  its  bi-country 
governance structure. Shell is one of the largest companies 
in the world with an annual income of EUR 212 billion in 
2016, or 30 % of Dutch GDP. Received distributed income 
increased from just below 21 % of the net operating surplus 
to 47 % in 2005. Eggelte et al. (2014) estimated, based on 
average  net  profits  and  dividend  payout  ratios,  that  Shell 

global  decline  in  interest  rates  has  led  to  lower 
interest 
non-financial 
corporations, further increasing gross savings. 

expenditures 

by 

Graph 4.4.4:  Non-financial corporate sector saving and 

investment 

Average 2012-2016 
Source: European Commission (Eurostat) 

Graph 4.4.5:  Gross savings by non-financial corporations 

Source: European Commission (Eurostat) 

In  comparison  with  other  EU  countries,  the 
relatively high profit share and low distributed 
income  accounts  for  the  NFC  savings  surplus. 

alone  may  have  accounted  for  a  NFC  savings  surplus  of 
1.5 %  of  GDP  (Eggelte  et  al.,  2014).  The  volatility  in  net 
profits in 2015 and 2016 make it impossible to extrapolate 
this number.  

41 

-8-40481216199620002004200820122016% of GDPhouseholds and NPISHgeneral governmentfinancial corporationsnon-financial corporationstotal02468101214161820Gross SavingsInvestments% of GDPNLEADEFR-20-100102030409598010407101316% of GDPOther secondary income (-)Other primary income (-)Dividends paid (-)Interest received (+)Taxes on income  (-)Dividends received (+)Interest paid (-)Gross operating surplus (+)Gross savings (+) 
 
                                                           
 
 
 
                                                                                   
4.4. Investment 

their  equity  holdings  abroad  by  around  50  pps  of 
GDP, which is equivalent to an increase from 26 % 
to  43 %  of  total  assets  (see  EC,  2017b).  In  short, 
high  retained earnings  seem  to  be  used  to finance 
foreign investment by multinationals. 

Graph 4.4.6:  Gross operating surplus and components 

Dutch  NFC  savings  are  almost  6  pps  higher  than 
the euro area average. Roughly half of this can be 
explained  by  a  relatively  large  gross  operating 
surplus.  The  other  half  is  explained  by  low  net 
distributed  incomes.  Table  4.4.2  compares  the 
savings  of  the  Dutch  non-financial  corporation 
sector  with  the  euro  area  average  as  well  as  with 
peer  countries  such  as  France  and  Germany.  The 
difference  with  Germany  comes  solely  from  net 
distributed  income  (mainly  dividends),  while  the 
differences  in  NFC  savings  with  France  are 
entirely  accounted  for  by  a  lower  NFC  gross 
secondary 
operating 
incomes  such  as  corporate  income  taxes  do  not 
play an important role. 

surplus.  Differences 

in 

Table 4.4.2:  Non-financial corporate sector income sheet 

Source: European Commission (Eurostat); average 2012-
2016 

Average 2014-2016 
Source: European Commission (Eurostat) 

Graph 4.4.7:  Net operating surplus by sector 

Average 2012-2015 
Source: European Commission and Statistics Netherlands 
(production statistics) 

Profitability  is  particularly  high  in  the  trade 
and  manufacturing  sectors.  The 
three  year 
average NFC operating surplus in the Netherlands 
is roughly 24.5 % of GDP, compared to a euro area 
average  just  above  21 %  (see  Graph  4.4.6).  This 
difference  already  exists  in  NFC  value  added, 
which  is  relatively  high  in  terms  of  GDP.  This  is 
only  partially  transferred  into  compensation  of 
employees,  where 
the  difference  with  other 
countries  is  less  marked.  An  assessment  by 
industry  shows  that  in  particular  the  trade  and 
manufacturing  sectors  play  a  significant  role  (See 
Graph 4.4.7).  

The  net  payout  ratio  of  dividends  is  very  low, 
and points to high retained earnings, being used 
to  finance  foreign  investment.  Compared  with 
other  Member  States,  Dutch  NFCs 
receive 
relatively  large  amounts  of  distributed  income 
from abroad (mainly dividends), while on the other 
hand the payout ratio is relatively low, resulting in 
very low net distributed income (see Graph 4.4.8). 
An  assessment  of 
sheets  of 
multinational  enterprises  suggests  that  retained 
earnings  were  used  to  finance  foreign  investment. 
Between  2005  and  2015,  multinationals  increased 

the  balance 

42 

% of GDPNLEADEFROperating surplus, grossB2g24.421.123.716.4Net property incomeD4-4.3-6.2-8.0-3.4Distributed income of corporations receivedD425.23.31.97.0Distributed income of corporations paidD42-7.3-8.9-11.1-9.2Balance of primary incomesB5g20.214.915.713.0corporate income taxesD51-1.8-2.0-2.1-1.8other secondary income/expenditure-0.3-0.5-0.3-1.1Saving, grossB8g18.112.313.310.1pro memorie: net dividends-2.0-5.6-9.2-2.3383427262524242323232121191918171616-40-20020406080IrelandLithuaniaEstoniaLatviaNetherlandsGermanySlovakiaBelgiumAustriaSpainEuro areaFinlandPortugalItalySloveniaGreeceLuxembourgFrance% of GDPSubsidiesTaxes on production and importsCompensation of employeesGross value addedGross operating surplus051015202530Billion EUR 
 
 
 
 
 
 
 
4.4. Investment 

Graph 4.4.8:  Net distributed income ratios 

Graph 4.4.9:  Corporate savings by firm size 

Source: European Commission (Eurostat); average 2014-
2016. 

MNEs  drive  corporate  sector  savings.  While 
only  around  2 %  of  all  companies  active  in  the 
Netherlands  are  classified  as  multinationals,  they 
account for 40 % of private sector employment and 
around two thirds of private sector turnover (CBS, 
2015).  In  particular  MNE  saving  is  volatile  (See 
Graph 4.4.9). Although the production process and 
definitions  are  not  comparable  with  national 
accounts,  net  savings  by  large  firms  account  for 
roughly  two  thirds  of  total  NFC  savings.  This 
suggests  that  in  particular  these  firms  are  net 
lenders to the economy (see also EC, 2017b). 

(1) Gross saving is defined as gross operating surplus and 
other primary income less interest paid, taxes and dividends 
(methodology Jansen and Ligthart 2014).The series contain 
a break in 2011: since that year the balance sheet threshold 
for large firms and MNEs is EUR 40 million; it was EUR 23 million 
before 2011. 
Source: European Commission (Statistics 
Netherlands/Statistiek Financiën Grote Ondernemingen and 
Statistiek Financiën Alle Ondernemingen;). 

Real perspective on the current account 

The current account surplus of the Netherlands 
averaged  6 %  of  GDP  over  the  past  three 
decades.  In  2012,  the  current  account  balance 
reached a peak of 10.3 % of GDP, before declining 
slightly to 9 % of GDP in 2016 (see Graph 4.4.10). 
In  the  last  decade,  the  current  account  surplus 
remained  significantly  above  both  the  long-term 
average  and  the  current  account  benchmarks. 
Fundamental drivers explain 3.8 pps of the current 
account surplus, according to Commission current 
account 'norm' estimations for 2016.(44) This figure 
is  mainly  due  to  the  high  income  per  capita,  and 
expected  ageing  relative  to  the  rest  of  the  world 
that imply implying net capital exports, as well as 
the  Netherland's  status  as  corporate  financial 
centre for multinationals. 

The  balance  on  primary  incomes  declined 
sharply  between  2012  and  2016.  With  a  stable 
overall  trade  surplus,  the  recent  decline  in  the 
current  account  surplus  was  mainly  driven  by  a 
considerable  decrease  in  net  primary  incomes, 
from  a  surplus  of  2.4 %  of  GDP  in  2012  to  a 
deficit of -1.2 % of GDP in 2016. This decline was 
mostly visible in revenues from direct investment, 

(44)  The  current  account  'norm'  benchmark  is  derived  from 
regressions  capturing  the  main  fundamental  determinants 
of  the  saving-investment  balance  (e.g.  demographics, 
resources),  as  well  as  policy  factors  and  global  financial 
conditions.  See  also  European  Commission  2017k. 
Corresponding  IMF  current  account 
'norm'  estimates 
suggest a level of 5.5% of GDP for 2016. See IMF 2017.  

43 

0102030405060708090NetherlandsGreeceSpainSloveniaSlovakiaEstoniaUKFinlandIrelandFrancePortugalBelgiumSwedenEuro areaCyprus*AustriaLithuaniaLatviaGermanyItaly% of net operating surplus0%2%4%6%8%10%12%14%16%18%01020304050607080910111213141516% of GDPsmall and medium size firmsother large firmsMNE 
 
 
 
                                                           
4.4. Investment 

but  partly  offset  by  increasing  portfolio  revenues. 
In  2016,  the  balance  of  secondary  incomes  was 
affected  by  a  one-off  payment  of  EUR 2.7 billion 
from the EU budgetary contributions to the Dutch 
state. 

