Dutch economy was built on debt
Not long ago, the Netherlands was a “model” economy. But in the past few years it has fallen from grace.
Not long ago, the Netherlands was a "model" economy, says Economist.com's Charlemagne blog. But in the past few years it has fallen from grace into "a morass of recession and budget deficits". This is due not to excessive public debt at 75% of GDP, government debt is below the eurozone's 96% average but to the hangover from a huge pre-crash housing bubble. The mortgage binge left the Dutch with the euro bloc's highest household debt, worth 110% of GDP. As house prices have plummeted, shaken households 16% of whom are underwater on their mortgages have cut back on their spending.
The ongoing deleveraging in the domestic economy has negated reasonable export growth, causing a long recession. GDP has shrunk 3.5% since 2008 and is unlikely to exceed its pre-crunchpeak until 2017. Meanwhile, ongoing austerity to squeeze the budget deficit below the eurozone limit of 3% of GDP has undermined confidence and growth further, and thus become self-defeating. No wonder credit-ratings agency Standard & Poor's has stripped the Netherlands of its top-notch triple-A rating.
The worst may now be over, says Viktoria Dendrinou on Breakingviews. Property prices are bottoming out; GDP rose by 0.1% in the third quarter, the first positive result in six quarters; and unemployment has edged down since hitting 9% earlier this year. But the Netherlands faces a long slog. And its travails are a reminder that we can't count on robust growth in northern Europe to pull the debt-ridden periphery out of the mire.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.
-
Nationwide: House prices see biggest monthly fall in over two years
UK house prices dropped by 0.8% in June, according to Nationwide. We reveal the top-performing and worst-performing regions
-
Portfolio landlords could save £8,500 by remortgaging – or risk costs soaring by £23,000
Buy-to-let landlords with multiple properties could save thousands by taking advantage of this year’s lower mortgage rates, but failing to refinance could see them hit with a £23,000 bill.