The government should spend less money. This is not in line with the strength of the Dutch economy at the moment and thereby The Hague is adding “fuel to the inflationary fire,” according to De Nederlandsche Bank (DNB) director of monetary affairs and financial stability Olaf Sleijpen. Companies should also contribute by not passing on all the extra costs and reducing their profits a bit. DNB has long been asking the unions not to demand too high wage increases.
Sleijpen made his comments in the context of the publication of new economic forecasts by DNB. The central bank expects inflation in the Netherlands to fall more slowly than in other European countries. One reason is that companies try to pass on a lot of additional costs to maintain their profit margins. At the end of last year, according to DNB, corporate profits were even the main driver of inflation.
At the same time, Sleijpen doesn’t think the term “Graaiflation” can be used for it. We don’t really like that word. It fits into a model of social conflict. This won’t help us.’
DNB has long said that the government is too generous with all kinds of subsidies to deal with the consequences of inflation. These can be better addressed through poverty reduction than with general measures such as capping energy and reducing excise taxes on petrol and diesel. But now the central bank is also putting more pressure on the government’s fiscal discipline. “We think there is currently too much spending while the economy is still a bit overheated,” explains Sleijpen.
Coverage
DNB would like The Hague to seek budgetary cover for extra spending or financial setbacks and thus no longer run a budget deficit. Even in view of the national debt. It is still falling relative to gross domestic product (GDP), but if inflation falls again, debt could rapidly increase. “We are seeing this realization in politics as well.”
Regarding wage increases, DNB has long called for caution, with increases of up to 7 percent still within bounds. “Such raises can pay companies out of profits,” says Sleijpen, although he also indicates that this can vary by industry.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
