Dutch government deficit shrinking slowly

Dutch government deficit shrinking slowly

In 2012 the Dutch government deficit shrank to 4.1 percent of GDP while government debt rose to 71.2 percent of GDP. The Dutch government deficit and debt have now exceeded the European norms for the fourth year in a row, according to the latest figures published by Statistics Netherlands.

Government spending increased slightly in 2012, exceeding income by 24 billion euros. The cost incurred from the Exceptional Medical Expenses Act rose sharply by nearly 3 billion euros, which is over 10 percent. However spending on basic health insurance was stable for the first time in years. The higher unemployment rate meant an extra 0.8 billion euros in spending on benefits, up nearly 20 percent on 2011. Just like in 2011, government investments, salaries and subsidies were reduced.

Dutch government income rose by 5 billion euros on 2011 thanks to the higher revenues from wage and income taxes and social premiums. These yielded over 4 billion more than in 2011, mainly in health insurance premiums. Natural gas revenues also yielded an extra 2 billion euros. There was again less income from corporate tax. The reduction in the rate of conveyance tax half way through 2011 was still noticeable in 2012, as revenues were down by 0.8 billion euros. In the fourth quarter of 2012 government income rose sharply as the VAT rate was raised and a tax on banks was introduced. The two together put an extra 1.5 billion in the coffers.

Dutch government debt had risen to 428 billion euros by the end of 2012, up 33 billion on December 2011. The debt rose by more than the deficit. This is because the government provided capital to countries in difficulties through the European Financial Stability Facility (EFSF) and by injecting capital in the new European Stability Mechanism (ESM). Together this added up to over 9 billion euros. In 2012 the ING bank repaid some of the capital support it received in 2008. With this 1 billion euros, the government lowered its debt.

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