Dutch Macro Perspectives - Budget battles: when the coalition's wish list meets reality
The Netherlands Bureau for Economic Policy Analysis (CPB) released their economic and fiscal forecasts on the 26th of February, marking the beginning of discussions on the ‘Voorjaarsnota’, or Spring Budget, which encompasses the government’s budgetary negotiations.
Recent weeks have witnessed intense debates in Parliament, during which it became clear that the coalition parties have differing viewpoints on important subjects
The coalition is faced with significant challenges and choices, such as increasing defence spending, reducing nitrogen pollution, and expanding the electricity grid
The four coalition parties also have various wishes that will come on top of these issues
Although the estimated deficit has been revised, the ‘musts’ and ‘wishes’ appear to be structurally larger than there is room in the budget to accommodate them, which could lead to challenging discussions and decisions of the coalition
In recent years, the CPB's estimate has been too pessimistic on the public finances and the method of estimation is currently being evaluated
In anticipation of the results of this evaluation, two of the four coalition parties have proposed to already to take into account another year of overly pessimistic estimates into the budgets negotiations for this year
However, the VVD is not in favour of this, which means that this subject may also lead to friction within the coalition
The outcome of the Spring Budget negotiations as well as the expected higher defence spending will also have an impact on the DSTA's funding need
Although we do not expect this to lead to an increase in the funding need this year, but it may do so in the coming years