2006 OECD Economic Surveys: Netherlands 2006

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This 2005 OECD Economic Survey of the Dutch economy (published as the second issue in the 2006 volume) examines key economic challenges including putting public finances on a sustainable path, increasing resiliency in labour markets, strengthening product market competition, and improving the environment for innovation. As always, it assesses short-term prospects and provides a series of policy recommendations.

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Putting Public Finances on a Sustainable Path

This chapter discusses the fiscal challenges facing Dutch policymakers in the short and medium-term. After large budgetary overruns at the start of the decade, the Netherlands has successfully reined in the government deficit, thanks to a combination of expenditure restraint and revenue windfalls. The chapter discusses these short-term developments as well as the need to resist renewed pressures for spending increases and tax relief. It also discusses how the existing fiscal framework, which has generally functioned well, could be strengthened. Finally it reviews the medium-term budgetary trends, as the effects of population ageing loom large. It argues that the pension system, despite its many enviable features, would benefit from shifts in parameters like retirement age and replacement rate.

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