Cabinet rejects criticism, stands firm on cuts

22 September 2004

AMSTERDAM — In the face of growing public resistance and alternative growth budgets put forward by several opposition parties, the Dutch Cabinet has stood firm on the “painful” economising measures and further social security it has planned.

Finance Minister Gerrit Zalm admitted after presenting the 2005 Budget in Parliament on Tuesday that support for the government’s plans is “not tremendous”. But he pointed out that every cut to social security in the past has met with trade union protests.

Zalm also picked up on a poll conducted by public broadcaster Radio 1 that indicated 60 percent of the Dutch public opposes the government’s plans, even though 50 percent describe them as “necessary”.

Social Affairs Minister Aart-Jan de Geus and Economic Affairs Minister Laurens Jan Brinkhorst also emphasised the budget cuts were necessary.

Brinkhorst said the cabinet will implement further cuts to WW unemployment benefits, claiming that the government has only just begun with its reform agenda. His statement caught De Geus off guard, who said no further cuts to the WW system — besides those already announced —will be imposed during the government’s present term of office.

The Council of State — the government’s highest advisory body — has called for further measures, such as abolishing the minimum wage to help the job market to function better and a greater number of low educated workers to find a job. Zalm has promised to study the proposal.

But any further cuts will only serve to antagonise an already angry trade union movement. Labour federations FNV, CNV and MHP have launched a series of protests against the government’s austerity measures, objecting to cuts to fiscally attractive early retirement plans, social security and healthcare.

Up to 60,000 people protested in Rotterdam on Monday and protests involving several thousand people in The Hague, Utrecht, Arnhem and Eindhoven were staged on Tuesday as Zalm presented the budget.

Zalm also said that the Dutch polder model of consensus governing by agreement between unions, employers and the government only works when no “painful measures” are necessary, newspaper De Volkskrant reported.

The cabinet has planned to save EUR 2.5 billion next year in spending cuts and higher taxes to reduce the budget deficit to 2.6 percent of Gross Domestic Product (GDP). It claims the cuts are necessary to strengthen the economy in the long term.

The economy is forecast to grow by 1.25 percent this year and 1.5 percent in 2005. But despite the beginnings of an economic recovery, the number of jobless workers will rise to 550,000 next year.

The coalition government is made up of the Christian Democrat CDA, Liberal VVD and Democrat D66. Their parliamentary factions backed the budget’s main points as they say they are convinced of the need to tackle “structural weaknesses” in the Dutch economy, particularly high wages costs and a poor workforce participation rate, news agency ANP reported.

The government party MPs are however resisting cuts to funding used to assist students who have fallen behind in the education system and other cuts to the education budget. The CDA is also demanding that people aged 55 or older retain their right to an early pension, in contrast to the cabinet’s age limit of 57.

Wouter Bos, the leader of main opposition party Labour PvdA, accused the cabinet of not listening to anyone. Together with the Socialist Party and green-left GroenLinks, the PvdA hopes to minimise the cuts to the VUT and pre-pension early retirement schemes, but the chance of success is very small.

The government’s macroeconomic think-tank, the Central Planning Bureau (CPB), said all of the alternative budgets unveiled by the opposition parties would lead to job growth. But the growth would be stimulated by higher government spending and it remains unclear whether this growth would be structural or cyclical, news agency Novum reported. The budget deficit would remain about the same as the government’s intended target.

The opposition parties also urged the cabinet to better explain its measures to the public. They said the public needed to know that they would gain something in return from the cuts. Minister Zalm admitted the message had not been delivered well enough.

The General Affairs Ministry headed by Prime Minister Jan Peter Balkenende will in future co-ordinate the dissemination of information.

In an initial reaction to Zalm’s budget, small business association MKB accused the cabinet of “smothering” the economic recovery. But employers association VNO-NCW said the government had no choice but to press ahead with the cutbacks. “There is no substantial alternative. It is change or impoverishment,” it said.

Subject: Dutch news