Dutch postponing

The Netherlands typifies a European fear that any big fiscal stimulus might just benefit others.

America and Europe are not capable of reaching an agreement about the fiscal stimulus to fix the economic crisis. The Americans would like to increase stimulus spending while European governments want to see how the first wave of stimulus plans works out. Some politicians fear that the American plans to increase stimulus spending will lead to hyperinflation.

Actually, there is a way more important reason why European countries are postponing their stimulus plans: All the money a country puts into the economy will have to be earned back by the country itself. However, when other countries put a lot of money in the economy to recover it. Countries that didn’t put money in the economy (or put less money in) will also benefit from it due to raising exports but they would not have to pay the price for it. That is how the Dutch try to solve this problem.

There is another problem European governments have to face: rising unemployment and a pension time-bomb. Also, because of the recession the government is receiving less taxes which makes deficits increase.

According to forecasts the Dutch unemployment will rise from 3,9% to 9% next year, which is relatively low. The Dutch budget has been highly overestimated, it is revised from a surplus of 1% to a 5,5% deficit.
This made the Dutch increase the retirement age, so long-term solvency can be preserved.

The question is if the Dutch politicians will be able to postpone the second round of stimulus. It will, however, be better for Europe if they will spend the money.