Graph 4.4.10: Current account 

Graph 4.4.11: Trade balance goods by product group (2016) 

Source: European Commission (Eurostat) 

The  strong  trade  in  goods  continues  to  be  the 
main  driver  of  the  current  account  surplus. 
While  the  trade  balance  in  goods  achieved  a 
surplus  of  11.9 %  of  GDP  in  2016,  the  trade 
balance  in  services  recorded  a  deficit  of  0.9 %  of 
GDP. The trade surplus in goods is mostly driven 
by  chemical  products  as  well  as  food  and  live 
animals.  The  economy  shows  a  stable  export 
specialisation  in  agricultural  products  such  as  cut 
flowers,  bulbs  and  other  plants  compared  to  the 
EU-15.  According  to  an  analysis  by  Statistics 
Netherlands, the trade balance is inflated to a large 
extent  by  re-exports,  which  account  for  roughly 
45 %  of  total  exports  (CBS,  2017c).  Although  re-
exported goods are not processed or changed much 
while  in  the  Netherlands,  Statistics  Netherlands 
estimates  that  the  domestic  value  added  of  re-
exports  is  around  11  cents  per  exported  euro, 
leading to a total value added of just below 3 % of 
GDP  in  2016.(45)  The  trade  deficit  in  services  is 
largely  driven  by  trade  in  royalties,  tourism  and 
transport services.  

(45)  This is also illustrated by the high net operating surplus of 

the trading sector, see Graph 4.4.7. 

Source: European Commission (Statistics Netherlands) 

Graph 4.4.12: Trade balance services by product group 

(2016) 

Source: European Commission (Statistics Netherlands) 

Economic consequences 

Large  persistent  surpluses  could  point  to  a 
suboptimal  allocation  of  economic  resources 
over  time  and/or  between  certain  sectors.  The 
large  and  persistent  national  savings  surplus  has 
been  questioned  as  a  sign  of  inefficiencies.(46). 
Large  second  pillar  pension  savings,  for  instance, 
drive up the compulsory tax and non-tax payment 
burden on labour (the combination of taxes, health 
care and pension contributions, see Section 4.2). In 
the  midst  of  the  crisis,  pension  reserves  kept 

(46)  The  persistent  national  savings  surplus  was  already 
questioned  by  Bovenberg  (1991)  and  SER  (1992).  See 
Fransman (2014) for an extensive recent analysis. 

44 

-6-30369121599'00'01'02'03'04050607080910111213141516% of GDPPrimary income balanceSecondary income balance  Trade balance - services  Trade balance - goodsTrade balanceCurrent account balance (CA)050100150200250300350400450Import valueExport valuebillion EURMachinery & transport equipmentManufactured articlesChemical & related products, n.e.s.Food & live animals & othersMineral fuels, lubricants, related materialsCrude materials, inedible, except fuels-50-40-30-20-10010203040in EUR billionsExportsImportsBalance 
 
                                                           
 
 
 
                                                           
4.4. Investment 

Graph 4.4.13: NIIP and cumulative current account surplus 

Source: European Commission (Eurostat) 

In  sum,  more  domestic  spending  has  positive 
benefits  for  the  Netherlands  and  the  EU.  The 
persistent  and  large  national  savings  surplus  may 
be  to  some  extent  a  symptom  of  pro-cyclical 
institutions 
and 
shaping  household 
investment  behaviour.  Over  a  longer  period  of 
time,  it  may  be  of  little  benefit  (shown  by  the 
differences  between 
annual 
the 
surpluses 
the  NIIP).  More  domestic 
investment may lead to positive spillovers to other 
euro  area  countries  and,  endogenously,  to  more 
economic  growth 
the 
Netherlands.  

the  euro  area  and 

cumulated 

saving 

and 

in 

Graph 4.4.14: Euro area output and aggregate demand 

Source: European Commission (Eurostat) 

side.  Relatively 

growing,  among  others  due  to  higher  premiums 
driving  up  the  household  saving  rate,  and  driving 
down net take-home pay. Pro-cyclical income and 
consumption  dynamics  are  further  fuelled  by 
household balance sheet issues. Dutch households 
typically  have  long  balance  sheets,  with  large 
illiquid pension entitlements and housing equity on 
the  asset  side  and  high  household  debt  on  the 
liability 
liquidity  of 
households  increases  the  volatility  of  consumer 
demand  over  the  cycle.  This  led  to  a  relatively 
large  reduction  in  private  consumption  compared 
with  other  EU  countries.  Addressing  household 
balance  sheet  issues,  amongst  others  via  an 
overhaul of the second pension pillar (as currently 
being discussed by the social partners, see Section 
4.2.4), has  the  potential  to  reduce  the  volatility  of 
the  household  savings-investment  balance  and 
make  the  domestic  economy  more  resilient  to 
financial shocks 

low 

The  persistent  net  lending  position  did  not 
develop  into  an  equivalent  net  international 
investment  position.  By  running  current  account 
surpluses,  a  country  builds  up  a  positive  net 
international  investment  position  (NIIP).  While 
this  makes  the  surplus  country  a  creditor,  it 
harbours  a  risk  of  valuation  gains/losses  due  to 
changes  in  exchange  rates  and  market  prices. 
Although  NIIP  increased  in  line  with  the  current 
account surpluses in recent years, the NIIP remains 
far  below  the  level  of  cumulated  annual  current 
account surpluses over a longer period (see Graph 
4.4.13).  

relatively 

Symmetric  rebalancing  would  be  beneficial  for 
the  euro  area  economy.  Although  the  euro  area 
strong 
economy  has  experienced 
expansion  in  recent  years,  Commission  analysis 
points  to  a  shortfall  in  domestic  demand  (see 
Graph 4.4.14). A saving surplus in the Netherlands 
increases  the  supply  of  capital  to  other  countries 
(in  the  EU,  but  also  to  the  rest  of  the  world)  and 
lowers 
In  normal  economic 
conditions, this would stimulate domestic demand. 
However,  given  the  current  low  interest  rate 
environment,  an  increase  in  savings  has  little 
impact  on  interest  rates  and  is  ineffective  in 
stimulating  demand.  More  direct  spending  would 
then  be  more  effective  in  increasing  euro  area 
production  and 
It  should  be 
job  creation. 
emphasised  that  this  is  a  time-variant  conclusion 
and depends on the state of the economy. 

interest 

rates. 

45 

-2502550751001251501758991939597990103050709111315% of GDPNIIPCumulated current account9000920094009600980010000102000607080910111213141516Constant 2010 EUR mnTrade balanceAgg. DemandGDP 
 
 
4.4. Investment 

Box 4.4.1: Investment challenges and reforms in the Netherlands 

Section 1. Macroeconomic perspective 

In 2016, the investment rate returned to the long-term average level of 20 % of GDP. In particular 
residential investment experienced boom-bust episodes during the crisis, with a sharp drop related 
to the housing market slump and an equally sharp recovery from 2014 onwards. Looking ahead, 
private  investment  is  expected  to  continue  to  grow,  albeit  at  more  sustainable  lower  rates. 
Investment  in  intangible  assets  accounts  for  some  10 %  of  total  business  gross  fixed  capital 
formation, which is in line with the EU average but below levels in the US, the UK and the Nordic 
countries. Public  investment  peaked  at  4.3 %  of GDP  in 2009, declined  to  3.5 %  in 2016  and  is 
expected to remain roughly stable over the coming years, according to the European Commission 
Autumn 2017 Economic Forecast. Public and private expenditure on R&D remains well below the 
overall 2.5 % of GDP target and it is low compared to the top performers, despite increased public 
R&D funding in the new Coalition Agreement.  

Section 2. Assessment of barriers to investment and ongoing reforms 

Main barriers to investment and priority actions underway 
Overall, the Netherlands faces relatively few regulatory barriers to investment, as confirmed by the 
European  Commission  assessment  (see  EC,  2015).  The  new  government's  fiscal  plans  contain  a 
substantial  investment  in  R&D  (see  Section  4.5.2).  Certain  sectoral  regulations  may  create 
obstacles  to  investment,  e.g.  procedures  to  obtain  building  permits  are  lengthy,  although  World 
Bank Doing Business indicators point to a slight improvement compared to last year (in relative 
terms). Nevertheless, the Netherlands still ranks relatively low (76th compared to 87th in 2016), 
which is largely explained by the time it takes to obtain the building permit. The Netherlands has 
introduced  all  administrative  procedures  to  support  investment  in  renewable  energy  (see  EC, 
2017i),  lowering  barriers  to  investment  in  this  sector.  However,  despite  additional  measures  as 
well  as  a  new  'energy  transition  finance  facility'  that  opened  in  July  2017,  the  Netherlands  is 
expected to miss its renewable energy target for 2020.  

