Dutch deficit and stalled savings

EU finance chiefs will consider whether to give the Netherlands an official slap on the wrists over its economy on Tuesday.

This month's 'Ecofin' council kicks off with the usual informal gathering of euro ministers, who will decide whether to endorse the European Commission's recommendation to declare Holland in a state of excessive deficit.

It is yet another attempt by the commission to force a country to address its budgetary shortcomings under the EU stability pact underpinning the euro.

The pact states that euro members must not allow their deficit - the amount spending exceeds income - to creep above three per cent of GDP.

But ministers have repeatedly rejected commission moves to impose the pact's rules on France, Germany and Italy after they breached the three per cent limit.

It remains to be seen whether they will also allow their Dutch colleagues - always staunch supporters of EU fiscal rules - off the hook.

The Netherlands' deficit hit three per cent last year and at current spending levels the commission expects it to climb to 3.5 per cent in 2004.

A formal decision will be taken by all 25 EU ministers on Wednesday, and if they approve the commission's recommendation the Netherlands will have to take extra measures to rein in its debt.

On Wednesday finance chiefs will chew over the latest problem in the saga of a law cracking down on untaxed expat savings.

The law is being held up by third countries - notably Lichtenstein - which must agree similar measures by the end of June if the EU law is to come into effect by January 1 2005 as planned.

Internal market commissioner Frits Bolkestein is expected to ask ministers to put pressure on these countries to sign up to the deal.

And ministers will also consider their next move concerning global accounting standards which are supposed to be used by all listed companies from 2005.

One standard, IAS 39, has not yet been approved by the EU (and therefore cannot be enforced from 2005) because the EU banking sector thinks it will make their accounts much more volatile.

The commission has already warned the board in charge of drafting the accounting standards that a solution must be found by mid-June as time is running out for the text to be approved in time for the January 2005 deadline.

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