{{The Netherlands, outspoken advocate of fiscal pain as a cure for euro zone ills, found itself in unwelcome company this week as the bloc’s economic recovery left it among a handful of laggards still in recession.}}
Policymakers in southern states such as Greece and Spain may have had a moment of Schadenfreude when official data showed the northern Dutch among those still contracting while a Franco-German motor pulled the bloc as a whole back to growth.
For the austerity-touting core euro zone state critical of budget laxity elsewhere, things are not likely to change soon. Growth is forecast to be worse than expected next year and the Dutch budget deficit is swelling.
The deficit to GDP projection was just increased to 3.9 percent from 3.7 percent for next year, compared with the euro zone target of 3 percent.
And while moderate growth in Germany and France lifted the region as a whole out of recession last quarter, Dutch gross domestic product shrank both quarter-on-quarter and year-on-year, by 0.2 and 1.8 percent respectively.
In July, 25 companies were declared bankrupt every day, the highest reading since 1981. Unemployment hit another record high in the month, reaching 8.7 percent of the workforce.
The latter is minimal compared with places like Spain, but the Netherlands is nonetheless being hit by deeply pessimistic consumers, the highest unemployment rate in decades and plummeting home values.
“You can no longer speak of a European problem, but failing Dutch policy,” said Arnold Merkies, opposition member of parliament for the Socialist Party. “While unemployment falls in the countries around us, it continues to rise in our country.”
Leading banks ING and Rabobank said additional austerity planned by the government of pro-business Liberal Prime Minister Mark Rutte will wipe out any growth in 2014 because of the need to make additional spending cuts.
Rutte’ government is sticking to its austerity plans, although it has said it will take longer to bring finances back into order.
But it got a downbeat statistical outlook on Wednesday from official economic forecaster, the Central Planning Bureau.
It cut a quarter of a percentage point off growth forecasts for 2014 to 0.75 percent. Dutch GDP will shrink 1.25 percent this year, the CPB said, compared with a previously forecast contraction of 1.0 percent.
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