Dutch Debt to Come Down Regardless of EU: CPB
THE HAGUE, 10/10/13 - The Central Planning Bureau (CPB) has developed a method whereby estimates can be made on the development of a country’s state debt on the long term if there were no international frameworks to curb this.
Under EU standards, a country’s debt must in principle not be above 60 percent of Gross Domestic Product. The Netherlands would according to the CPB also arrive at a debt level of 44 to 50 percent in 2021 even without this European agreement (compared with 75 percent now).
The CPB made projections on the stability of government finances in the medium term in nine OECD countries. The estimates were made on the basis of results from the post-war past, in which three variables are measured: economic growth, interest rates and government policy.
The indicator gives the range of the risk that the debt will turn out much higher than can be anticipated. With the Netherlands, the US, the UK, Belgium and Germany, this risk is limited to at most 11 percent of GDP. For Italy, Spain and Iceland, the risk rises to 30 to 40 percent of GDP. For Portugal, it is unpredictably high.
If Portugal were to manage its government finances autonomously, without the cutbacks programme imposed by the IMF and the EU, it would have a debt of at least 132 percent of GDP in 2021 (compared with 123 percent this year), but it coul also be 110 to 167 percentage points higher.
If the CPB methodology had already been used in 2007, investors and financial markets could have deduced from this that the risk of unsustainable debt in the US, the UK, the Netherlands and Belgium was ‘insignificantly’ small, and in Germany and Iceland, ‘small’. But the alarm bells would already have gone off for Spain, Italy and Portugal.