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 Macro-Economic Forecast 2023 (MEV 2023) budget deficit in 2020 was 3.7% and 2.6% of GDP in 2021. It is expected to fall to 1.1% of GDP in 2022 on account of additional revenue from profit tax, higher natural gas income and lower-than-budgeted government expenditure. In 2023 the deficit will probably rise again to 2.5% of GDP owing to the measures in the Budget Memorandum 2023. Public debt will fall from 2019 54,7% in 2020, 52,4% in 2021 and in 2022 and 2023 49,6% and 48,8% respectively Source: MEV 2023.
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, allowed member states to grant more state aid. The Netherlands has notified the Commission that it had used the framework and awarded approximately € 36.6 billion in state aid as at 3 November 2022 (source, state aid brief and appendix by European Commission of October 2022 and calculation by the Netherlands Court of Audit. This amount comprises aid approved by the Commission to support KLM and public transport. The final date of the temporary state aid framework was 30 June 2022. Some instruments have a phase-out and transition plan and member states can take specific investment and solvency support measures until 31 December 2022 and 31 December 2023 respectively.
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 actual amounts awarded in aid granted during the COVID-19 pandemic in comparison with 1) state aid actually granted for regular purposes, 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. The figures in figure 4 are taken from Eurostat and are based on ‘aid element’, a quantification of the benefit to the recipient and the costs to the government. This can be different from the nominal aid amount.
State aid expenditure
|State aid regular purposes||State aid financial sector||State aid COVID-19 crisis|
Like during the financial crisis the Netherlands spent a considerable amount on state aid for combatting the COVID-19 crisis. The Eurostat data cover the period to year-end 2020. Source: Eurostat