After the whole corona party and after whole years of quantitative easing from the European Central Bank (a.k.a. just inventing money out of thin air because we can), Dutch government discovers that they have quite a hole in the country's finances, and someone, somehow, has to fill it in. What is this about?
As reported here and here over the last weeks, the shortfall is somewhere around €10 billion and €15 billion. But it might be actually more, we'll see about those numbers. And how did we get here? Well, a couple of hot items:
Corona Circus
Even if the government really believes that they did a great job handling Corona situation and all the measures were justified, in reality (and you can browse through the older posts on this blog) things are not quite exactly shiny. They have a more brownish color. And there are some really big expenses chapters here. But before we go there, let's just mention that the measures in the beginning of the pandemic, should have been, but their nature, different than the ones from the late stages of the pandemic. But in reality this didn't quite happen, since the governments all over the world, have a keen interest to convince everyone and to keep us convinced that lockdowns and vaccination is the only way out. Which, in retrospective, it's a big lie.
- testing anti-Corona - the procedure involving testing, the materials, the locations that were created, the personnel involved, the laboratories to process the samples, well, all these are costing money. And when you have these tests for free, a lot of people start to abuse the system and go to the testing on a regular basis, just because. Way more that it's necessary. If it's actually necessary at all, since a result will just label you positive or negative, with no other measures taken. For the last year, all the free testing was a waste of money; a small price for each test (like €5) would already filter out a lot of abuse. But these tests were the base for the government to justify more idiotic measures, so you know why those were for free.
- vaccines - a big bucks business, this is where billions were made. These vaccines were forced upon population, to prevent big parts of it not to take the vaccine. In the Netherlands by QR codes and an enraged government against the non-vaccinated, in other European countries, like Austria, by law. Meanwhile, Ursula von der Layen still has to justify the 1.8 billions Pfizer doses that EU "secured". You think that stopped there? The government in the Netherlands just blew off millions of euro, by buying Novovax vaccine that no one actually wanted. 840.000 doses that are now expiring in silence. But someone has to pay for them, and no, not the ones that signed this deal will actually get to do it.
- lockdowns - by far, the most devastating measure in the economy. And in 2021, completely useless. Unless you count bankrupting the economy a scope. But the reckless play of the Dutch government, turning off and on parts of the economy as they saw fit, translated in big financial loses for a lot of companies and whole sectors (especially tourism, restaurants, hotels). Amsterdam, for example, discovers that it's a quiet city without all the tourists around, but also a deep in the hole one. How big is the hole? Well, around 500 millions euros so far. Cash problems seems to be out of the sudden, quite real.
Inflation
After more than 10 years of serious pumping free money into the system, ECB can finally say that the chicken come home to roost. Buying governmental debt from states that are technically bankrupt, but also caught in the euro zone net, is finally triggering some nasty results. This was accelerated by the whole supply chain issues and the Ukrainian war, but don't let you be fooled by those pins: the bubble was created and sustained by all the major Central banks around the world. And now the inflation hits. And what the Dutch government is doing?
In order to keep face and calm down a little bit the population about the increase in the price of the fuel, they lower the taxes on it. Which, it would be a great idea if the drop in revenue will be followed by a drop in public expenses. But no. Now, the lower price of the gasoline means that someone else has to cover that by other means. For around 6 billion euros.
The crazy green energy policies from the last years are also coming now to fruition, for most of the European countries. The natural gas was seen for years as an enemy of the humanity. But that's when you have it. When you actually don't have it, and the Russian gas seems to flow - or not - into your economy, the whole equation is changing. And now we have the whole "cut the energy dependency from Russia" rhetoric; but where the new gas will come from? Nobody is quite sure. It will be at the same price (or closer) that of the Russian product? Hardly so.
And the government is still pouring money in the subsidies, to sweeten the impact of high prices. About 3 billion euros so far.
Illegal taxation
This was running now for years, and in a nutshell is that the Belastingdienst (Tax Service) was continuously taxing investments and savings on a fictive number (30 percent income tax on 4 percent imagined return), and this was deemed illegal by the Supreme Court (and common sense, we might say). This whole fuck-up costs money: about 7 billion euros.
Other
There are more items that will required extra spending, like raising the minimum wage or the state pensions. Due to the rising inflation, is a matter of time when the whole government sector will ask for more money in their salaries. Also the increased military expenses and other expenses related to Ukrainian refugees are putting more pressure on the budget. This will require more and more billions to account for.
Solutions
As usual, the government has the right solutions for these problems:
The Cabinet had already counted on the 1 billion euros this new corporate tax would raise, according to NOS. To compensate for this, the coalition is considering a tax increase in "Box 2" - the tax for major shareholders that many entrepreneurs pay.
‘I am assuming there will be tax increases,’ Rutte said. ‘That is unavoidable… the major problems which we are now seeing, cannot simply solved by looking at the spending side.’
"If you want to do something for vulnerable groups, then it is a redistribution of money within the Netherlands," Minister Karien van Gennip of Social Affairs recently said. "So other people will have to pay for that."
The other alternative is to cut spending or allow the national debt to rise further.
The simplest solution: raise taxes. Government, we all know, does a great job at redistribution of wealth, so acting as Robin Hood makes sense.
As alternative solutions is to cut spending - which it won't happen since we're talking here about politicians. Spending cuts are quite unpopular and nobody will risk his party trajectory over this.
Allowing national debt to rise is also easy, since ECB is just keep on buying debt. And basically all the euro holders are paying in the same time by inflation.
