Dutch plan EUR 6 bn in austerity cuts in 2014

(THE HAGUE) - The Dutch government is planning additional budget cuts amounting to six billion euros ($8 bn) next year in its battle to get its deficit back on track, Finance Minister Jeroen Dijsselbloem said on Wednesday.

"The die is cast, we commit ourselves to six billion (euros) structurally in extra measures to be taken next year," Dijsselbloem told the Dutch parliament.

In a letter to the Lower House, Dijsselbloem, who also chairs the Eurogroup of finance ministers, said the Dutch cabinet will make an official decision on the cuts in August which will then be presented in the budget to parliament in September.

His announcement comes a week after EU Economics Affairs Commissioner Olli Rehn's visit to The Hague to present recommendations to get the Dutch deficit back below the EU's 3.0-percent target ceiling.

Rehn said the European Commission believed the Netherlands could reach a deficit target of 2.8 percent next year, but which would imply austerity measures to the tune of six billion euros.

The Netherlands is, like Germany, traditionally pro-fiscal discipline and austerity measures.

It announced on March 1 that it would slash its 2014 budget by a further 4.3 billion euros ($5.6 billion) to respect the EU deficit limit.

However, the government announced in April it was postponing some austerity measures in the hope of stimulating growth, while respecting its EU obligations.

According to figures by the government's central planning bureau (CPB) think tank, the Dutch economy has shrunk to a level comparable to 2007, just before the world-wide financial crisis erupted.

"Given recent financial developments and the cabinet's wish to get its finances in order, we will follow the Commission's recommendations and will make additional suggestions about the six billion euros in August," Dijsselbloem said in his letter.

The Netherlands is closely aligned with Germany on the issue of fiscal discipline but its deficit has for the fourth year in a row breached the EU's 3.0-percent ceiling.