## _cr07216

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---

### Background and macroeconomic context
- Government: three-party coalition (Christian Democratic Party, the Labor Party, a small Christian Party) took office in February 2007.
- Recovery: firmly entrenched; recent growth above the euro area average.
- Strengths:
  - Inflation is low.
  - External position is strong (large current account surplus).
  - Financial sector stability benefiting from macroeconomic upswing.
- Recent fiscal outcome:
  - General government balance: deficit of 3.1 percent of GDP in 2003 → surplus of 0.6 percent of GDP in 2006.
  - Adjustment had a large structural component, estimated by staff at over 3 percentage points of GDP.
- Structural/demographic considerations:
  - Population aging a major long-term challenge.
  - Netherlands comparatively favorably placed because of favorable initial fiscal position, demographics, and a large, fully funded, second pension pillar.
  - CPB benchmark: achieving fiscal sustainability would require either a structural general government surplus equivalent to nearly 3½ percent of GDP by 2011 or other sustainability-enhancing measures.

### Near-term outlook and risks
- Staff GDP Growth Projections: 2007 = 2.9; 2008 = 2.7. Inflation Projections: 2007 = 1.8; 2008 = 2.1.
- CPB (Apr. 2007) GDP Growth Projections: 2007 = 2.8; 2008 = 2.8. Inflation Projections: 2007 = 1.3; 2008 = 1.3.
- DNB (Dec. 2006) GDP Growth Projections: 2007 = 3.0; 2008 = 2.8. Inflation Projections: 2007 = 1.7; 2008 = 2.3.
- Staff and official projections for 2007: 2.8–3.0 percent; for 2008: 2.7–2.8 percent.
- Staff projects inflation around 2 percent by 2008.
- Domestic conditions:
  - Output expected to rise above potential, boosting investment and exerting upward pressure on inflation.
  - Unemployment declined to 4.1 percent; vacancies increasing.
  - Upward pressure on wages likely; staff stressed importance of wage moderation.
- Risks to baseline:
  - Higher-than-projected oil prices.
  - Further significant euro appreciation.
  - Slower-than-expected trading partner growth.
  - Upside potential from stronger reexports and private consumption, with the caveat that higher inflation could damp real incomes.

### Fiscal policy stance, targets, and sustainability
- Government target: general government structural surplus of 1 percent of GDP by the end of its term (2011).
  - Staff broadly supported the target.
- Remaining sustainability gap:
  - About 2½ percent of GDP remains to be closed to achieve long-run fiscal sustainability.
  - CPB benchmark indicated nearly 3½ percent of GDP structural surplus by 2011 or equivalent measures.
- Proposed government measures (expected impact):
  - Raise participation (more effective income tax credit design; gradually reduce transferability of the general tax credit).
  - Limit increases in health care spending.
  - Introduce a special tax on higher-income pensioners.
  - These proposed measures would close 0.7 percentage point of GDP of the gap.
  - Government intends, in political compromise, to take additional structural measures to close about one-third of the remaining gap.
- Staff recommendations on fiscal execution:
  - Identify and implement other sustainability-enhancing measures as quickly as possible to close the remaining gap.
  - Err on the side of a higher-than-targeted surplus in executing fiscal policy.
  - Frontload fiscal adjustment by locking in any unexpected saving in 2007 and in the context of the 2008 budget.
  - Staff favored additional labor market reforms to raise participation further.

### Staff guidance on locking in surpluses and medium-term comparisons
- Staff urged taking opportunities to lock in a higher-than-targeted surplus by 2011 to:
  - Lessen resource pressures.
  - Act as insurance against uncertainties in long-term projections.
- Comparative medium-term budget targets (selected):
  - Netherlands (2011): Medium-Term Budget Target 1.0 (In percent of GDP); Debt-to-GDP Level in 2050 10.0.
    - Comment: "Target requires comparatively less structural fiscal adjustment than for other countries (especially compared with 2006, but about 1 percentage point of GDP from staff’s estimate of 2007); other measures, equivalent in present value terms to 2½ percent of GDP, are needed to deliver sustainability."
  - Germany (2010): Medium-Term Budget Target -0.5; Debt-to-GDP Level in 2050 97.0.
  - France (2010): Medium-Term Budget Target 0.0; Debt-to-GDP Level in 2050 20.0.
  - Italy (2010): Medium-Term Budget Target 0.1; Debt-to-GDP Level in 2050 55.0.
  - Belgium (2011): Medium-Term Budget Target 1.1; Debt-to-GDP Level in 2050 10.0.
- Staff assessment: Netherlands relatively well placed, needing comparatively less adjustment; projected debt levels in 2050 lower for the Netherlands.

### Near-term fiscal stance concerns and 2007–2008 outlook
- Staff projected a small deficit in 2007 (about 0.1 percent of GDP), implying significant stimulus; authorities projected a deficit of 0.1–0.3 percent of GDP.
- Projection deterioration mainly reflected lower nontax revenues.
- 2008 budget: importance of returning to consolidation well recognized.
  - Coalition agreement includes revenue measures frontloaded for 2008, broadly offset by unidentified later revenue reductions.
  - CPB projected a surplus of 0.7 percent of GDP without coalition-agreement measures, with higher revenues from cyclical factors and an increase in health insurance premia.
  - Coalition envisages measures over 2008–11 increasing expenditure by 1.1 percent of GDP, to be mostly offset by reductions elsewhere and efficiency savings.
  - Ministry-level planning for savings begun; risk that efficiency savings could be more modest than expected.
- Spending control and fiscal framework:
  - Tight spending control important; maintain multiyear real expenditure ceilings referenced to targeted structural balance.
  - Refinements: enlarge safety margin for Maastricht deficit ceiling; place interest payments outside expenditure ceilings; better management of gas revenue fund resources; report tax expenditure.

### Structural policies, labor market, and participation
- Authorities’ plans: raise rewards from work and reduce cost of doing business.
- Staff recommendations: consider additional structural measures to close the sustainability gap faster and ease tight labor market.
  - In particular, measures to boost labor supply and enhance labor market flexibility.
- Labor market concerns:
  - Employment rate measured in hours is low.
  - Employment protection is high.
- Specific options and measures:
  - Phasing out transferability of the general tax credit (policy set at 20 years in coalition compromise; staff notes shorter phase-out would have larger near-term impact).
  - Address inactivity traps with carefully designed measures.
  - Consider shorter duration for unemployment benefits and raising retirement age in line with life expectancy.
  - Reduce red tape (government goal: further red tape reduction of 25 percent).
  - Increase wage differentiation and reduce employment protection legislation.

### Financial sector stability, supervision, and housing
- Overall resilience:
  - Stress tests indicated sector could weather adverse macroeconomic shocks.
  - Bank capital adequacy well above minimum requirements.
  - Pension funds and insurance companies’ coverage ratios recovered to around 2001 levels.
  - Risk-oriented, cross-sectoral supervision seen as international best practice.
- Vulnerabilities:
  - High household and nonfinancial corporate indebtedness (household indebtedness prompted by tax deductibility of mortgage interest payments).
  - Low profit margins in banking.
  - EU measures to promote pension mobility could increase foreign penetration, posing supervisory challenges.
  - Housing market distortions (rent control) adversely impact housing market.
- Policy measures and concerns:
  - Mortgage code of conduct (effective January 2007) intended to limit household mortgage debt service to 25–30 percent of borrower income; around one-third of households remain exposed to interest rate risks; all households exposed to capital risks.
  - DNB indicated too early to tell effectiveness of the code; a more obligatory approach may be needed if ineffective.
  - Staff believed housing market reform should remain on the agenda despite insufficient political support.
  - Supervisory arrangements: prudential supervision to DNB; conduct of business supervision to AFM; coordination under a covenant; Netherlands ahead of most countries in implementing Basel II, Solvency II, and IFRS.
  - Staff-flagged supervisory issues: AFM expansion risks, cross-border merger implications, need for transparency/comparability in pension plan ratings.

### Measures to reduce the sustainability gap (effects in percent of GDP)
- Increase retirement age from 65 to 67 years: 0.6
- Reduction of the old-age related deduction in income tax: 0.7
- Reduction of cost of health care (higher contribution rates): 0.7
- Shortening of unemployment benefit from 3 to 1.5 years: 0.2
- Individualization of the general tax credit: 0.4
- Phasing out tax deductibility of mortgage interest payments: 0.1–0.2
- Fiscalization of pension savings (for high income): 0.2
- Cutting government consumption by 0.5% of GDP: 0.5

### Staff appraisal and policy priorities (summary)
- Near-term: take advantage of favorable growth while containing inflationary pressures through wage moderation and monitoring external risks.
- Fiscal: support government’s structural surplus target and press for additional sustainability-enhancing measures to close remaining sustainability gap (about 2½ percent of GDP); recommend frontloading adjustment and locking in unexpected savings.
- Structural: pursue measures to raise labor supply and labor market flexibility to boost participation and productivity.
- Financial: maintain robust supervision given vulnerabilities from high indebtedness and potential increased foreign penetration; monitor mortgage lending code effectiveness and keep housing market reform on agenda.

### Selected key statistics (as reported)
- Real GDP growth (annual): 2001: 1.9; 2002: 0.1; 2003: 0.3; 2004: 2.0; 2005: 1.5; 2006: 2.9; 2007 (Proj.): 2.9; 2008 (Proj.): 2.7
- CPI (HICP): 2001: 5.1; 2002: 3.9; 2003: 2.2; 2004: 1.4; 2005: 1.5; 2006: 1.7; 2007 (Proj.): 1.8; 2008 (Proj.): 2.1
- Unemployment rate: 2001: 2.4; 2002: 2.9; 2003: 4.1; 2004: 4.9; 2005: 5.0; 2006: 4.1; 2007 (Proj.): 3.4; 2008 (Proj.): 3.3
- General government balance (percent of GDP): 2001: -0.2; 2002: -2.0; 2003: -3.1; 2004: -1.8; 2005: -0.3; 2006: 0.6; 2007 (Proj.): -0.1; 2008 (Proj.): 0.7
- Structural balance (percent of GDP): 2001: -1.1; 2002: -2.2; 2003: -2.5; 2004: -1.2; 2005: 0.5; 2006: 1.0; 2007 (Proj.): -0.1; 2008 (Proj.): 0.5
- General government gross debt (percent of GDP): 2001: 50.7; 2002: 50.5; 2003: 52.0; 2004: 52.7; 2005: 53.8; 2006: 53.2; 2007 (Proj.): 53.3; 2008 (Proj.): 52.7
- Current account balance (percent of GDP): 2001: 2.4; 2002: 2.5; 2003: 5.4; 2004: 8.9; 2005: 6.3; 2006: 7.1

*Source: _cr07216 - EXECUTIVE SUMMARY*

### EXECUTIVE SUMMARY

### _cr07216 - EXECUTIVE SUMMARY

### Background
- A three-party coalition government—comprising the Christian Democratic Party, the Labor Party, and a small Christian Party—took office in February 2007.
- The recovery is firmly entrenched; recent growth has been above the euro area average.
- Macroeconomic context and strengths:
  - Inflation is low.
  - The external position is strong (large current account surplus).
  - Financial sector stability is benefiting from the macroeconomic upswing.
- Recent fiscal outcome:
  - General government balance moved into surplus in 2006 after shifting from a deficit of 3.1 percent of GDP in 2003 to a surplus of 0.6 percent of GDP in 2006.
  - The adjustment had a large structural component, estimated by staff at over 3 percentage points of GDP.
- Key structural and demographic considerations:
  - Population aging is a major long-term challenge, but the Netherlands is comparatively favorably placed because of a favorable initial fiscal position, demographics, and a large, fully funded, second pension pillar.
  - CPB benchmark: achieving fiscal sustainability would require either a structural general government surplus equivalent to nearly 3½ percent of GDP by 2011 or other sustainability-enhancing measures to close the “sustainability gap.”

### Near-term outlook
- Growth projections for 2007–2008 (projections given in table form in source):
  - Staff GDP Growth Projections: 2007 = 2.9; 2008 = 2.7. Inflation Projections: 2007 = 1.8; 2008 = 2.1.
  - CPB (Apr. 2007) GDP Growth Projections: 2007 = 2.8; 2008 = 2.8. Inflation Projections: 2007 = 1.3; 2008 = 1.3.
  - DNB (Dec. 2006) 1/ GDP Growth Projections: 2007 = 3.0; 2008 = 2.8. Inflation Projections: 2007 = 1.7; 2008 = 2.3.
  - 1/ The DNB’s inflation projections are based on the national definition of consumer price index, which has tended to show only slightly different inflation in recent years than using the HICP.
- Staff and official projections for 2007: 2.8–3.0 percent; for 2008: 2.7–2.8 percent.
- Staff projects inflation around 2 percent by 2008.
- Domestic conditions:
  - Output is expected to rise above potential, providing impetus to investment and exerting upward pressure on inflation.
  - Unemployment has declined to 4.1 percent; vacancies have been increasing.
  - Upward pressure on wages seemed inevitable; staff stressed the importance of wage moderation.
- Risks to the baseline:
  - Higher-than-projected oil prices.
  - Further significant euro appreciation.
  - Slower-than-expected trading partner growth.
  - Upside potential from stronger reexports and private consumption, with the caveat that higher inflation could damp real incomes.

### Fiscal policy
- Government target:
  - New government announced target of a general government structural surplus of 1 percent of GDP by the end of its term (2011).
  - Staff broadly supported the target, consistent with Fund recommendations during the previous Article IV consultation.
- Sustainability gap:
  - A remaining “sustainability gap” of about 2½ percent of GDP remains to be closed to achieve long-run fiscal sustainability.
  - CPB benchmark indicated nearly 3½ percent of GDP structural surplus by 2011 or equivalent measures.
- Proposed government measures and expected impact:
  - Measures envisaged to close part of the sustainability gap include raising participation (through a more effective design of the income tax credit and gradually reducing the transferability of the general tax credit from a non-working to a working partner), limiting increases in health care spending, and introducing a special tax on higher-income pensioners.
  - These proposed measures would close 0.7 percentage point of GDP of the gap.
  - In circumstances of political compromise, the new government intends to take additional structural measures to close about one-third of the remaining gap.
- Staff recommendations on fiscal execution:
  - Identify and implement other sustainability-enhancing measures as quickly as possible to close the remaining gap.
  - Err on the side of a higher-than-targeted surplus in executing fiscal policy to lessen resource pressures and take advantage of robust growth.
  - Frontload fiscal adjustment by locking in any unexpected saving in 2007 and in the context of the 2008 budget.
  - Staff favored additional labor market reforms (see Structural policies) to raise participation further.

### Structural policies
- Authorities’ plans:
  - Raise the rewards from work and further reduce the cost of doing business.
- Staff recommendations:
  - Consider additional structural measures to close the sustainability gap faster and ease the tight labor market.
  - In particular, further measures to boost labor supply and enhance labor market flexibility merit serious consideration.
- Labor market concerns:
  - Employment rate measured in hours is low.
  - Employment protection is high.

### Financial sector issues
- Overall resilience:
  - Stress tests indicated that the sector could weather adverse macroeconomic shocks.
  - Bank capital adequacy is well above minimum requirements.
  - Pension funds and insurance companies’ coverage ratios have recovered to around 2001 levels.
  - The risk-oriented, cross-sectoral approach to financial supervision is, in many respects, international best practice.
- Vulnerabilities and concerns:
  - High household and nonfinancial corporate indebtedness (the household indebtedness is prompted by the tax deductibility of mortgage interest payments), making these sectors vulnerable to rising interest rates.
  - Low profit margins in the banking sector.
  - EU measures to promote pension mobility could increase foreign penetration of the Dutch financial system, posing supervisory challenges.
  - Housing market distortions (e.g., rent control) adversely impact the housing market.
- Policy measures:
  - A code of conduct on mortgage lending is meant to prevent households from overborrowing; its effectiveness remains to be seen.
  - While there was insufficiently broad political support for housing market reform at the time, staff believed such reform should remain on the discussion agenda.

### Staff appraisal (summary of policy priorities)
- Near-term: take advantage of favorable growth while containing inflationary pressures through wage moderation and monitoring external risks.
- Fiscal: support the government’s structural surplus target while pressing for additional sustainability-enhancing measures to close the remaining sustainability gap (about 2½ percent of GDP); recommend frontloading adjustment and locking in unexpected savings.
- Structural: pursue measures to raise labor supply and labor market flexibility to boost participation and productivity.
- Financial: maintain robust supervision given vulnerabilities from high indebtedness and potential increased foreign penetration; monitor effectiveness of the mortgage lending code of conduct and keep housing market reform on the agenda.

*Source: _cr07216 - EXECUTIVE SUMMARY*

### 14. Staff urged the authorities to take any available opportunities to lock in

### 14. Staff urged the authorities to take any available opportunities to lock in

### Fiscal sustainability and targets
- Staff urged taking opportunities to lock in a higher-than-targeted surplus by 2011.
- A higher structural surplus would:
  - Lessen resource pressures.
  - Act as insurance against uncertainties inherent to long-term projections and analysis.
- Staff noted that a significant portion of the sustainability gap remained unfilled.
- Dutch analysts have identified and quantified specific measures needed to achieve sustainability (Appendix I)—though the current government plans would close only part of the gap.
- Comparative medium-term budget targets and staff comments (as presented):
  - Netherlands (2011): Medium-Term Budget Target 1.0 (In percent of GDP); Debt-to-GDP Level in 2050 10.0. Comment: "Target requires comparatively less structural fiscal adjustment than for other countries (especially compared with 2006, but about 1 percentage point of GDP from staff’s estimate of 2007); other measures, equivalent in present value terms to 2½ percent of GDP, are needed to deliver sustainability."
  - Germany (2010): Medium-Term Budget Target -0.5; Debt-to-GDP Level in 2050 97.0. Comment: "Target requires structural fiscal adjustment of 1.9 percentage points of GDP from 2006; looking at the government's balance sheet, staff calculations suggest negative net worth of 30 percent of GDP (achieving a balanced budget by 2011); thus additional measures are needed to achieve sustainability."
  - France (2010): Medium-Term Budget Target 0.0; Debt-to-GDP Level in 2050 20.0. Comment: "Target requires structural adjustment of 0.5 percentage point of GDP per year from 2006; sustainability requires structural reforms to boost potential growth by ¼ percentage point, assuming both non-age related spending and revenues are held constant in percent of GDP after 2010."
  - Italy (2010): Medium-Term Budget Target 0.1; Debt-to-GDP Level in 2050 55.0. Comment: "Target requires structural fiscal adjustment of about 3.2 percentage point of GDP from 2006; additional structural reforms that boost labor productivity growth by ¼ percentage point per year will be necessary to achieve sustainability."
  - Belgium (2011): Medium-Term Budget Target 1.1; Debt-to-GDP Level in 2050 10.0. Comment: "Target requires structural fiscal adjustment of 1¾ percentage points of GDP from 2006; to achieve sustainability, structural measures to boost labor productivity growth by ¼ percentage point per year are needed, assuming both non-age related spending and revenues are held constant in percent of GDP after 2010."
- Staff projection/assessment notes:
  - Netherlands seems relatively well placed, needing comparatively less adjustment to achieve its 2010/11 target.
  - Projected debt levels in 2050 are, for the most part, lower in the Netherlands.
  - Detailed debt sustainability analysis was contained in the staff report for the 2006 Article IV consultation, IMF Country Report No. 06/283 (July 2006), Appendix IV.
  - Staff projections based on a sustainable path, except for Germany which reflects a normative scenario with aging costs at 4 percent of GDP (IMF Country Report No: 06/438).

### Near-term fiscal stance and 2007–2008 outlook
- Near-term developments:
  - Following the fiscal surplus in 2006, staff projected a small deficit in 2007 (about 0.1 percent of GDP), implying significant stimulus (Table 3).
  - This projection was in line with the authorities’ projections of a deficit of 0.1–0.3 percent of GDP.
  - The projected deterioration mainly reflected lower nontax revenues.
  - Reduction in the corporate income tax rate from 29.6 percent to 25 percent is offset by a broadening of the tax base, including by limiting deductions.
- Authorities’ explanations for 2006–07 patterns:
  - Some budget components—related to gas revenues, health spending, and local government activities—are inherently volatile or not fully under central government control.
  - Better-than-expected local government outturn in 2006 assumed to reflect one-off items not recurring in 2007.
  - Higher oil, and therefore gas, prices and revenues in 2006 expected to start to unwind in 2007.
- 2008 budget and consolidation:
  - Importance of the 2008 budget returning to fiscal consolidation was well recognized.
  - Coalition agreement includes specific revenue measures frontloaded for 2008, broadly offset by (unidentified) revenue reductions in later years.
  - CPB projected a surplus of 0.7 percent of GDP without incorporating measures in the coalition agreement, with higher revenues reflecting cyclical factors and an increase in health insurance premia.
  - Coalition agreement envisages measures over 2008–11 that would increase expenditure by 1.1 percent of GDP, to be mostly offset by reductions in other expenditures and significant efficiency savings in the civil service.
  - Ministry-level planning for savings has already begun, though there is risk that efficiency savings could be more modest than expected.

### Spending control and fiscal framework
- Tight spending control seen as important for continued improvement in the underlying fiscal position.
- Coalition agreement envisages broadly offsetting revenue and expenditure measures, with deficit-reducing measures frontloaded.
- Authorities see scope to save on health care costs, given variation across health care providers.
  - Authorities developing “yardstick competition” to regulate average prices per hospital (not individual prices), allowing hospitals and insurers to negotiate.
- Authorities remain committed to the fiscal framework anchored by multiyear real expenditure ceilings and set with reference to the targeted structural fiscal balance.
  - Framework credited with providing discipline and preventing "big policy mistakes."
  - 2006 fiscal ROSC found the Netherlands achieves or exceeds good practice standards.
  - New refinements aligned with earlier staff recommendations include: enlarging the safety margin for the Maastricht deficit ceiling; placing interest payments outside the expenditure ceilings; better management of the resources of the budgetary fund on gas revenues; and reporting of tax expenditure.

### Financial sector stability and supervision
- Cyclical and structural improvements noted in financial sector stability:
  - Pension fund and insurance company balance sheets benefited from increases in equity prices and long-term bond yields.
  - Most pension fund coverage ratios now above the long-term requirement set under the 2006 FTK (Financial Assessment Framework) regulations governing pension funds.
    - Pensions are required to achieve a coverage ratio sufficient to meet nominal obligations with a 97.5 percent probability. In practice, this implies a coverage ratio of 125–130 percent.
  - Insurers strengthened, despite downward pressure on premiums from health care reforms.
  - Banking sector capital ratios remain well above required levels, though profitability has declined as a flattening yield curve eroded interest income.
- DNB stress tests:
  - Suggest most financial sector participants could weather fairly sharp adverse macroeconomic shocks.
  - Indicate pension sector portfolios are particularly sensitive to interest rate and asset price developments, underscoring the need for high coverage ratios.
  - Real coverage ratios (assuming full inflation indexation of benefits) are substantially lower than nominal ratios, arguing for aiming for high coverage ratios.
- Mortgage lending and private equity:
  - Mortgage code of conduct (effective January 2007) intended to limit household mortgage debt service to 25–30 percent of borrower income.
  - Around one-third of households remain exposed to interest rate risks; all households are exposed to capital risks.
  - DNB indicated it is too early to tell whether the code will be effective; if not, a more obligatory approach may be needed.
  - Private equity finance not seen as a significant concern due to small scale, due diligence, and limited credit risk to banks; DNB preparing guidelines for institutional investor due diligence.
- Institutional and supervisory improvements:
  - New supervisory framework assigns prudential supervision to DNB and conduct of business supervision to AFM.
  - Positive attributes noted:
    - Integration of macro-prudential analysis with risk management.
    - DNB’s systematic risk-based supervision framework (FIRM) enables tailored supervision.
    - AFM’s self-assessment templates for conduct of business issues.
    - Coordination between DNB and AFM under a covenant agreement.
    - Early implementation issues were resolved under the covenant; supervised institutions praised openness of supervisors.
    - Netherlands ahead of most countries in implementing Basel II, Solvency II, and IFRS.
- Staff-flagged supervisory concerns:
  - AFM’s substantial expansion of responsibilities risks delaying execution of core responsibilities if additional responsibilities arrive too quickly. Authorities suggested no new major responsibilities expected.
  - Potential cross-border merger of a large Dutch bank would have important supervisory implications requiring close cooperation between home and host supervisors.
  - EU directives may increase competition from foreign-based providers in the pension sector; transparency and comparability between plans recommended.
  - Plan to provide a simple rating of pension plans should be based on prudent assessments of financial strength and take into account degrees of inflation indexing; ratings may be assuming excessively high returns on equity investments and could be reconsidered at the next review.

### Housing market
- Major distortions affecting housing market with adverse effects on housing access and affordability, labor mobility, and household financial leveraging.
- Staff argued mortgage interest deductibility:
  - Promotes high mortgage debt and boosts housing prices.
  - Harms access and affordability for low-income earners.
- Supply-side distortions (rent controls and restrictions on new housing supply) contribute to chronic shortage of housing and impede labor mobility.
- Authorities acknowledged the view but indicated insufficient political support for such reforms at present.

### Structural reforms, participation, and staff appraisal
- Importance of addressing inactivity traps and making work pay agreed by all; coalition agreement contains measures to raise participation.
- Careful design of measures emphasized to avoid unintended side effects when targeting particular groups (low-income, women, senior workers).
  - Example: phasing-out of transferability of the general tax credit could raise rewards from work; phase-out period set at 20 years due to political compromise.
- Staff saw scope for further measures to promote higher participation and productivity beyond recent reforms.
- Authorities continue to enthusiastically support overseas development assistance (ODA), continuing to exceed the United Nations’ target of 0.7 percent of GNI.
- Staff appraisal highlights:
  - Dutch economy performing well with recovery firmly entrenched.
  - Significant structural fiscal adjustment contributed to a general government surplus in 2006 after breaching the Maastricht deficit ceiling in 2003.
  - Competitiveness satisfactory, with continued wage moderation important.
  - Aging population remains a major policy challenge; authorities well aware of policy requirements based on CPB work.
  - New government’s target of a general government structural surplus of 1 percent of GDP by 2011 is broadly appropriate, but additional sustainability-enhancing measures are needed.
  - Identifying and implementing measures quickly would minimize the cost of aging by lowering debt and interest payments and enhance intergenerational equity.
  - Significant progress made in structural areas (health care, disability benefits, administration of social benefits), but current robust growth and tightening labor market provide a favorable environment for further fiscal consolidation and additional measures to enhance labor market flexibility and participation.
  - A more ambitious approach to closing the sustainability gap would have been welcome.

*Source: IMF staff report excerpt (Content unit: _cr07216 - 14. Staff urged the authorities to take any available opportunities to lock in).*

### 33. The near-term fiscal stance is a concern. Fiscal stimulus this year would be

### _cr07216 - 33. The near-term fiscal stance is a concern. Fiscal stimulus this year would be

### Fiscal stance and near-term policy
- Fiscal stimulus in the current year "would be unhelpful in a context of emerging resource constraints."
- Recommendation: tighten the fiscal stance as soon as possible by:
  - locking in any unexpected saving in 2007; and
  - preparing the 2008 budget to return to the course of fiscal consolidation.
- Policy objective: make "decisive and significant progress toward securing the 2011 fiscal surplus target."
- Political consideration: "The electoral cycle only strengthens the case for early action toward securing this target."

### Spending control and 2008 budget preparation
- Continued improvement in the underlying fiscal position requires tight spending control.
- In preparing the 2008 budget, set "prudent expenditure ceilings through 2011."
- Timing of measures: "before the envisaged spending increases are implemented, the offsetting expenditure-reducing measures should preferably be in place" to minimize underperformance risk.
- Sectoral risk: "spending overruns remain a perennial risk in the health sector."
- Cost restraint measures in health:
  - introducing greater competition; and
  - "yardstick benchmarking."
- Oversight: "careful monitoring will be required, with a view to timely remedial actions if needed."

### Longer-term fiscal strategy and surpluses
- Recommendation: err on the side of higher surpluses when executing fiscal policy and setting expenditure ceilings.
- Rationale:
  - "A higher structural surplus would help lessen resource pressures and act as insurance against the uncertainties surrounding key macroeconomic and reform parameters of the long-term projections and analysis of aging."
  - "The case for a higher surplus is strengthened because a significant portion of the sustainability gap remains unfilled."

### Financial sector stability and supervision
- The financial sector benefits from the macroeconomic upswing and improvements in supervision and risk management.
- Pension funds: "have seen a marked recovery in financial positions"; further increases in coverage ratios would "better protect the real value of pensions."
- Supervisory approach: implementation of a "risk-oriented, cross-sectoral approach to financial sector supervision" is "impressive" and "in many respects, the design and implementation of supervision in the Netherlands are international best practice."

### Housing market reform
- Observation: "The lack of progress in reforming the housing market stands in sharp contrast with the Netherlands’ willingness to tackle other difficult areas."
- Positive step: adoption of the mortgage code of conduct to limit excessive household indebtedness is "welcome."
- Limitation: the mortgage code "does not address the underlying tax incentive to maximize mortgage debt."
- Recommendation: begin reforming "the numerous distortions adversely affecting the housing market."

### Labor supply, productivity, and structural reforms
- Priority: "Efforts on a broad front to increase labor supply are of considerable urgency" and can "boost sustainable growth by raising productivity."
- Benefits: easing the tight labor market and addressing aging-related challenges.
- Specific policy options:
  - Phasing out the transferability of the general tax credit is "potentially one of the most effective measures to raise the rewards from work"; but it "would have a significant and more immediate impact if phased out over a much shorter period than the envisaged 20 years."
  - Address "other inactivity traps with carefully designed measures that avoid unintended side effects."
  - Consider politically difficult measures: "a shorter duration for unemployment benefits and raising the retirement age in line with increases in life expectancy."
- Complementary policies to support productivity and innovation:
  - provide an environment conducive to entrepreneurship and competition;
  - increase the role of market forces in various sectors;
  - strengthen investigative powers of the competition authority;
  - reduce red tape (government goal: a further red tape reduction of 25 percent).
- Labor market flexibility:
  - "Further efforts to reduce employment protection legislation would be beneficial" because it acts as a tax on new hiring, reduces labor participation, and hampers labor movement to high productivity areas.
  - "Greater wage differentiation would help attract labor to higher productivity companies and sectors, while strengthening the incentives for human capital investment."

### Official development assistance
- The authorities' commitment to ODA: "continuing to exceed the United Nations’ ODA target, is highly commendable."

*Source: _cr07216 - 33. The near-term fiscal stance is a concern. Fiscal stimulus this year would be*

### 40. It is recommended that the next Article IV consultation with the Netherlands remain

### _cr07216 - 40. It is recommended that the next Article IV consultation with the Netherlands remain

### Macroeconomic overview and recent developments
- Recommendation: the next Article IV consultation with the Netherlands remain on the 12-month cycle.
- Land area (2006): 41.5 thousand sq. km.
- Population (2006): 16.3 million
- Life expectancy at birth (2006): 76.4 (male), 81.7 (female)
- Fertility rate (2006): 1.7 children/woman
- Infant mortality rate (2006): 4.96 per 1,000 live births
- Population per sq. km. of land area (2006): 483 persons
- Nominal GDP (at market prices) 2006: 527.9 (100.0) (In billions of euros; percent of GDP indicated where shown)

### Output, demand, and prices (annual percentage changes and levels as reported)
- Gross domestic product (constant prices) growth: 2001: 1.9; 2002: 0.1; 2003: 0.3; 2004: 2.0; 2005: 1.5; 2006: 2.9; 2007 (Proj.): 2.9; 2008 (Proj.): 2.7
- Private consumption (constant prices): 2001: 1.8; 2002: 0.9; 2003: -0.2; 2004: 0.6; 2005: 0.7; 2006: -1.2; 2007 (Proj.): 1/1.7; 2008 (Proj.): 1.8
- Public consumption (constant prices): 2001: 4.6; 2002: 3.3; 2003: 2.9; 2004: 0.1; 2005: 0.3; 2006: 8.7; 2007 (Proj.): 1/1.0; 2008 (Proj.): 1.4
- Exports of goods and nonfactor services (constant prices): 2001: 1.9; 2002: 0.9; 2003: 1.5; 2004: 8.0; 2005: 5.5; 2006: 7.5; 2007 (Proj.): 6.7; 2008 (Proj.): 5.5
- Imports of goods and nonfactor services (constant prices): 2001: 2.5; 2002: 0.3; 2003: 1.8; 2004: 6.4; 2005: 5.1; 2006: 7.9; 2007 (Proj.): 6.9; 2008 (Proj.): 5.6
- Output gap (percent of potential output): 2001: 2.6; 2002: 0.4; 2003: -1.3; 2004: -1.3; 2005: -1.8; 2006: -0.9; 2007 (Proj.): --; 2008 (Proj.): 0.3
- Consumer price index (HICP): 2001: 5.1; 2002: 3.9; 2003: 2.2; 2004: 1.4; 2005: 1.5; 2006: 1.7; 2007 (Proj.): 1.8; 2008 (Proj.): 2.1
- GDP deflator: 2001: 9.2; 2002: 3.8; 2003: 2.2; 2004: 0.7; 2005: 1.7; 2006: 1.5; 2007 (Proj.): 1.8; 2008 (Proj.): 2.1

### Public sector accounts (percent of GDP)
- Revenue: 2001: 45.0; 2002: 43.9; 2003: 43.8; 2004: 44.4; 2005: 45.1; 2006: 46.8; 2007 (Proj.): 1/45.8; 2008 (Proj.): 46.7
- Expenditure: 2001: 45.2; 2002: 45.9; 2003: 46.9; 2004: 46.2; 2005: 45.4; 2006: 46.3; 2007 (Proj.): 1/45.9; 2008 (Proj.): 46.0
- General government balance: 2001: -0.2; 2002: -2.0; 2003: -3.1; 2004: -1.8; 2005: -0.3; 2006: 0.6; 2007 (Proj.): -0.1; 2008 (Proj.): 0.7
- Structural balance: 2001: -1.1; 2002: -2.2; 2003: -2.5; 2004: -1.2; 2005: 0.5; 2006: 1.0; 2007 (Proj.): -0.1; 2008 (Proj.): 0.5
- Primary balance: 2001: 2.9; 2002: 0.8; 2003: -0.5; 2004: 0.7; 2005: 2.1; 2006: 2.8; 2007 (Proj.): 2.1; 2008 (Proj.): 2.9
- General government gross debt: 2001: 50.7; 2002: 50.5; 2003: 52.0; 2004: 52.7; 2005: 53.8; 2006: 53.2; 2007 (Proj.): 53.3; 2008 (Proj.): 52.7

- Note: 1/ The introduction of the new healthcare system in 2006 resulted in a shift in health care expenditure from private to public consumption, lowering private and raising public consumption without changing overall GDP. This also raised government revenues and lowered private disposable income, without affecting net financial positions.

### External sector and financial vulnerability (selected indicators)
- Current account balance (percent of GDP): 2001: 2.4; 2002: 2.5; 2003: 5.4; 2004: 8.9; 2005: 6.3; 2006: 7.1
- Exports goods and services (annual percent change, U.S. dollars): 2001: -0.7; 2002: 4.4; 2003: 16.9; 2004: 17.7; 2005: 7.7; 2006: 12.2
- Imports goods and services (annual percent change, U.S. dollars): 2001: -0.3; 2002: 4.4; 2003: 22.7; 2004: 19.3; 2005: 7.6; 2006: 12.1
- Official reserves (in billions of U.S. dollars): 2001: 16.9; 2002: 19.0; 2003: 21.6; 2004: 21.2; 2005: 20.5; 2006: 23.9
- Foreign assets of the banking sector (in billions of U.S. dollars): 2001: 211.4; 2002: 256.2; 2003: 308.2; 2004: 376.9; 2005: 409.0; 2006: 554.7
- Foreign liabilities of the banking sector (in billions of U.S. dollars): 2001: 250.1; 2002: 305.8; 2003: 328.2; 2004: 392.5; 2005: 418.0; 2006: 550.2
- Public sector debt (Maastricht definition): 2001: 50.7; 2002: 50.5; 2003: 51.8; 2004: 52.5; 2005: 52.8; 2006: 52.3
- Government bond yield: 2001: 5.2; 2002: 5.0; 2003: 4.2; 2004: 4.1; 2005: 3.4; 2006: 3.8
- Risk-based capital-asset ratio (deposit-taking institutions): 2001: 11.7; 2002: 12.0; 2003: 12.3; 2004: 12.3; 2005: 12.6; 2006: 11.7 (1/ Data is for the third quarter)

### Financial soundness and banking sector indicators (selected)
- Regulatory capital to risk weighted assets: 2001: 11.7; 2002: 12.0; 2003: 12.3; 2004: 12.3; 2005: 12.6; 2006: 11.7
- Regulatory Tier I capital to risk weighted assets: 2001: 8.6; 2002: 9.1; 2003: 9.6; 2004: 9.9; 2005: 10.3; 2006: 9.4
- Nonperforming loans to total gross loans: 2001: 2.3; 2002: 2.4; 2003: 2.0; 2004: 1.5; 2005: 1.2; 2006: ...
- Household debt to GDP: 2001: 84.7; 2002: 91.3; 2003: 99.0; 2004: 104.6; 2005: 113.3; 2006: ...
- Real estate price growth: 2001: 11.2; 2002: 8.5; 2003: 4.9; 2004: 4.2; 2005: 4.8; 2006: 4.2

### Labor market, participation, and structural policy measures
- Employment and unemployment:
  - Employment (annual percent): 2001: 2.1; 2002: 0.4; 2003: -0.6; 2004: -1.4; 2005: -0.4; 2006: 1.5; 2007 (Proj.): 1.3; 2008 (Proj.): 1.0
  - Unemployment rate (percent): 2001: 2.4; 2002: 2.9; 2003: 4.1; 2004: 4.9; 2005: 5.0; 2006: 4.1; 2007 (Proj.): 3.4; 2008 (Proj.): 3.3
- Household savings ratio (percent of disposable income): 2001: 6.8; 2002: 6.5; 2003: 6.3; 2004: 8.2; 2005: 7.5; 2006: 7.3; 2007 (Proj.): 7.7; 2008 (Proj.): 8.0
- Structural labor-market measures (recent actions and staff recommendations):
  - Disability: reforms in January 2006 introduced a distinction between fully disabled and partially disabled; staff recommends reassessment of the existing stock of disabled, not only those younger than 45 years.
  - Unemployment benefits: effective October 2006, maximum duration cut from 60 to 38 months; staff recommends considering a maximum period much shorter than three years and tapering benefits over time.
  - Poverty and inactivity traps: changes in real estate tax and child credit in 2006; scheduled increases in the earned income tax credit; staff highlights reform of rent subsidy arrangements, examination of the minimum wage.
  - Female participation: childcare subsidies increased by €130 million in 2006 and a further €125 million in 2007; legislation requiring primary schools to arrange child supervision from 2007–08 school year; staff advises phasing of childcare subsidies to lessen implicit tax on middle class.
  - Early retirement: fiscal incentives removed as of January 2006; staff urges care that the “life-course scheme” not substitute for past subsidized early retirement.
  - Employment protection legislation (EPL): changes effective October 2006 and March 2007 eased LIFO and dismissal checks; staff urges further easing as EPL remains high by international comparison.
  - Productivity: NMa became formally independent in July 2006; staff supports further reduction of licenses and permits, continued reduction in red tape (another 25 percent target), strengthening NMa investigative powers, and greater wage differentiation in collective labor agreements.

### Measures to reduce the sustainability gap (Appendix I; effects in percent of GDP)
- Increase of retirement age from 65 to 67 years: 0.6
- Reduction of the old-age related deduction in income tax: 0.7
- Reduction of cost of health care (higher contribution rates): 0.7
- Shortening of unemployment benefit from 3 to 1.5 years: 0.2
- Individualization of the general tax credit 1/: 0.4
- Phasing out tax deductibility of mortgage interest payments 2/: 0.1–0.2
- Fiscalization of pension savings (for high income) 3/: 0.2
- Cutting government consumption by 0.5% of GDP: 0.5
- Notes:
  - 1/ Individualizing the general tax credit would allow both partners to get the allowance (up to €1,990 per person), lessening disincentives to labor participation.
  - 2/ Full details not available.
  - 3/ This measure calls for high income earners to pay social contributions on their pension savings (presently, pension savings are not subjected to social insurance premiums in the Netherlands).

### IMF engagement, surveillance, and data provision
- 2007 Article IV discussions held in Amsterdam and The Hague during March 29–April 10, 2007; mission team: Messrs. Feldman (head), Nadal De Simone, Moore (all EUR), and Roger (MCM).
- The Netherlands has accepted the obligations of Article VIII and subscribes to the SDDS; economic data are adequate to conduct effective surveillance.
- The authorities released the mission’s concluding statement, organized a press conference, and agreed to publication of the staff report.
- Exchange rate arrangements: currency is the euro, which floats freely and independently.
- Exchange restrictions: none except for restrictions imposed solely for security reasons and notified to the Fund; specific restrictions listed for certain countries and persons.
- Statistical issues: national accounts, financial and balance of payments, and fiscal data published by national agencies; 2006 healthcare reform caused significant reclassification of private consumption into public consumption without affecting overall GDP.

*Source: Staff Report for the 2007 Article IV Consultation—Informational Annex, Prepared by the European Department, May 22, 2007.*

### 1. This staff statement provides information on developments that has become available

### _cr07216 - 1. This staff statement provides information on developments that has become available

### Developments since the staff report
- The new information does not alter the thrust of the staff appraisal.
- Recent data broadly in line with staff projections:
  - Real GDP in Q1 2007 was 0.6 percent higher than in the previous quarter (2.5 percent higher than a year earlier).
  - Consumer and producer confidence remained strong through May 2007.
  - Unemployment continued to fall; the number of unemployed in April 2007 reached the lowest level in four years.
  - Year-on-year CPI inflation in May (HICP basis) was 2.0 percent.
- 2007 fiscal deficit projection revised upward in the Spring Memorandum:
  - Authorities project a 2007 general government deficit of 0.7 percent of GDP (versus earlier projection of a deficit of 0.1–0.3 percent of GDP noted in the staff report).
  - Widening mainly reflects lower natural gas revenues and health sector overruns.
  - Revision strengthens case for early remedial actions to tighten the fiscal stance and return to fiscal consolidation.

### Economic outlook (authorities’ statement)
- Growth and confidence:
  - After a period of headwind, the Dutch economy has been advancing above potential growth since last year.
  - Economic growth is now broad based; domestic demand fuelled by increasing consumer and producer confidence.
  - Household consumption forecasted to grow rapidly this year, but remains only marginally above its long-term average.
  - Investment grew rapidly in 2006; investment growth expected to decelerate somewhat in 2007 before picking up.
  - Short-term outlook: economic growth forecasted to remain well above potential and the output gap expected to turn positive in 2008.
- Competitiveness and corporate performance:
  - Last year the Dutch competitive position increased for the first time since 2000.
  - Return-on-equity has steadily improved and is currently at the highest level since the mid-eighties.

### Fiscal policy — recent trajectory and government plans
- Past fiscal consolidation:
  - Debt ratio reduced from close to 80 percent in the mid-nineties to well below 50 percent nowadays.
  - Authorities set a target of a structural surplus of 1 percent of GDP in 2011.
  - Structural reforms combined with budgetary consolidation expected to reduce the sustainability gap by approximately one third.
- Coalition Agreement measures:
  - Revenue-side: increase environmental taxes; revise tax system to enhance labor participation.
  - Expenditure-side: efficiency-enhancing measures, including reduction in the number of civil servants by approximately 13,000 before 2011 (7 percent of the government workforce), yielding an expenditure reduction of € 630 million.
- Recent setbacks and response:
  - Short-term setbacks: reversal from a budgeted surplus to expected deficit of 0.7 percent GDP in 2007 (worsening by 0.9 percent of GDP compared to the September budget).
  - Main causes: lower gas revenues (0.5 percent of GDP) and health care overruns (0.2 percent of GDP).
  - Government aims to register a budgetary surplus in 2008; upcoming budget to include measures to contain health care expenditures.
  - Commitment reiterated to structural surplus of 1 percent of GDP in 2011.
- Fiscal framework improvements implemented:
  - Lowered signal value for the deficit from 2.5 percent of GDP to 2 percent of GDP.
  - Interest payments brought outside expenditure ceilings.
  - Use of best (realistic) forecasts replacing tradition of cautious growth assumptions.
  - Measures to improve management of resources in the government’s savings fund for infrastructural outlays.

### Financial sector — stability and supervisory issues
- Current state:
  - Financial sector and financial stability viewed as robust; supervisory framework and implementation represent best international practice.
  - Bank capital adequacy well above minimum requirements.
  - Pension funds and insurance companies’ coverage ratios recovered to around 2001 levels.
- Risks and policy considerations:
  - Expansion of AFM responsibilities could negatively impact core tasks; authorities note no intention to broaden AFM mandate.
  - Cross-border banking requires intensified coordination with foreign supervisors due to strong internationalization.
  - Possible increase in competition in the pension sector from foreign-based providers; need for increased transparency of pension supervision in the EU.
  - Low profit margins in banking and EU measures to promote pension mobility could increase foreign penetration, posing supervisory challenges.
  - High indebtedness in non-financial corporate and household sectors increases vulnerability to rising interest rates.
  - Introduction of a mortgage code of conduct to limit excessive household indebtedness; code does not address tax incentives for maximizing mortgage debt.
  - Housing market distortions include tax deductibility of mortgage interest payments and rent controls.

### Structural reforms and labor market
- Recent outcomes:
  - Structural reforms (e.g., disability scheme overhaul) continue to pay off.
  - Labor participation increased by one percentage point in 2006 compared to 2005 and expected to increase another one percentage point in 2007.
  - Additional labor supply from policy measures estimated at 50,000 persons (effect waning in 2007 and 2008).
  - New and filled vacancies increasing since Q2 2003.
- Remaining challenges:
  - Labor market tensions reappearing in some segments; shortages could lead to substantial wage increases, limiting competitiveness and growth.
- Government measures to increase participation:
  - Target groups: older workers, women, foreign-born workers, and young people (in cooperation with private sector).
  - Measures include reducing transferability of the general tax credit from the non-working to the working partner; introducing an earned income tax credit; increasing the tax credit for the working elderly; and stronger incentives in the state pension to encourage continued employment at older ages.

### Executive Board assessment — main messages and recommendations
- Commendations:
  - Significant fiscal adjustment in recent years and implementation of difficult structural reforms.
  - Continued strong and broad-based growth performance.
- Policy recommendations and concerns:
  - Importance of further fiscal consolidation to reduce overheating risks and address population aging.
  - Encourage tightening fiscal stance as soon as possible, locking in any unexpected saving in 2007, and ensuring the 2008 budget makes decisive progress toward the medium-term fiscal surplus target.
  - Emphasize tight spending control: implement offsetting expenditure-reducing measures before envisaged spending increases; set prudent expenditure ceilings through 2011 in preparing the 2008 budget; carefully monitor health care to counter overruns.
  - Support for target of a general government structural surplus of 1 percent of GDP by 2011; encourage identifying and implementing additional sustainability-enhancing measures to better address aging and intergenerational equity.
  - Encourage erring on the side of a higher-than-targeted surplus in fiscal execution.
  - Financial supervision:
    - Welcome risk-oriented, cross-sectoral approach; Netherlands supervision design and implementation seen as international best practice.
    - Mortgage code welcomed but does not address tax incentive to maximize mortgage debt; recommend rectifying distortions in the housing market affecting supply and demand.
  - Labor supply and structural reforms:
    - Consider faster phasing out of transferability of the general tax credit (phasing over a shorter period than envisaged 20 years would have more significant near-term impact).
    - Consider other policies to boost labor supply, including shorter unemployment benefit duration and raising the retirement age in line with life expectancy increases.
    - Encourage measures to boost productivity and sustainable growth: increase market forces, strengthen competition authority powers, reduce administrative burdens, make employment protection legislation less stringent, and consider greater wage differentiation.

### Key statistics and selected economic indicators (as reported)
- Real economy (change in percent)
  - