THE HAGUE, 10/05/06 - The Dutch government must aim for a structural budget surplus of 1 percent of GDP in 2011. Windfalls should be used for further pruning public sector expenditure, according to the International Monetary Fund.

The IMF applauds the current cabinet's cutbacks, saying these have contributed to economic recovery. This year, GDP growth will be 2.6 percent and in 2007, 2.8 percent, predicted the IMF in a report on the Netherlands presented yesterday.

Because of the ageing population, measures in addition to those that should lead to a 1 percent surplus in 2011 are necessary, in the IMF view. Raising the retirement age to at least 67 is named as an option, as is a higher contribution by relatively wealthy pensioners to the state pension (AOW) scheme.

The IMF warns that the career saving scheme (levensloopregeling) should not become an instrument for large-scale early retirement. The IMF also urges a reduction of the duration of unemployment benefit (WW) and relaxation of dismissal law.

As well, mortgage interest deductibility should be reduced, although market distortion must be prevented. In July, the IMF will launch a study on this subject.