The FINANCIAL — Consumer confidence has dropped more in the Netherlands than in any other country in the 27-member European Union over the last year, reflecting the sharp reversal in the fortunes of this usually buoyant nation.
Releasing the numbers Monday, the national statistics office CBS said the dramatic turnaround reflects Dutch apprehension about the economy and job security.
According to Borsa Italiana – London Stock Exchange Group, in March 2011, the Netherlands was among the six most optimistic countries in Europe. But a year later, the region's debt crisis has caught up with the euro zone's fifth-largest economy.
The Netherlands fell back into recession last year, with output contracting in third and fourth quarter. Unemployment is rising and the government is struggling with a widening budget gap, a disturbing trend that economists say threatens to turn off investors and raise the country's borrowing costs.
The Dutch can blame many of their troubles on the slowdown in the euro zone. The region's crisis also explains why the mood among consumers has deteriorated EU-wide, not just in the Netherlands. But the Dutch recorded by far the sharpest decline in yearly terms, as cuts in pensions and falling house prices take their toll.
Dutch consumer confidence fell to -23.6 in March from +8.1 a year ago and -22.6 in February. The year-on-year comparison translates to a decline of 31.7, much steeper than the EU average decline of 6.3.
CPB estimates the country will wind up with a budget gap of 4.6% of gross domestic product in both 2012 and 2013, well over the EU limit of 3%. The statistics institute sees unemployment rising to 5.5% from an average from 4.5% in 2011. That's better than its previous prediction of 6.75% unemployment in 2012, but not enough to cheer consumers.
Adding to the unease, the government coalition has yet to reach agreement on measures needed to bring its fiscal shortfall in line with European Union requirements in 2013. After weeks of negotiations, Prime Minister Mark Rutte's center-right coalition is still at odds over the size and speed of EUR9 billion in spending cuts.
The cuts come on top of EUR18 billion in savings already planned by 2015.
The government is unlikely to take steps necessary to reduce the deficit quickly in our opinion, Citigroup said in a report last month. The bank concluded that the Netherlands no longer belongs to the "core countries" in the euro zone, which could lead to a rise in borrowing costs for the country.
Dutch Central Bank's President Klaas Knot rejected Citigroup's assumption, saying it's premature.