Tuesday, March 26, 2013

Dutch Economy Falling Behind Germany

The Netherlands (Wikimedia)
The Economist is reporting on economic developments in the Netherlands - one of a select group of Eurozone countries still with a AAA rating (the others are Germany, Austria, Finland and France, the latter with a split rating) -. The Netherlands, often regarded as Germany's little brother, is slipping behind its big brother with a shrinking economy. Germany's economy is still growing.  According The Economist the Dutch weakness is caused by a slowdown in consumer spending due to anxiety about dropping house prices. Till the financial crisis started in 2008, the Dutch housing market has been supported by a favorable mortgage tax treatment, resulting in the Euro-zone's highest household-debt levels (at 249% of income according to 2010 Eurostat data.) Now that the economy is facing a slowdown, the housing market has been under pressure. The IMF, which had been visiting the Dutch parliament,  agrees that the Dutch housing market needs to be structurally reformed. The IMF, surprisingly, also finds that further austerity measures, considered by the Dutch government, are not only unnecessary, but also counterproductive. Is this the beginning of a fundamental change in IMF's austerity views?

No comments:

Post a Comment