Social partners support cabinet’s crisis package

The social partners have finally agreed to support the crisis package proposed by the Dutch cabinet. However, their support is conditional on the mutual agreement that trade unions will only put forward modest wage demands and that employers would not raise the issue of adjusting the current retirement age of 65 years without due consideration. The Dutch cabinet has allocated €6 billion to maintain spending levels and infrastructural investment.

Following weeks of deliberation, the Dutch cabinet and social partners reached consensus on the cabinet’s crisis package, with the social partners supporting the government’s proposals. The social partners also had to reach agreement between them. In this regard, the trade unions needed to restrict their wage demands to below the rate of inflation, while employers agreed to not raise the issue of adjusting the retirement age from 65 to 67 years without due consideration. The cabinet then put forward a package of proposals.

The package sets aside €6 billion for support measures, in addition to the €80 billion and €50 billion already released to rescue Dutch banks and stabilise the economy. Discord arose within the government coalition between the Christian Democratic Appeal (Christen Democratisch Appèl, CDA) and the Labour Party (Partij van de Arbeid, PvdA) regarding whether immediate budget cutbacks should be made or whether efforts should first be made to stimulate the economy. The PvdA stood its ground in this respect. Thus, it was agreed that cutbacks will only be made after the start of 2011 in order to first restore government financing. The coalition parties have not agreed on exactly how to achieve this, but they do agree that policy on budget cutbacks should be shaped in due course given the prevailing economic uncertainties.

Measures to boost economy

Measures aiming to stimulate the economy until 2011 can be divided into four categories: labour market and education; infrastructure; sustainability and innovation; and maintaining benefit levels. Concerning the labour market and education, further training for unemployed people will be intensified and part-time unemployment facilitated. A total of €1.7 billion will be spent on achieving this goal, along with an equal amount on improving the country’s infrastructure. Completion of road network and waterway construction projects will be accelerated. A further €1.2 billion will be directed at sustainability measures including wind energy and corporate social responsibility (CSR) incentives, as well as making homes, schools and hospitals more energy efficient. A further €1.1 billion will be spent on business incentives, covering value-added tax (VAT) measures and also subsidies for innovative companies. Finally, expenditure on unemployment in 2010 and 2011 will not be reduced even if the budget is exceeded. This budget line had been abandoned earlier.

Domestic expenditure will be maintained. This will be achieved by investing in green energy sources and abolishing flight tax. One fifth of the country’s energy must come from sustainable sources by 2020. The two biggest government parties have yet to agree on the level of annual investment needed to achieve this objective.

Budget cutbacks after 2011 could include the following: wage moderation for civil servants; reductions in ministerial budgets; restriction of care allowances; and/or raising the retirement age from 65 to 67 years.

Trade unions increase in retirement age

The trade unions firmly oppose the cabinet’s desire to raise the retirement age to 67 years (NL0902049I). The social partners will be given until 1 October 2009 to come up with an alternative proposal within the Social and Economic Council (Sociaal Economische Raad, SER). Any alternative option must generate annual savings of €4 billion. The Chair of the Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV), Agnes Jongerius, believes that an alternative solution can be found.

Wage moderation

Part of the agreement also involves the Dutch cabinet refraining from tampering with existing collective agreements. As agreed, teachers will still receive a 3% pay rise. However, because the national budget will remain unchanged, the advisory councils involved emphasise that schools will in fact have to cover the cost of the pay rise themselves. As a result, teachers fear bigger class sizes or even dismissals.

The social partners had agreed to strive for wage moderation at an earlier stage and the cabinet has already saved €3.2 billion in this regard. Nevertheless, the social partners emphasise that because a bottom line had not been agreed regarding wage moderation, this sum cannot be assumed in terms of cost cutting. According to them, wage increases should stay relatively in line with inflation, thereby maintaining spending power. If, however, wage moderation fails to generate the desired level of savings, the cabinet has plans for further cutbacks.

Marianne Grünell, Hugo Sinzheimer Institute (HSI)

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