A social distance reminder on Jodenbreestraat in Amsterdam during the coronavirus pandemic and lockdown. 19 March 2021

Tuesday, 18 June 2024 - 17:30

Dutch government's Covid support to businesses was effective, but lasted too long

The coronavirus support the Dutch government gave businesses was very effective. The Dutch economy would have sustained far more damage without it. But it lasted too long, the Bureau for Economic Policy Analysis (CPB) concluded in a study into the effects of the coronavirus support, NOS reports.

Almost immediately with the first coronavirus lockdown, the Rutte III Cabinet set up a support package of 30 billion euros. Entrepreneurs could use the support to keep paying their staff and fixed costs. They could defer their taxes, and self-employed people could turn to the municipality for income support.

That was very effective, the CPB concluded. The Dutch economy shrank by 8 percent in the first coronavirus quarter, but the pain was mainly borne by the government. Unemployment remained low and the Netherlands kept functioning, also doing well compared to other European countries.

“This package was really a cushion for the economy. There was fear of a complete standstill, but this created the confidence that the economy could recover, even in a pandemic,” CPB researcher Bastiaan Overvest said.

The downside is that the Cabinet kept the support going for too long, eventually providing companies with around 86 billion euros in support. According to the CPB, the government should have phased out the packages earlier. As it did with the TOZO scheme for the self-employed, the Cabinet should have set stricter conditions for the fixed-cots scheme for entrepreneurs and made them start paying taxes again sooner.

Because the support went on for too long, the economy operated too well for a period, Overest said. “The labor market remained tight, and the economy continued to grow. Yet the support continued. It could have been phased out earlier.”

The number of bankruptcies remained low and even briefly fell as government support sustained non-viable companies. Bankruptcies are now increasing again, and more entrepreneurs are asking for help with paying off overdue taxes.