Netherlands EMU


Country Analysis


The probability of the Netherlands joining EMU from the start date remains very high. The Dutch have displayed the most robust economic performance on the Continent over the past 4 years. While we do have some concerns that this may peak out by 1998, GDP growth in 1997 should come in around 2.8%. Inflation statistics remain stable at this time and may heat up in the second half of 1997 going into 1998. Nevertheless, the Netherlands should be a founding member of EMU even without fudge factors.The debt/GDP ratio in the Netherlands is currently well above the Maastricht Treaty reference point. Clearly, the Dutch government has made a major effort to reduce their debt/GDP ratio over the past several years with much success. The Dutch also currently hold the Presidency of the Council of Ministers. As a result, the Dutch are very eager to conclude the inter-governmental conference by the Amsterdam summit in June. To some extent, this has been a source of national political pride. Therefore, it is unlikely that the current government will change its course relative to EMU and should hold a parliamentary majority in the upcoming elections due in May 1998.

1995 1996e 1997f
ERM Member Y Y Y
Inflation 2.0 2.0 1.9
Budget Deficit / GDP 4.0 2.6 2.3
Debt / GDP 79.7 78.7 78.2
10Y Bond Yields 6.9 6.1 5.8
f=forecast e=estimate

© Princeton Economic Institute


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