The EU will set a stricter fiscal path in the Netherlands to balance its budget!
The European Union will impose a stricter fiscal path on the Netherlands, forcing it to limit its spending more aggressively after the traditionally fiscally disciplined country ignored recommendations from the bloc's executive arm.
The government in The Hague presented a medium-term plan for the next four years that exceeded the trajectory given as a reference by the European Commission last June, Vice President Valdis Dombrovskis told reporters. That trajectory provided by the EU executive will now become binding.
The commission on Tuesday signed off on most of the region's 2025 budgets and medium-term plans submitted by EU member states, which for the first time were assessed under the bloc's new fiscal regulation.
The rules give national governments more leeway to set their own adjustment path to reduce their deficit and debt levels below the reference values of 3% and 60% of gross domestic product respectively. The regulation also now contains a more robust enforcement system.
The Netherlands proposed an average increase in net spending of 4.2% per year over its four-year plan, compared to the 3.2% reference trajectory issued by the commission, Dombrovskis said. For this reason, the commission concluded that the Dutch budget for the next year is contrary to its recommendations.
After talks between The Hague and Brussels, the commission proposed that the Dutch government respect the spending ceiling recommended in June. The recommendation must be confirmed by the Council, which brings together member states, in the coming weeks. The commission also found France's budget for next year in line with Brussels' recommendations and extended the timeline to reduce its public debt from four to seven years, as Bloomberg previously reported.
Dombrovskis said the Paris medium-term proposal is more demanding than the EU executive recommended given the worsening initial position compared to June, with the deficit now forecast at over 6% of GDP. As a result, France's net spending increase will be only 1.1% of GDP compared to the 1.6% recommended by the commission. "It is important that France has ambitious fiscal plans," he said.
In the case of Germany, Dombrovskis said that he has been in contact with the country's new finance minister, Joerg Kukies, who, since early elections are scheduled for February 23, will request another extension for the presentation of fiscal plans. For the eurozone group of economies as a whole, the commission recommends that governments continue to reduce the levels of debt accumulated in previous years to overcome the Covid pandemic and the energy crisis.
However, maintaining tight budgets and massive investment clashes the bloc faces could reach 800 billion euros ($842 billion), according to former European Central Bank president Mario Draghi. The commission argues that despite limited spending, national governments will be able to keep their public investments afloat thanks to billions of euros coming from the EU's post-pandemic recovery fund.
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