46 

Regulatory/administrative burdenTaxationPublic administrationAccess to financePublic procurement/PPPsCooperation of academia, research and businessJudicial systemFinancing of R&D&ICSRInsolvency frameworkBusiness services/regulated professionsCompetition and regulatory frameworkRetailEPL & framework for labour contracts ConstructionWages & wage settingDigital economy/telecomEducation EnergyLegend:TransportNo barriers to investment identifiedCSRInvestment barriers that are also subject to a CSRSome progressNo progressSubstantial progressLimited progressFully addressedPublic administration/ Business environmentFinancial Sector / TaxationR&D&ISector specific regulationLabour market/ Education 
 
 
 
4.5. SECTORAL POLICIES 

4.5.1.  PRODUCTIVITY DEVELOPMENTS, 

INNOVATION AND COMPETITION 

The post-crisis recovery in productivity growth 
is  mostly  driven  by  total  factor  productivity 
(TFP)  growth.  The  Dutch  economy  is  one  of  the 
most  productive  of  the  world  with  an  income  per 
capita  20 %  above  the  EU  average.  Since  the 
1970s,  productivity  growth  has  slowed  down 
considerably  from  an  average  5 %  per  year  to 
barely 1 %  over  the  last years.  The  recent  modest 
recovery  in  GDP  growth  is  mostly  down  to  TFP 
growth, which  has been  the only  sustained  source 
of  productivity  growth  in  recent  years  (see  Graph 
4.5.1).  

manufacturing  and  low  in  services.  Post-crisis 
productivity  growth  was  also  relatively  high  in 
manufacturing,  trade  and  transport  sectors  (see 
Graph 4.5.2). 

Table 4.5.1: 

Total productivity growth, 1995-2015 (%) 

Source: European Commission, AMECO database and own 
calculations 

Graph 4.5.1:  Contributions to changes in growth of real 

value added 

Graph 4.5.2:  Productivity development by sector 

Source: European Commission, EU KLEMS database 

to 

sectors.  A 

contributions 

aggregate 
The  main 
productivity  growth  come  from  developments 
within 
shift-share  analysis  of 
productivity  growth  shows  that  changes  in  the 
sectoral  structure  had  a  negative  -  albeit  minor  - 
effect  on  aggregate  productivity  growth  while  the 
bulk  of  the  productivity  growth  was  due  to 
productivity  developments  within  sectors  (see 
Table 4.5.1). 

Whereas  ICT,  energy  and  the  financial  sector 
experienced  the  fastest  productivity  growth 
before  the  crisis;  productivity  growth  has  been 
driven  mostly  by  the  real  estate,  construction 
and  trade-related  sectors  after  the  crisis. 
in 
Productivity 

traditionally  high 

levels  are 

Sector codes are: A Agriculture, C Manufacturing, D-E 
Electricity, gas, F Construction, G Wholesale and retail trade, 
H Transportation, I Accommodation and food, J Information, 
K Financial, M-N Professional activities, O Public 
administration, P Education, Q Health, R Arts, S Other 
services. 
Source: European Commission (EU KLEMS) 

A  recent  study,  focussing  on  Dutch  firm  level 
data shows relatively small differences between 
sectors  and  finds  no  evidence  for  a  lack  of 
technology  diffusion.  The  detailed  analysis  of 
firm-level  productivity  growth  before,  during  and 
after  the  crisis  in  a  recent  CPB  study  -  based  on 
register data and other administrative data sources 
for  53  sectors  for  the  period  2006-2015  -  shows 
strikingly  similar  patterns  in  all  sectors  between 
so-called leading firms at the 'productivity frontier' 
and  lagging  firms  (see  Van  Heuvelen,  Bettendorf 
and Meijerink, 2018, forthcoming). Leading firms 
and  lagging  firms  are  found  to  be  subject  to  a 

47 

-5-4-3-2-101234010203040506070809101112131415growth (%)HoursLabor compositionICT capitalnon-ICT capitalTFPTotalStructuralWithinDynamic shiftFrance18.31.918.9-2.9Germany16.90.617.8-1.9Italy-0.92.0-1.4-1.5Netherlands22.7-1.826.7-1.9Euro area15.92.016.5-2.6Shift-share decompositionM-NGQCFOPHIJKASR-1.5-1.0-0.50.00.51.01.52.02.53.004080120average growth per year 2010-2015Productivity level 2015 (euro per hour) 
 
 
 
 
 
 
 
4.5. Sectoral policies 

housing  would  reduce  skill  shortages  at  regional 
level  and  further  increase  labour  productivity 
(OECD, 2017a,c). 

Construction sector 

is 

to 

low, 

sector 

developments 

slow  digitisation  and 

The  level  of  labour  productivity  in  the  Dutch 
reflecting 
construction 
skill 
fragmentation, 
shortages.  Contrary 
in 
neighbouring  countries,  the  contribution  of  both 
ICT capital and TFP to labour productivity growth 
in the Dutch construction sector has been negative 
since  the  crisis.  This  may,  amongst  others,  be 
linked to subdued investment in technologies, slow 
digitisation of the construction value chain, under-
use  of  ICT  skills,  an  ageing  workforce  and 
shortages of skilled labour. Supporting innovation 
in  particular  of  micro-
and 
companies 
self-employed  without 
employees,  who  account  for  more  than  85 %  of 
firms 
the  Dutch  construction  sector  (EU 
average: 57 %), could reduce fragmentation of the 
sector, 
its 
attractiveness for younger workers(47) in particular 
and  promote  participation  in  larger,  cross-border 
construction value chains (EC, 2017a).  

the  scaling  up 
the 

speed  up  digitisation, 

improve 

and 

in 

in 

few 

relatively 

regulatory  barriers 

Specific  sectoral  regulations  and  payment 
delays  may  hamper  productivity 
the 
construction  sector.  Although  the  Netherlands 
faces 
to 
investment  and  business  development  in  general 
(see  Box  4.4.1),  barriers  do  remain  e.g.  linked  to 
planning  and  permit  procedures  for  construction 
investment.  Apart  from  a  horizontal  authorisation 
scheme on hoisting, the Netherlands imposes fully-
simpler 
fledged 
procedural  alternatives.  Moreover,  while 
the 
Netherlands  has  good  public  administration-to-
business  payment  relations,  payment  delays  in 
B2B  relations  increased  significantly  in  2016: 
41 %  of  construction  companies  experience  late 
payments,  and  over  a  fifth  of  construction  SMEs 
working  as  sub-contractors  are  not  paid  at  all  by 
the main contractor (EC, 2016b). 

permits  without 

building 

(47)  Slow  digitisation  and  comparatively  low  entry  level 
salaries for apprentices contribute to a low attractiveness of 
the sector and an ageing workforce. 

that 

revealing 

to  conclude 

sector,  while 

decline  of  productivity  growth  during  the  crisis, 
with the strongest decline for frontier firms in the 
services 
increasing 
differences  in the  productivity increase during  the 
recovery  (see  Graph  4.5.3).  These  findings  allow 
the  authors 
the  observed 
productivity  slowdown  is  not  due  to  changes  in 
transmission  mechanisms  (technology  diffusion 
from  leading  frontier  firms  to  other  firms  in  the 
sector such that successful technologies employed 
by  the  frontier  firms  are  transmitted  to  the  other 
firms  in  the  economy).  The  study  also  shows  that 
there is substantial mobility of firms with regard to 
their  relative  position  to  the  national  productivity 
frontier (only some 10 % of the firms remain at the 
national  productivity  frontier  over  a  period  of  5 
years).  A  significant  share  of  firms  is  found  to 
change positions over time, including among those 
classified as either leading or lagging firms.  

Graph 4.5.3:  Productivity growth by firm productivity level 

(leaders/laggards) 

Source: European Commission based on Van Heuvelen et al 
(2018, forthcoming) 

the 

Further  reducing  on-the-job  skill  mismatches 
and  putting  skills  to  better  use  can  increase 
productivity. Based on data from the Programme 
for 
International  Assessment  of  Adult 
Competencies  (PIAAC)  survey,  the  actual  use  of 
numeracy  and  IT  skills  on  the  job  is  much  lower 
than  the  proficiency  of  the  workforce;  there  are 
also significant numbers of over-skilled workers in 
the  lower  wage  quintiles  in  particular.  Reducing 
the  skills  mismatch  to  OECD  best  practice  could 
increase productivity by  up  to  3 %  (OECD,  2015, 
2017b).  Addressing  shortages  and  restrictions  in 

48 

-12%-8%-4%0%4%8%12%16%20%070809101112131415manufacturing (top 10%)manufacturing (laggards)services (top 10%)services (laggards) 
 
                                                           
4.5. Sectoral policies 

4.5.2.  RESEARCH AND INNOVATION 

which  is  more  than  intramural  R&D  intensity  of 
1.16 %(49).  

rankings, 

to  worldwide 

According 
the 
Netherlands  has  a  strong  innovation  capacity 
thanks to a productive R&D sector, competitive 
business  environment  and  solid  framework 
conditions in general. The country ranks highly in 
all  main  composite  indexes:  World  Economic 
Forum  Global  Competitiveness 
(4th); 
European  Innovation  Scoreboard  (4th);  Global 
Innovation  Index  (3rd);  Digital  Economy  and 
Society Index (4th). 

