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Wednesday, 23 May 2012

Dutch Consumer confidence capsizes after the details of the Spring Agreement get published.

Today the Dutch Central Bureau of Statistics presented the consumer confidence data for May: a tell-tale signal on the Dutch economy, proving that the 2011-recession is gaining momentum currently.

Here is the latest data on the Dutch consumer confidence:

Dutch consumers more pessimistic

In May, the mood among Dutch consumers deteriorated again, after having improved in April. The consumer confidence indicator fell by 6 points to –38, virtually equalling the low level it reached in March.
Consumer confidence

Consumers were obviously more negative about the economic climate in May than in April. This component indicator of consumer confidence dropped by 8 points to reach -61.
The component indicator willingness-to-buy also declined, by 4 points to -23. Consumers’ confidence in their own financial situation over the next 12 months was dented as the indicator plummeted 10 points to -25, the lowest level ever observed. Consumers thought the time was somewhat less favourable to buy durable goods like furniture, washing machines or TV sets. Their opinions on their own financial situation over the past 12 months hardly changed.

Dutch consumer confidence
Click to enlarge
There is no doubt that the Dutch consumer confidence suffered from the consequences of the Dutch Spring agreement. On May 6, I gave my opinion on this agreement, that although it contained some slight improvements compared to the preceding PVV-VVD-CDA policy, was in general nothing more than silly austerity:

Many financial and political reporters were just too relieved to notice that the plans of the new center-leftwing coalition weren’t anything more than an ordinary, visionless cheese-slicer operation (as it is called in The Netherlands): no real economic and social security reforms and bold plans, but just ‘slicing together’ billions in austerity measures.

After the initial euphoria at the press and politicians that the Spring coalition saved the bacon of the Dutch at the European Union by presenting a plan that would theoretically lead to a 3% budget deficit in 2013, the party at the Dutch consumers seems over now.

The Dutch newspaper Telegraaf ( presented last week the integral plan of the Spring coalition. Here are the most important measures of this plan, combined with my comments (please take in consideration that I only show the measures that cost the Dutch citizens money. There are also some tax-breaks and abolishment of earlier fiscal measures in this plan):

Housing market:

  • From January 2013, the interest paid on NEW mortgages can only be deducted when the mortgage is a real loan with total amortization before maturity.
  • Existing mortgages keep the current terms
This is unfair and stupid. Current mortgage borrowers (including yours truly) are saved at the expense of new mortgage borrowers. Besides that it kicks the can down the road on the Mortgage Interest Deduction (MID), which should be abolished at the shortest possible notice in order to set the Dutch housing market free. This is a very, very bad plan.

Social security:

  • The age for Dutch retirement benefit will increase yearly from 2013. In 2019 the retirement age will be 66 and in 2023 67 years.
  • Employers pay for the first 6 months of Unemployment Benefit. Length and height of UB remains unchanged.
The first bullet means kicking the can down to the road until 2023 for a 2 years increase of the retirement age. It would be much fairer to increase the retirement age immediately, instead of spreading it over ten years.


  • The excess of healthcare will be increased to €350. Lower incomes will be compensated.

This excess punishes sick people and especially mid-incomes in the lower ranges with an extra insurance cost of €350 per family member. It won’t have a positive effect on health costs,  as people might wait longer with visiting a doctor, only to have higher health expenses in the process. Ridiculous measure.


  • The high VAT-rate will be increased from 19 to 21% in October 2012. This increase will be returned to the Dutch via income and wage taxes.
  • A promised amount of €430 mln in tax relief for Dutch trade and industry will not be handed out.
  • Traveling expenses for home to work traffic will be taxed, by abolishing the untaxed amount and by laying taxes on company and leased cars.

Concerning bullet one and three: there goes consumption. People are punished for traveling to their work.

Concerning bullet two: a certain amount of jobs goes down the drain here. I’m generally as little in favor of sponsoring companies with tax breaks, as I’m in favor of sponsoring people that enjoy incomes far above the median income. However, suffice it to say that his money - when indeed paid - would have yielded a certain amount of jobs. These jobs will not be created now. This measure will therefore add to the image of the unreliable government.

Other measures:
  • Civil servants and education professionals need to accept a zero wage increase policy for the next two years.
  • Central government will have to save €500 mln at its own expenses.
  • There need to be additional austerity measures to the tune of €400 mln, concerning maintenance of roads and waterways.
  • Communities, provinces and polder boards (government body for dike, polder and waterway maintenance) must mandatory bank at the central government.
Zero wage increase policies are utterly stupid measures that give consumers the creeps. These consumers will act accordingly by saving more money and spending less.

The third bullet will cost 3600 workers in the road and waterway industry their jobs. This has been calculated by the central road and waterway board ( and it will lead to extra costs for road maintenance in the future: penny-wise is pound-foolish.

The consumers gave their opinion on these plans. You can read it in the CBS data.

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