What is the financial impact of EU COVID-19 measures on the Netherlands?
The EU has been taking measures since March 2020 to cushion the financial and socioeconomic consequences for the EU member states of the COVID-19 pandemic. Our summary of the measures can be read here.
The EU measures are relevant to the Netherlands for several reasons. The potential benefits include additional income that will enable it to increase expenditure. The measures could also entail costs if, for instance, the Netherlands has to make higher contributions to the EU or, together with other member states, has to guarantee expenditure at EU level. The measures’ impact on the Netherlands is summarised in figure 1.
A more detailed summary of the costs and benefits to the Netherlands of the EU COVID-19 measures is provided in this table. Below we take a closer look at the measures that benefit the Netherlands. More information on the costs is provided in the table linked to above.
Stronger financial position
Relaxation of Stability and Growth Pact rules
A relaxation of the rules of the Stability and Growth Pact (SGP) has enabled the Netherlands and other EU member states to let their annual budget deficit and public debt exceed the limits in the SGP (3% and 60% of GDP respectively). The European Commission will not impose sanctions if they do so. Owing to the economic consequences of the war in Ukraine, the rules will be relaxed for a further year until 2024.
On the basis of figures in the CPB’s Central Economic Plan of March 2022 in 2020 was 4.2% and 4.4% of GDP in 2021. It is expected to fall again to 2.5% of GDP in 2022 owing to the termination of aid measures and the economic recovery. Public debt will rise from 48.7% in 2019 to 54.3% in 2020, 55,1% in 2021 and 53,8% in 2022.
Figure 2 and figure 3 show the developments in the Netherlands compared to the SGP/rules.
Figure 2: The Netherlands’ budget deficit may now exceed the -3% SGP limit without the European Commission imposing a sanction.
Figure 3: The Netherlands’ public debt may now exceed the 60% SGP limit without the European Commission imposing a sanction.
Relaxation of state aid rules
The European Commission’s temporary framework for state aid measures, which will be in force until 30 june 2022, allows member states to grant more state aid. The Netherlands has notified the Commission that it had used the framework to grant approximately € 36.6 billion in state aid as at 31 May 2022 (source, calculation by the Netherlands Court of Audit. This amount comprises aid approved by the Commission to support KLM and public transport. Besides the temporary framework for state aid measures, member states can make use of regular aid mechanisms such as block exemption, which the Commission does not need to approve. A summary of the state aid rules in force is available here.
Figure 4 shows the approved state aid granted under the temporary framework during the COVID-19 pandemic in comparison with 1) state aid actually granted, including aid granted under block exemption schemes, and 2) aid granted to the financial sector in recent years. The state aid framework had similarly been relaxed for the financial sector during the financial crisis. As only the approved state aid granted during the COVID-19 crisis is currently known, actual expenditure might be lower.
State aid expenditure
|State aid ex financial sector||Staid aid financial sector||Approved state aid COVID-19 crisis|