Index 

like 

through 

integration 

Fostering  higher  business  sector  investment  in 
R&D  has the potential  to  increase  productivity 
growth,  in  particular  in  the  manufacturing 
sector.  Productivity  growth  is  driven  by  many 
factors  —  from  investment  in  ICT  and  non-ICT 
capital, 
and  diffusion  of  new 
technology,  complementary  investment  in  other 
intangibles and training the workforce to maximise 
their  positive  contribution, 
to  well-
functioning  institutions  and  markets  (Grabska  et 
al.,  2017).  Advanced  economies 
the 
Netherlands  have  limited  potential  to  increase 
productivity  by  catching  up  with 
leaders’ 
processes.  Instead,  fully  exploiting  the  benefits  of 
digitisation and innovation by making investments 
in R&D and other intangible assets is essential for 
increased  productivity.  Business  R&D  intensity 
(1.16 %) remains low compared to peers and grew 
slowly in recent years (2011-2016), while nominal 
R&D  investment  (in  EUR)  grew  by  17 %  in  the 
same  period.  Although  relatively  low  investments 
in  R&D  in  part  reflect  the  economic  structure  of 
the Netherlands, which has a strong specialisation 
in  services  and  other  sectors  with  a  low  formal 
R&D  component,  R&D  in  manufacturing  is  also 
relatively low (see Graph 4.5.4). Nevertheless, this 
low  level  may  be  partly  explained  by  R&D 
activities  in  other  countries  by  large  Dutch  firms. 
The  Netherlands  has  a  high  number  of  large 
multinationals whose R&D activities are located in 
other  countries.  For 
the  2017  EU 
Industrial  R&D  Investment  Scoreboard  places  38 
Dutch  companies  among  the  top  2 500  R&D 
investors  in  the  world(48).  These  companies  alone 
make  up  1.3 %  of  GDP  in  R&D  investments, 

instance, 

(48)  http://iri.jrc.ec.europa.eu/scoreboard17.html. 

Graph 4.5.4:  R&D intensity in manufacturing 

Source: European Commission, EU KLEMS database 

the 

share  of  employment 

The  dynamics  of  entrepreneurial  activities  and 
innovative  business  growth  appear  relatively 
good.  Both 
in 
knowledge-intensive  activities  (17.5 %),  and  the 
share  of  employment  in  fast  growing  SMEs  in 
innovative sectors (5.5 %) are relatively high. Also 
the share of the population engaged in early-stage 
entrepreneurial  activity  is  relatively  high  (11%  of 
total population aged 25-64, GEM, 2017).  

Public  support  to  research  and  innovation  is 
well established.  Total  public support  to  research 
and  innovation  reaches  EUR 6.5 billion,  which 
include  EUR 1.2 billion  of  indirect  fiscal  support 
through the WBSO scheme. The clarity of the R&I 
support  system  coupled  with  regular  monitoring 
and  evaluations  is  a  strong  point.  In  the  coalition 
agreement,  the  government  announced  that  by 
extra  EUR 400 million  will  be 
2020, 
an 
research,  of  which 
structurally 
spent  on 
and 
research 
EUR 200 million 
innovation.  In  2018  and  2019  an 
incidental 
investment  of  EUR 50 million  will  be  made  in 
research infrastructure. Moreover, the government 
announced  to  invest  EUR 2.5 billion  in  a  new 
finance  and  development  organisation  called 

applied 

for 

(49)  The  figure  excludes  Airbus,  a  company  with  headquarters 
in  the  Netherlands  but  with  relatively  little  industrial 
activity  in  the  country.  Including  this  company,  total 
investment  of  these  top  companies  amounts  to  1.8 %  of 
GDP. 

49 

02468101214161820SEDKFRFIUSATDENLSIUKITHUESCZLUPTEELVSK% manufacturing GVA 
                                                           
 
                                                           
 
4.5. Sectoral policies 

research staff (a third of the scientific personnel is 
foreign; 45 % of PhDs). A recent evaluation of the 
the  Government's 
top  sector  policy, 
industry 
approach  has 
the 
that 
concluded 
policy, 
successfully  strengthened  collaborations  between 
public  and  private  actors  through  now  well-
established  governance  (Bongers  et  al.,  2017).  It 
however  highlighted  that  public  authorities  may 
need  to  adopt  a  clearer  and  stronger  role,  in 
particular taking up more responsibility in defining 
innovation  objectives,  as  this  would  give  more 
directions to the potential collaboration, especially 
for solving societal challenges.  

4.5.3.  PUBLIC PROCUREMENT 

The  Netherlands  has  performed  satisfactorily 
on  public  procurement.  Its  performance 
is 
excellent  on  the  use  of  e-procurement,  favouring 
competition among bidders, decision speed and the 
use  of  strategic  procurement.  The  Netherlands  is 
also one of the most experienced Member States in 
terms  of  using  pre-commercial  procurement.  The 
public  procurement  expertise  centre  PIANOo  is 
key  to  the  capacity  building  of  public  procurers 
and  fostering  innovation  procurement  (see  Box 
4.5.1). 

the 

suppliers 

amendment 

The 
2012  Public 
of 
Procurement  Act  also  provided  greater  legal 
certainty  and  opportunities  for  SMEs.  The 
amendment includes: the prohibition on minimum 
turnover  requirements,  the  requirement  to  justify 
bundling  of  contracts,  the  promotion  of  splitting 
contracts  into  lots  and  a  lower  administrative 
burden  to  take  part  in  the  tender.  Since  January 
2017, there is further an obligation for all national 
government 
e-invoicing. 
Nevertheless, a number of practical obstacles make 
it  difficult  for  SMEs  to  participate  in  public 
contracts, 
procurement, 
disproportionate 
eligibility 
requirements, high administrative costs, long-term 
framework  contracts  and  a  lack  of  procurement 
tenders  published 
expertise.  The  number  of 
according  to  EU  rules  is  below  the  EU  average 
(representing 2.2 % of GDP compared to 4.4 % of 
GDP in the EU), and reporting quality is generally 
poor,  with  75 %  of  bids  published  EU-wide 
without tender value (EC, 2017k). 

large 
unclear 

such 

use 

or 

as 

to 

Invest-NL.  This  should  lead  to  more  venture 
capital  for  innovative  start-ups  and  scale-ups. 
Invest-NL will also try to attract public and private 
capital  from  other  funds,  such  as  the  EFSI-fund 
and  the  EIB.  Most  existing  risk  financing  and 
venture  capital  funding,  such  as  the  SEED capital 
scheme,  will  be  grouped  together  within  this 
facility.  

that  extra 

The public R&D intensity has gradually risen to 
0.88 %  of  GDP  in  2016,  which  approaches  the 
average level of most advanced EU peers (1 %). 
In 2015, total budget for R&D amounted to 0.73 % 
of  GDP,  a  relatively  high  level  in  the  EU,  but 
lower  compared  to  most  advanced  EU  peers.  For 
the  period  2018-2021,  total  government  budget 
outlays for R&D is forecast to decline from 0.67 % 
to  0.63 %  of  GDP  (not  counting 
the  extra 
expenditure on research and innovation announced 
in the coalition agreement), mostly due to nominal 
GDP growth, the denominator (see Vennekens and 
Van Steen, 2017). Dutch stakeholders and advising 
bodies  suggest,  in  several  issued  opinions  and 
analyses, 
investments  would  be 
necessary in the coming years. Particular concerns 
remain  regarding  maintaining 
the  knowledge 
capacity  of  the  technological  institutes  over  the 
long  term.  Over  the  period  2010-2021,  public 
funding for institutions that are focused on applied 
research,  essentially  the  TO2  institutes,  would 
decrease  by  21 %.  Upon 
the 
government,  the  Dutch  research  council  issued  an 
opinion  on  how  to  orient  the  policy  for  applied 
research  (AWTI,  2017).  The  council  notably 
advised 
by 
EUR 330 million  per  year  to  support  the  research 
capacity of public research organisations. Research 
public 
infrastructures  would 
investments in the coming years (Strategic Agenda 
TO2, 2017). 

request  of 

investment 

increase 

require 

also 

to 

Collaboration between business and knowledge 
institutions may prove to be an effective way to 
increase  innovation.  The  Netherlands  innovation 
ecosystem  can  build  on  its  higher  education  and 
public  research  systems.  The  science  base  is  very 
good with 14.3 % of scientific publications among 
the  10 %  most  cited  worldwide,  amongst  the 
highest  performers  in  the  EU.  The  openness  and 
quality  of  public  research  is  also  reflected  in  the 
international 
high  proportion  of 
scientific 
internationalisation  of 
the 
publications  and 

50 

 
4.5. Sectoral policies 

Box 4.5.1: Policy highlight: Public procurement expertise centre in the Netherlands 

PIANOo (Professioneel en Innovatief Aanbesteden, Netwerk voor Overheidsopdrachtgevers)(1) is 
the  public  procurement  expertise  centre  of  the  Netherlands,  linked  to  the  Ministry  of  Economic 
Affairs.  PIANOo's  aim  is  to  improve  the  government's  procurement  processes  and  compliance 
with (EU) procurement rules in the Netherlands. It further aims at increasing the procurement of 
innovative solutions in the Netherlands. The main task of the centre is to provide information and 
give  advice  to  government  organisations  on  purchasing  and  tendering  services  and  equipment. 
PIANOo  offers  access  to  tools  and  model  documents  on  their  website,  organises  meetings, 
provides  for  an  online  forum,  publishes  topical  documents  and  organises  tendering  law  courses. 
PIANOo's  expertise  is  built  up  through  a  large  network  of  around  3 500  public  procurement 
professionals and contracting authorities. The centre brings together experts in specific areas and 
fosters dialogue between government contracting authorities and private sector companies.  

