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Central bank president lashes out at Dutch Cabinet over deficit levels
Klaas Knot, president of the Dutch central bank DNB, urged the Cabinet to figure out where the money for all the extra money it plans to spend on farmers, energy bill compensation, and earthquake victims in Groningen should come from. “We don’t comment on specific expenditures,” Knot said on Nieuwsuur. “But the budget deficit in the Netherlands is actually too high.”
According to Knot, all the big extra expenses, like the price cap on energy to help people pay their bills, buyout schemes for farmers in the nitrogen crisis, and compensation for Groningen residents whose homes and mental health have been damaged by fracking earthquakes, could put the Netherlands close to the European Union’s limit of a 3 percent budget deficit.
“You don’t expect that in a time when the economy is doing well,” Knot said on the program. If the next economic crisis rears its head, the Netherlands might be in trouble. “Then the budget deficit will increase further, and we will pass the 3 percent limit. And then we will have to cut spending when the economy is weakening.”
Whether the money should come from budget cuts or tax increases is up to the government to decide, Knot said. “But a budget deficit of 3 percent is really too high in the current economic climate.”
The government managed a small budget surplus of 0.1 billion euros in 2022, Statistics Netherlands (CBS) reported on Friday. A year earlier, the budget deficit was 20 billion euros or 2.4 percent of the GDP.
Government expenses increased last year due to higher healthcare expenses, wage increases for government officials, and support measures to help Netherlands residents and businesses with inflation and high energy bills. But income from taxes increased slightly more, resulting in the budget surplus, CBS said.
Government debt increased by 31 billion euros last year. But because the economy grew more strongly than the debt, the government debt as a percentage of the GDP decreased by 1.5 percent to 51.0 percent