The public debt of the Netherlands remained stable in the first quarter of 2009. The debt-to-GDP ratio was just above the EMU limit of 60 percent of the gross domestic product (GDP), whereas the debt ratios of other European countries mounted in the course of 2009.
Fewer bailouts in the Netherlands in 2009
The bailout operations to save Dutch banks in 2008 had increased the debt-to-GDP ratio more than in other European countries. In a later stage, fewer bailout operations were needed and banks could pay off their debts quicker. As a result, the Dutch debt-to-GDP ratio hardly grew in 2009.
Debt ratios in European countries
Number of bailouts considerable in the Netherlands
In many European countries, public debts had been reduced significantly in recent years due the limits imposed by the EMU. Prior to the credit crunch, the Netherlands complied with EMU limits. By the end of 2007, public debt had dropped to 45 percent of the GDP. Only countries in Northern and Eastern Europe had lower debt ratios.
As several banks were in jeopardy, the Dutch government had to come up with large sums to guarantee their survival. In the fourth quarter of 2008, government bailouts had run up to 81 billion euro in loans and capital investments, resulting in an increase in public debt by 13.7 percentage points of the GDP.
Effect bailouts on public debt
Repayment have positive effect on public debt in 2009
As Fortis Bank made a huge repayment of 34 billion euro and ING Bank, SNS-Reaal and Aegon also repaid part of the loans they received, the effect of the interventions on public debt dropped to 10.1 percentage points of the GDP in 2009, so on balance public debt declined.
The debt-to-GDP ratio was affected by the economic recession that swept the world in 2009. As the GDP shrank, public revenue decreased and public expenditure increased. The public deficit ran up to 31 billion euro, or 5.4 percent of the GDP. On balance, the Dutch debt-to-GDP ratio hardly grew, whereas the ratio continued to rise in many other countries. At the end of last year, the situation in the Netherlands was fairly favourable compared to other Western European countries, despite the massive government interventions in the finacial market that were carried out in 2008.
Frank Notten and Deon Tanzer