One  information  tool  provided  by  PIANOo  is  a  web-based  'Innovatiekoffer'(2)  ("innovation 
suitcase") to help contracting authorities with innovation-focused procurement. The tool describes 
various instruments, e.g. demand analysis, risk management, market consultation and innovation 
partnership.  The  tool  also  encompasses  trajectories,  which  describe  how  to  combine  different 
instruments, and specific cases of innovative projects.  

(1)  www.pianoo.nl/ 
(2)  www.innovatiekoffer.nl/ 

In  2005,  the  Netherlands  introduced  the  Small 
Business 
Innovation  Research  Programme 
(SBIR) to encourage companies to develop new 
innovative  products  and  services  to  meet  the 
demand  of  public  authorities.  It  consists  of  a 
two-stage  competition  in  which  companies  with 
the best proposals carry out a feasibility study. The 
programme then finances the development of their 
innovative solutions, so that public entities may be 
able  to  buy  these  new  products  in  the  future.  An 
evaluation of the SBIR instrument has been carried 
out  at  the  request  of  the  Ministry  of  Economic 
Affairs  which  showed  that  the  SBIR  instrument 
has social added value (Bongers et al., 2017).   

innovation 

The  new  government  programme  specifically 
indicates  that  public  procurement  should  be 
used  more 
strategically,  with  particular 
emphasis on innovation procurement and wider 
use  of  the  SBIR  instrument.  The  Netherlands 
continues  to  pursue  ambitious  quantitative  and 
qualitative 
targets, 
including a target of 2.5 % of total procurement for 
spend  on 
central  public  administration 
innovation.  Moreover,  the  Ministry  of  the Interior 
manages 
(Slimmer 
netwerk), which involves around 4 000 innovation 
officials  and  advisers  within  the  government, 
provinces,  municipalities,  water  authorities  and 
police  (OECD,  2017e).  Examples  such  as  the 

‘Smarter  Network’ 

procurement 

the 

to 

Erasmus  University  Medical  Centre  highlight  the 
potential 
innovation 
procurement (OECD, 2016). 

positive 

impacts 

of 

economy’ 

The  Netherlands  is  a  global  front  runner  in 
circular  procurement,  with  pilot  projects 
developed  to  promote  the  uptake  of  the 
‘circular 
(where  products  are 
designed to be energy-efficient, long-lasting and 
recycled  as  much  as  possible) 
in  public 
procurement.  Most circular  procurement  projects 
are  carried  out  as  part  of  either  the  ‘Green  Deal: 
Circular  Procurement’  agreement  or  the  REBUS 
(Resource  Efficient  Business  Models)  project. 
Both  of  these  initiatives  aim  to  develop  tools  and 
practical  examples 
for  circular  procurement. 
However,  there  are  still  a  number  of  barriers  to 
promoting  innovation  in  the  circular  economy; 
these  require  better  awareness  of  the  fact  that 
transitioning to a circular economy needs different 
forms  of 
financial 
(business cases), organisational (working methods) 
and social (focused on cooperation and teamwork) 
(SER, 2017). 

technological, 

innovation: 

4.5.4.  ENERGY AND SUSTAINABILITY 

The  government  plans  to  draft  a  national 
climate  and  energy  agreement  outlining  the 

51 

 
 
 
4.5. Sectoral policies 

programme  aimed  at  supporting  the  national 
climate  policy  and 
the  natural  resources 
agreement.  Although  among  the  highest  of  the 
EU, the waste recovery rate is rather low vis-à-vis 
neighbouring  countries,  while  the  physical  waste 
intensity  (i.e.  the  waste  intensity  in  terms  of 
Domestic  Materials  Consumption)  is  relatively 
high  and  increasing  faster  than  EU  average.  The 
Netherlands scores relatively low (16th) in the 2016 
Eco-Innovation Index(50), which points to the need 
to  improve  the  circular  economy  programme. 
Nevertheless,  the  performance  as  regards  the 
development  of  environmental  technologies  and 
the diffusion of these technologies seems to be not 
too far from the EU average in 2016. The agendas 
sent to parliament in January 2018 include a focus 
on  monitoring  progress  in  the  transition  to  a 
circular  economy  and  the  scale  up  of  successful 
pilot projects and other initiatives.  

of 

use 

fields 

for  CO2 

environment 

government  will 

a 
The  Dutch 
“modernisation of the tax system” to deliver on 
its  pledge 
to  green  and  decarbonise  the 
country’s  economy.  A  fiscal  annex  to  the  new 
Dutch  government  programme,  which  includes  a 
pledge to cut carbon emissions by 49 % from 1990 
levels  by  2030,  outlines  initiatives  to  offset 
reductions in income tax with increased taxation in 
and 
energy, 
the 
consumption.  The  government  also  aims 
to 
introduce  a  minimum  price 
from 
electricity  generation  —  a  carbon  price  floor  — 
starting  at  EUR 18  in  2020  and  rising  to  EUR 43 
by  2030  to  supplement  the  price  signal  from  the 
EU  ETS.  Companies  in  the  sector  would  be 
charged  an  additional  levy  based  on  the  price 
difference  between  the  EU  allowances  and  the 
to  better  reflect  CO2 
price  floor.  In  order 
emissions,  a  rebalancing  of  the  energy  tax  for 
consumers will see gas costs increase by EUR 0.03 
per  cubic  metre,  while  tax  on  electricity  will 
decrease  by  EUR 0.0072  per  kilowatt  hour.  The 
Netherlands  is  among  the  Member  States,  which 
give an incentive for the use of electric vehicles in 
order  to  improve  local  air  quality  by  applying 
lower  excise  duties  for  electricity  supplied  to 
charging stations. For the time being, air pollution 
continues  to  give  rise  to  serious  human  health 
concerns 
(European  Environment  Agency, 
2017, pp.57-58).

national  strategy  to  meet  its  2030  objectives. 
The  agreement  is  to  be  drawn  up  in  cooperation 
with  local  and  regional  authorities  as  well  as 
stakeholders.  Measures  from  this  agreement  will 
be  incorporated  into  national  climate  law.  The 
government's ambitions include closing of all coal-
fired  power  plants  by  2030,  selling  only  zero 
emission  cars  by  2030,  reducing  emissions  from 
housing  and  buildings  through  a  combination  of 
energy  efficiency  and  sustainable  power  and 
heating, and allotting additional areas for off-shore 
wind  farms.  Compensating  measures  for  closing 
coal-fired power plants have not been announced.  

Natural  gas  production  will  be 
further 
decreased.  As  a  result  of  production  ceilings  set 
for  the  Groningen  field  (due  to  earthquakes)  and 
lower  production  levels  at  other  small  gas  fields 
following natural depletion, gas production will be 
further reduced in the coming years. According to 
the  International  Energy  Agency,  the  Netherlands 
is  expected  to  become  a  net  importer  of  gas  by 
2025. 

