According to the EU executive board, the Netherlands is on an “expansionary budget course” which is not caused by temporary and targeted support measures for households and businesses to keep energy costs affordable and costs for housing Ukrainian refugees.
The European Commission’s judgment does not immediately mean that Kaag has to go back to the drawing board, says political journalist Sophie van Leeuwen. “The budget deficit fluctuates around 3 percent, but what is happening in the Netherlands is also exceptional and perhaps Europe is not used to that in the Netherlands”. The government has announced it will invest billions of euros to offset high energy bills, and funds will be made available for climate and nitrogen.
“And these are historic times too,” says Van Leeuwen. ‘The European Commission now wants Kaag to take action, but the question is how Kaag will pay for all of this. This question has been floating around for months, whether it’s going to raise money from wealthy people or the business community.’
Mortgage interest deduction
Another criticism from the European Commission has been, for a long time, the deduction of mortgage interest. ‘We subsidize owner-occupied housing in the Netherlands and the debt burden in the Netherlands is very high. Brussels thinks something should be done about it.’ According to Van Leeuwen, political parties such as the CDA and VVD are not keen on raising the price of an average house. Those are difficult conversations within the coalition.’
“Structural Problems Not Addressed”
In a package of recommendations on euro countries’ fiscal policy, the committee also writes that the Netherlands has made only limited progress in solving structural problems, such as high household debt and a disrupted housing market. As a result, there are still imbalances in the Dutch economy, he warns.
Earlier this year, the Council of State asked for an explanation of the Dutch government’s ‘expansive fiscal policy’, known for years as very frugal in other member states and in Brussels. Under Rutte IV, the cabinet appears to be structurally investing billions more in health care, education, and solving the housing shortage and nitrogen problem.