Govt crisis puts Dutch AAA rating at risk: analysts

Tuesday, April 24, 2012

http://images.thenews.com.pk/24-04-2012/ethenews/e-104637.htm

THE HAGUE: The collapse of austerity talks in the Netherlands this weekend has put the country at risk of losing its top notch AAA rating, according to analysts.

“This story is going to cost the Netherlands their triple A,” said Arnold Heertje, a former political economics professor at the University of Amsterdam. “Interest rates on the bond markets will increase.”

Dutch Prime Minister Mark Rutte was to convene his cabinet Monday for crisis talks after right-wing leader Geert Wilders quit make-or-break austerity talks on Saturday, saying his party rejected European Union demands.

The talks, which had been going on for seven weeks, aimed to cut some 16 billion euros (21 billion dollars) from the budget.

They included a slight rise in Value-Added Tax (VAT), a freeze on civil servants’ wages and cuts to both the health and development budgets, Dutch media reported.

After the walkout the prime minister said that snap elections were likely, a move that would put on hold the austerity package, which was aimed at steering the country back within European Union deficit targets.

The Dutch central planning bureau forecast last month that the 2013 public deficit would rise to 4.7 percent of gross domestic product under current conditions, higher than the EU deficit ceiling of 3.0 percent of GDP.

The fall of the government will be “a disaster for the economy of the Netherlands, both from the point of view of the AAA rating and the ‘real economy,’” Heertje said.

Sylvester Eijffinger, economics professor at the University of Tilburg, agreed: “The markets will become very nervous.