The Netherlands is the only Member State that 
did not reach its 2013/2014 indicative renewable 
energy  sources  (RES)  trajectory  of  5.9 %  of 
gross  final  energy  consumption.  With  a  5.84 % 
renewable  energy  share  in  gross  final  energy 
consumption  in  2015,  the  Netherlands  is  also 
expected  to  miss  its  2015-2016  indicative  RES 
trajectory  of  7.6 %.  While  the  National  Energy 
Outlook 2017 projects acceleration in the increase 
of  the  renewable  energy  share  towards  2020,  it  is 
unlikely  that  the  Netherlands  will  be  able  to  fully 
deliver  by  2020.  The  government  has  announced 
some  additional  measures  as  it  plans  to  increase 
the  support  scheme  for  renewable 
funds 
energies 
Duurzame 
(Stimulering 
Energieproductie)  towards  EUR  3.2.billion  per 
year. The national target of 16 % renewable energy 
in  2023  agreed  upon  in  the  National  Energy 
Agreement  is  expected  to  be  met.  Although  the 
Dutch  government  adopted  an  'Energy  Agenda' 
providing  strategic  guidance  for  a  low-carbon 
energy  system  for  2050,  it  has  not  adopted  an 
explicit  RES  target  for  2030.  Given  the  slight 
increases in energy consumption, energy efficiency 
efforts  need  to  be  kept  up  to  ensure  the  2020 
targets will be met. 

in 

The  coalition  agreement  includes  the  further 
development  of  a  national  circular  economy 

(50)  https://ec.europa.eu/environment/ecoap/scoreboard  

52 

 
                                                           
ANNEX A: OVERVIEW TABLE 

Commitments  

Summary assessment (51) 

2017 country-specific recommendations (CSRs)  

CSR 1: While respecting the medium-term objective, 
use fiscal and structural policies to support potential 
growth  and  domestic  demand,  including  investment 
in  research  and  development.  Take  measures  to 
reduce  the  remaining  distortions  in  the  housing 
market and the debt bias for households, in particular 
by decreasing mortgage interest tax deductibility.  

The  Netherlands  has  made  some  progress 
addressing CSR 1(52): 

in 

While  respecting  the  medium-term  objective,  use 
fiscal  and  structural  policies  to  support  potential 
growth and domestic demand,  

Substantial  progress.  The  government  has  taken 
fiscal  measures  that  support  domestic  demand,  in 
particular  increasing  expenditure  on  security  and  on 
teachers' salaries. 

including investment in research and development.  Some  progress.  From  2018  onwards, 

the 
government  increases  expenditure  on  research  and 
development. 

Take measures to reduce the remaining distortions in 
the housing market and the debt bias for households, 
in  particular  by  decreasing  mortgage  interest  tax 
deductibility.  

Some  progress.  The  government  has  announced  to 
accelerate  the  reduction  of  mortgage  interest  tax 
deductibility  from  2020  onwards  until  it  reaches  37 
%  in  2023,  which  is  still  relatively  high.  For  the 
rental  market, 
the  government  has  created  a 
roundtable  on  the  middle  segment  rental  market 
(Samenwerkingstafel  Middenhuur) 
bring 
stakeholders  together  to  discuss  challenges  and 
solutions  in  the  rental  market.  The  roundtable  will 

to 

(51)  The following categories are used to assess progress in implementing the country-specific recommendations (CSRs):  
No progress: The Member State has not credibly announced nor adopted any measures to address the CSR. This category covers a 
number  of  typical  situations  to  be  interpreted  on  a  case  by  case  basis  taking  into  account  country-specific  conditions.  They 
include the following:  

no legal, administrative, or budgetary measures have been announced 
in the national reform programme, 
in any other official communication to the national Parliament/relevant parliamentary committees or the European Commission, 
publicly (e.g. in a press statement or on the government's website); 
no non-legislative acts have been presented by the governing or legislative body; 
the  Member  State  has  taken  initial  steps  in  addressing  the  CSR,  such  as  commissioning  a  study  or  setting  up  a  study  group  to 
analyse possible measures to be taken (unless the CSR explicitly asks for orientations or exploratory actions). However, it has 
not proposed any clearly-specified measure(s) to address the CSR. 

Limited progress: The Member State has:  
announced certain measures but these address the CSR only to a limited extent; and/or 
presented  legislative  acts  in  the  governing  or  legislative  body  but  these  have  not  been  adopted  yet  and  substantial  further,  non-

legislative work is needed before the CSR is implemented; 

presented non-legislative acts, but has not followed these up with the implementation needed to address the CSR. 
Some progress: The Member State has adopted measures  
that partly address the CSR; and/or  
that address the CSR, but a fair amount of work is still needed to fully address the CSR fully as only a few of the measures  have 
been implemented. For instance, a measure or measures have been adopted by the national Parliament or by ministerial decision 
but no implementing decisions are in place.  

Substantial progress: The Member State has adopted measures that go a long way towards addressing the CSR and most of them 

have been implemented.  

Full implementation: The Member State has implemented all measures needed to address the CSR appropriately. 

(52)  This overall assessment of CSR1 does not include an assessment of compliance with the Stability and Growth Pact. 

53 

 
 
                                                           
 
A. Overview table 

issue  recommendations  on  how  to  stimulate  the 
middle  segment  of  the  rental  market.  Furthermore, 
the  Law  on  Spatial  Planning  was  amended  in  2017, 
zones 
allowing  municipalities 
specifically  for  building  middle  segment  rental 
dwellings.  Other  remaining  distortions  in  the  social 
housing sector have not been addressed. 

aside 

set 

to 

The  Netherlands  has  made  limited  progress  in 
addressing CSR 2: 

CSR  2:  Tackle  remaining  barriers  to  hiring  staff  on 
permanent contracts. Address the high increase in the 
self-employed  without  employees, 
including  by 
reducing  tax  distortions  favouring  self-employment, 
without  compromising  entrepreneurship,  and  by 
promoting  access  of  the  self-employed  to  affordable 
social  protection.  Based  on  the  broad  preparatory 
process  already  launched,  make  the  second  pillar  of 
inter-
the  pension 
generationally  fairer  and  more  resilient  to  shocks. 
Create  conditions  to  promote  higher  real  wage 
growth, respecting the role of the social partners.  

system  more 

transparent, 

Tackle 
permanent contracts.  

remaining  barriers 

to  hiring  staff  on 

Limited  progress.  The  government  has  announced 
several  additional  measures  and  ideas/intentions  for 
further reflection on segmentation, but no legislative 
measures have been presented yet. 

including  by  reducing 

Address  the  high  increase  in  the  self-employed 
without  employees, 
tax 
self-employment,  without 
distortions 
compromising  entrepreneurship,  and  by  promoting 
access  of  the  self-employed  to  affordable  social 
protection.  

favouring 

Limited  progress.  The  government  has  announced 
the  introduction  of  a  minimum  hourly  rate  for  the 
self-employed and ideas for further reflection, but no 
legislative  measures  have  yet  been  presented.  The 
announced reduction of tax brackets from four to two 
may  reduce  the  maximum  rate  of  specific  tax 
deductions  for  some  self-employed  not  operating  at 
the margin of the labour market in a phased manner. 
No  specific  measures  have  been  announced  on  the 
social security coverage of the self-employed.  

Based  on  the  broad  preparatory  process  already 
launched,  make  the  second  pillar  of  the  pension 
system  more  transparent,  inter-generationally  fairer 
and more resilient to shocks.  

No  progress.  The  government  has  confirmed  its 
intention  to  reform  the  second  pillar  of  the  pension 
system, but no measures have been announced so far.  

Create  conditions  to  promote  higher  real  wage 
growth, respecting the role of the social partners.  

The 

progress. 

government 

Limited 
has 
acknowledged the need for higher real wage growth. 
The  announced  new  fiscal  measures  will  reduce  the 
tax  burden  on  labour  income.  In  addition,  the 
coalition  agreement 
in 
expenditure  on  teachers'  salaries.  In  general,  wage 
setting  is  the  competence  of  the  social  partners  and 
recent  wage  demands  (and  those  already  agreed  for 
certain sectors) are substantially higher for 2017 and 
2018. A  tightening of  the  labour  market  is expected 

includes  an 

increase 

54 

 
A. Overview table 

to push up real wage growth.  

Europe 2020 (national targets and progress)  

Employment rate target set in the 2016 NRP: 80 %.  Labour  market  participation  stood  at  81.6  %  in  Q2-
2017  and  employment  at  77.1  %  in  2017Q2.  The 
Netherlands is on target to reach this goal. 

R&D target: 2.5 % of GDP. 

In 2016,  total R&D  expenditure  amounted to  2.03% 
of  GDP.  The  average  yearly  growth  rate  of  1.0% 
since  2012  would  need  to  increase  substantially  to 
over 5 % to reach the target by 2020. 

  National greenhouse gas (GHG) emissions target:  

 

-16 %  in  2020  compared  to  2005  (in  sectors  not 
covered by the EU emission trading scheme). 

According to national projections, the Netherlands is 
expected to overachieve its greenhouse gas reduction 
target  2020 
the  Effort  Sharing 
Regulation of -16 % by 10 pp compared to 2005. 

target  under 

  Non-ETS 2016 target: -9 %.   

The  intermediate  -9 %  target  for  2016  has  been 
overachieved by 11 %.  

2020 renewable energy target:  

  Energy from renewable sources is 14 % of gross 

final energy consumption by 2020. 

  The 2015-2016 interim target is 7.6 %.  

