The Netherlands: country overview

04 July 2012
by Ina Dimireva -- last modified 04 July 2012

The Netherlands economy is noted for stable industrial relations, moderate unemployment and inflation, a sizable current account surplus, and an important role as a European transportation hub.

Year of EU entry: Founding member (1952)

Member of Schengen area:Yes

Political system: Constitutional monarchy

Capital city: Amsterdam

Total area: 41 526 km²

Population: 16.7 million

Currency: euro

Listen to the official EU language: Dutch

Map of The Netherlands

Country overview

The Netherlands, as the name indicates, is low-lying territory, with one-quarter of the country at or below sea level. Many areas are protected from flooding by dykes and sea walls. Much land has been reclaimed from the sea, the Flevoland polder being the most recent example.

The Dutch Parliament (or Staten Generaal) consists of two chambers. The first, with 75 members, is indirectly elected and has limited powers. The second chamber, or lower house, is directly elected. Members of both houses serve a four-year term. Given the country's multi-party system, all governments are coalitions.

Industrial activity in the Netherlands predominantly consists of food processing, chemicals, petroleum refining as well as electrical and electronic machinery. It has a dynamic agricultural sector and is well known for its plants and cut flowers. The port of Rotterdam is the busiest in Europe, serving a vast hinterland which stretches into Germany and central Europe.

Economy overview

Industrial activity is predominantly in food processing, chemicals, petroleum refining, and electrical machinery. A highly mechanized agricultural sector employs only 2% of the labor force but provides large surpluses for the food-processing industry and for exports. The Netherlands, along with 11 of its EU partners, began circulating the euro currency on 1 January 2002. After 26 years of uninterrupted economic growth, the Dutch economy - highly dependent on an international financial sector and international trade - contracted by 3.5% in 2009 as a result of the global financial crisis. The Dutch financial sector suffered, due in part to the high exposure of some Dutch banks to U.S. mortgage-backed securities. In 2008, the government nationalized two banks and injected billions of dollars of capital into other financial institutions, to prevent further deterioration of a crucial sector. The government also sought to boost the domestic economy by accelerating infrastructure programs, offering corporate tax breaks for employers to retain workers, and expanding export credit facilities. The stimulus programs and bank bailouts, however, resulted in a government budget deficit of 5.3% of GDP in 2010 that contrasted sharply with a surplus of 0.7% in 2008. The government of Prime Minister Mark RUTTE began implementing fiscal consolidation measures in early 2011, mainly reductions in expenditures, which resulted in an improved budget deficit of 3.8% of GDP.