The forecaster, whose estimates are used by the cabinet to decide on budget policies, predicted on Tuesday wider budget deficits for both this year and next and said the country needed "credible measures" to present to markets. The Netherlands, one of four euro zone countries still holding a full set of AAA ratings from the three main credit agencies, has along with Germany been a notably harsh critic of failures by the region's peripheral nations to hit deficit-reduction target. The think tank said that, in common with the euro zone strugglers, the Dutch now faced the same challenge of enforcing austerity while also boosting growth.
"The Netherlands is confronted with the same problems as Italy and Spain. Budget cuts are equally required in these countries in order to regain control of the government budget, whereas reforms must be implemented simultaneously in order to ensure economic growth," the forecaster said in a report. Dutch bond spreads for 10-year debt against the German benchmark have been among the tightest in the euro zone, but they widened in February after a new bond was issued.
The Netherlands, which has been in recession since July due to rising unemployment and weak consumer spending, needs a fresh round of austerity if it hopes to hit a deficit target of 3 percent of gross domestic product next year, as required by the European Commission, compared with the 4.6 percent goal expected this year. The Liberals-Christian Democrats coalition and its political ally, the Freedom Party, are in talks on how to bridge the gap, which could require cuts of up to 16 billion euros.
Finance Minister Jan Kees de Jager, who has been berating southern European countries for breaking budget rules, said on Monday it would be harder for the Netherlands to adhere to the EU budget regulations but it would respect them. The Dutch Labour party, which got a new leader last week and whose backing is crucial for securing parliament support on euro zone bailouts, wants more time to reduce the deficit.Raising the pension age, limiting tax benefits on mortgage interest payments and reducing unemployment benefits and termination benefits were examples of reforms that would stimulate economic growth, the forecaster said. The think tank slightly raised budget deficit forecasts, predicting a gap of 4.6 percent of gross domestic product this year and next in the absence of spending cuts. On March 1, CPB had forecast a deficit of 4.5 percent of GDP for both years.