With a 5.84 % renewable energy share in gross final 
energy  consumption  in  2015,  the  Netherlands  is 
expected  to  miss  its  2015-2016  indicative  RES 
trajectory of 7.6 %. It is unlikely that the Netherlands 
will  fully  deliver  on 
target  without 
additional effort. 

the  2020 

Energy  efficiency  target:  11.5  Mtoe  of  cumulative 
savings  in  final  energy  consumption  in  2014-2020. 
This translates into:  

Primary  energy  consumption  increased  from  64.59 
Mtoe  in  2015  to  64.8  Mtoe  in  2016.  Final  energy 
consumption  remained  stable  at  49.5  Mtoe  during 
2015 and 2016. 

  60.7 Mtoe in primary energy consumption, and 

  52.2 Mtoe in final energy consumption. 

Early school leaving (ESL) target: <8.0 %. 

Tertiary education target: >40 %. 

Given  the  slight  increases  in  energy  consumption, 
efforts need to be kept up to ensure the 2020 targets 
will be met. 

The  ESL  rate  has  been  falling  for  years,  and  the 
national  target  has  already  been  achieved  in  2016 
with an 8 % rate. 

The rate was 45.7 % in 2016, which is well above the 
national target and the EU average of 39.1 %. 

Target  for  reducing  the  number  of  people  living  in 
households  with  very  low  work  intensity  in  number 
of people: - 100 000 (aged 0-64). 

Starting in 2010 with 1 595 000 people belonging to 
this group the number has increased to 1 653 000 in 
2015, and remained stable in 2016. Thus, the target is 
not in reach. 

55 

 
 
ANNEX B: MACROECONOMIC IMBALANCE PROCEDURE 

SCOREBOARD 

Table B.1: 

The MIP scoreboard for the Netherlands (AMR 2018) 

Flags: b: Break in series. p: Provisional.  
(1) This table provides data as published under the Alert Mechanism Report 2018, which reports data as of 24 Oct 2017. 
Please note that figures reported in this table may therefore differ from more recent data elsewhere in this document. 
Source: European Commission 2017, Statistical Annex to the Alert Mechanism Report 2018, SWD(2017) 661. 

56 

Thresholds201120122013201420152016Current account balance, % of GDP 3 year average-4%/6%7.1 8.7 9.6 9.6 9.0 8.8 Net international investment position% of GDP-35%20.4 27.0 31.0 48.7 55.1 69.1 Real effective exchange rate - 42 trading partners, HICP deflator3 year % change±5% (EA) ±11% (Non-EA)-2.4 -6.0 0.5 0.7 -0.8 -2.3 Export market share - % of world exports5 year % change-6%-8.2 -12.4 -11.0 -11.0 -6.4 0.1 Nominal unit labour cost index (2010=100)3 year % change9% (EA) 12% (Non-EA)4.8 2.3 5.2 4.2 -0.4p-1.1pHouse price index (2015=100), deflated 1 year % change6%-4.0 -8.1 -8.2 0.0 3.4 4.4 Private sector credit flow, consolidated% of GDP14%4.2 2.0 1.5 -1.8 -0.8p1.5pPrivate sector debt, consolidated% of GDP133%225.0 225.9 223.4 225.7 225.1 221.5pGeneral government gross debt% of GDP60%61.6 66.3 67.8 68.0 64.6 61.8 Unemployment rate3 year average10%4.8 5.3 6.0 6.8 7.2 6.8 Total financial sector liabilities, non-consolidated1 year % change16.5%9.0 5.0 -1.1 7.7 3.6 5.3pActivity rate - % of total population aged 15-643 year change in pp-0.2 pp-1.2b-0.7 1.2b0.9b0.6 0.3 Long-term unemployment rate - % of active population aged 15-743 year change in pp0.5 pp0.7b1.1 1.3 1.3 1.1 0.0 Youth unemployment rate - % of active population aged 15-243 year change in pp2 pp1.4 1.5 2.1 2.7 -0.4 -2.4 External imbalances and competitivenessInternal imbalancesEmployment indicators 
 
 
 
 
 
ANNEX C: STANDARD TABLES 

Table C.1: 

Financial market indicators 

1) Latest data Q3 2017. Includes not only banks but all monetary financial institutions excluding central banks. 
2) Latest data Q2 2017. 
3) As per ECB definition of gross non-performing debt instruments 
4) Quarterly values are not annualised 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators) 

57 

201220132014201520162017Total assets of the banking sector (% of GDP)(1)379.9336.6364.0355.6350.9331.0Share of assets of the five largest banks (% of total assets)82.183.885.084.684.7-Foreign ownership of banking system (% of total assets)(2)10.27.56.77.26.97.2Financial soundness indicators:2)              - non-performing loans (% of total loans)(3)2.72.73.02.42.22.1              - capital adequacy ratio (%)14.515.318.420.622.423.1              - return on equity (%)(4)4.15.03.37.07.34.8Bank loans to the private sector (year-on-year % change)(1)4.0-1.11.1-2.00.5-1.0Lending for house purchase (year-on-year % change)(1)4.3-0.11.35.43.47.1Loan to deposit ratio(1)119.2117.8114.1113.4110.6108.2Central Bank liquidity as % of liabilities--0.60.70.81.4Private debt (% of GDP)225.9223.4225.7225.1221.5-Gross external debt (% of GDP)(2) - public36.338.441.237.732.128.1    - private304.5320.5337.2345.6343.6343.5Long-term interest rate spread versus Bund (basis points)*43.839.229.219.520.321.0Credit default swap spreads for sovereign securities (5-year)*86.449.028.216.123.417.9 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.2: 

Headline Social Scoreboard indicators 

† The Social Scoreboard includes 14 headline indicators, of which 12 are currently used to compare Member States 
performance. The indicators "participants in active labour market policies per 100 persons wanting to work" and 
"compensation of employees per hour worked (in EUR)" are not used due to technical concerns by Member States. Possible 
alternatives will be discussed in the relevant Committees. 
(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 (SMD) and/or living in households with zero or very low work intensity (LWI).       
(2) Unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within two weeks.       
(3) Gross disposable household income is defined in unadjusted terms, according to the draft Joint Employment Report 2018.       
(4) Reduction in percentage of the risk of poverty rate, due to social transfers (calculated comparing at-risk-of poverty rates 
before social transfers with those after transfers; pensions are not considered as social transfers in the calculation).       
(5) Average of first three quarters of 2017 for the employment rate and gender employment gap.  
Source: Eurostat 

58 

201220132014201520162017 5Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)8.99.38.78.28.0:Gender employment gap (pps)11.310.511.411.111.010.4Income inequality, measured as quintile share ratio (S80/S20)3.63.63.83.83.9:At-risk-of-poverty or social exclusion rate1 (AROPE)15.015.916.516.416.7:Young people neither in employment nor in education and training (% of population aged 15-24)4.95.65.54.74.6:Dynamic labour markets and fair working conditions†Employment rate (20-64 years)76.675.975.476.477.177.9Unemployment rate2 (15-74 years)5.87.37.46.96.04.9Gross disposable income of households in real terms per capita3 (Index 2008=100) ::96.997.699.2:Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction451.050.045.548.042.5:Children aged less than 3 years in formal childcare46.046.044.646.453.0:Self-reported unmet need for medical care0.50.40.50.10.2:Individuals who have basic or above basic overall digital skills (% of population aged 16-74):::72.077.079.0 
 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator       
(1) Long-term unemployed are people who have been unemployed for at least 12 months.       
(2) Difference between the average gross hourly earnings of male paid employees and of female paid employees as a 
percentage of average gross hourly earnings of male paid employees. It is defined as "unadjusted", as it does not correct for 
the distribution of individual characteristics (and thus gives an overall picture of gender inequalities in terms of pay). All 
employees working in firms with ten or more employees, without restrictions for age and hours worked, are included.       
(3) PISA (OECD) results for low achievement in mathematics for 15 year-olds.       
(4) Impact of socio-economic and cultural status on PISA (OECD) scores. Values for 2012 and 2015 refer respectively to 
mathematics and science.       
(5) Average of first three quarters of 2017, unless for the youth unemployment rate (annual figure). 
Source: Eurostat, OECD 

59 

Labour market indicators201220132014201520162017 5Activity rate (15-64)79.079.479.079.679.7:Employment in current job by durationFrom 0 to 11 months12.011.511.913.013.9:From 12 to 23 months8.48.27.67.78.4:From 24 to 59 months17.716.015.614.814.4:60 months or over61.163.063.663.061.8:Employment growth* (% change from previous year)-0.2-1.2-0.10.91.12.1Employment rate of women(% of female population aged 20-64)71.070.669.770.871.672.7Employment rate of men (% of male population aged 20-64)82.381.181.181.982.683.1Employment rate of older workers* (% of population aged 55-64)57.659.259.961.763.565.4Part-time employment* (% of total employment, aged 15-64)49.049.849.650.049.749.8Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)19.220.221.120.020.621.7Transition rate from temporary to permanent employment(3-year average)19.116.516.222.5::Long-term unemployment rate1 (% of labour force)1.92.52.93.02.52.0Youth unemployment rate (% active population aged 15-24)11.713.212.711.310.88.9Gender gap in part-time employment52.451.150.650.450.249.0Gender pay gap2 (in undadjusted form)17.616.516.116.1::Education and training indicators201220132014201520162017Adult participation in learning(% of people aged 25-64 participating in education and  training)16.917.918.318.918.8:Underachievement in education314.8::16.7::Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)42.243.244.846.345.7:Variation in performance explained by students' socio-economic status411.5::12.5:: 
 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.4: 

Social inclusion and health indicators 

(1) At-risk-of-poverty rate (AROP): proportion of people with an equivalised disposable income below 60 % of the national 
equivalised median income.  
(2) Proportion of people who experience at least four of the following forms of deprivation: not being able to 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. 
(3) Percentage of total population living in overcrowded dwellings and exhibiting housing deprivation. 
(4) People living in households with very low work intensity: proportion of people aged 0-59 living in households where the 
adults (excluding dependent children) worked less than 20 % of their total work-time potential in the previous 12 months. 
(5) Ratio of the median individual gross pensions of people aged 65-74 relative to the median individual gross earnings of 
people aged 50-59. 
(6) Fixed broadband take up (33%), mobile broadband take up (22%), speed (33%) and affordability (11%), from the Digital 
Scoreboard 
Source: Eurostat, OECD 

60 

201220132014201520162017Expenditure on social protection benefits* (% of GDP)Sickness/healthcare10.410.210.09.4::Disability2.32.32.22.7::Old age and survivors12.012.212.312.1::Family/children1.01.00.91.1::Unemployment1.41.61.61.5::Housing0.40.40.40.5::Social exclusion n.e.c.1.41.51.41.2::Total28.929.228.928.4::of which: means-tested benefits3.83.93.84.1::General government expenditure by function (% of GDP, COFOG)Social protection16.817.016.916.316.2:Health8.38.28.28.17.7:Education5.55.45.45.35.3:Out-of-pocket expenditure on healthcare (% of total health expenditure)10.411.712.212.3::Children at risk of poverty or social exclusion (% of people aged 0-17)*16.917.017.116.817.6:At-risk-of-poverty  rate1 (% of total population)10.110.411.611.612.7:In-work at-risk-of-poverty rate (% of persons employed)4.64.55.35.05.6:Severe material deprivation rate2  (% of total population)2.32.53.22.62.6:Severe housing deprivation rate3, by tenure statusOwner, with mortgage or loan0.20.20.10.40.5:Tenant, rent at market price1.92.11.62.43.3:Proportion of people living in low work intensity households4 (% of people aged 0-59)8.99.310.210.29.7:Poverty thresholds, expressed in national currency at constant prices*1137811215109621113611865:Healthy life years (at the age of 65)Females10.19.210.29.4::Males10.09.510.710.5::Aggregate replacement ratio for pensions5 (at the age of 65)0.50.50.50.50.5:Connectivity dimension of the Digital Economy and Society Inedex (DESI)6::71.673.780.181.7GINI coefficient before taxes and transfers*46.546.448.049.049.8:GINI coefficient after taxes and transfers*25.425.126.226.728.2: 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.5: 

Product market performance and policy indicators 

1 The methodologies, including the assumptions, for this indicator are shown in detail here: 
http://www.doingbusiness.org/methodology.        
2 Average of the answer to question Q7B_a. "[Bank loan]: If you applied and tried to negotiate for this type of financing over 
the past six months, what was the outcome?". Answers were codified as follows: zero if received everything, one if received 
most of it, two if only received a limited part of it, three if refused or rejected and treated as missing values if the application is 
still pending or don't know.       
3 Percentage population aged 15-64 having completed tertiary education.       
4 Percentage population aged 20-24 having attained at least upper secondary education.       
5 Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are 
shown in detail here: http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm       
6 Aggregate OECD indicators of regulation in energy, transport and communications (ETCR).       
Source: European Commission; World Bank — Doing Business (for enforcing contracts and time to start a business); OECD (for 
the product market regulation 
indicators); SAFE (for outcome of SMEs' applications for bank loans) 

61 

Performance Indicators2010201120122013201420152016Labour productivity (real, per person employed, year-on-year % change)Labour productivity in Industry6.951.230.431.50-1.53-1.100.47Labour productivity in Construction-5.77-0.04-4.78-0.165.149.257.34Labour productivity in Market Services2.271.330.550.781.121.86-0.21Unit labour costs (ULC) (whole economy, year-on-year % change)ULC in Industry-10.891.612.630.074.201.271.03ULC in Construction9.67-0.827.82-2.36-7.98-10.34-5.34ULC in Market Services-2.690.271.781.05-1.39-2.340.72Business Environment2010201120122013201420152016Time needed to enforce contracts(1) (days)514.0514.0514.0514.0514.0514.0514.0Time needed to start a business(1) (days)8.08.05.04.04.04.04.0Outcome of applications by SMEs for bank loans(2)1.431.251.801.581.641.300.90Research and innovation2010201120122013201420152016R&D intensity1.721.901.941.952.002.002.03General government expenditure on education as % of GDP5.605.505.505.405.405.305.30Persons with tertiary education and/or employed in science and technology as % of total employment45454647474848Population having completed tertiary education(3)28282929303131Young people with upper secondary level education(4)78787978798081Trade balance of high technology products as % of GDP1.711.982.862.262.751.52naProduct and service markets and competition200320082013OECD product market regulation (PMR)(5), overall1.490.960.92OECD PMR5, retail1.470.910.91OECD PMR5, professional services1.571.281.23OECD PMR5, network industries(6)2.061.711.57 
 
 
 
 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.6:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 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 material 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   
Weighting of energy in HICP: the proportion of 'energy' items in the consumption basket used for the construction of the HICP 
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual % 
change) 
Real unit energy cost: real energy costs as % of total value added for the economy 
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2010 EUR)  
Real unit energy costs for manufacturing industry excluding refining : real costs as % of value added for  manufacturing 
sectors 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP 
Electricity and gas prices for medium-sized industrial users: consumption band 500–20 00MWh and 10 000–100 000 GJ; figures 
excl. VAT. 
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste 
Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP 
Proportion of GHG emissions covered by EU emissions trading system (ETS) (excluding aviation): based on GHG emissions 
(excl land use, land use change and forestry) as reported by Member States to the European Environment Agency. 
Transport energy intensity: final energy consumption of transport activity (kgoe) divided by transport industry gross value 
added (in 2010 EUR) 
Transport carbon intensity: GHG 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. consumption of 
international bunker fuels 
Aggregated supplier concentration index:  covers oil, gas and coal. Smaller values indicate larger diversification and hence 
lower risk. 
Diversification of the energy mix: Herfindahl index covering natural gas, total petrol products, nuclear heat, renewable 
energies and solid fuels 
* European Commission and European Environment Agency 
Source: European Commission and European Environment Agency (Share of GHG emissions covered by ETS); European 
Commission (Environmental taxes over labour taxes and GDP); Eurostat (all other indicators) 

62 

Green growth performance201120122013201420152016MacroeconomicEnergy intensity kgoe / €0.130.130.130.120.120.12Carbon intensity kg / €0.310.310.310.290.30-Resource intensity (reciprocal of resource productivity)kg / €0.290.290.270.270.280.24Waste intensity kg / €-0.19-0.21--Energy balance of trade % GDP-3.5-5.0-4.0-3.4-1.8-1.4Weighting of energy in HICP%11.3211.2811.6611.699.779.36Difference between energy price change and inflation %3.43.60.0-1.5-2.9-5.6Real unit of energy cost% of value added13.013.611.611.1--Ratio of environmental taxes to labour taxesratio0.170.160.160.160.16-Environmental taxes% GDP3.53.33.33.43.43.4Sectoral Industry energy intensity kgoe / € 0.160.160.150.150.150.16Real unit energy cost for manufacturing industry excl. refining% of value added23.123.518.017.2--Share of energy-intensive industries in the economy% GDP8.978.958.968.437.917.64Electricity prices for medium-sized industrial users€ / kWh0.100.100.090.090.090.08Gas prices for medium-sized industrial users€ / kWh0.030.040.040.040.040.03Public R&D for energy % GDP0.010.020.020.010.020.02Public R&D for environmental protection% GDP0.010.010.010.000.000.00Municipal waste recycling rate%49.149.449.850.951.853.1Share of GHG emissions covered by ETS*%40.839.944.647.648.047.8Transport energy intensitykgoe / €0.550.520.520.480.500.50Transport carbon intensitykg / €1.271.201.181.071.09-Security of energy supplyEnergy import dependency%30.030.526.233.451.845.2Aggregated supplier concentration indexHHI14.615.815.317.021.0-Diversification of energy mixHHI0.360.340.350.330.330.33 
 
 
 
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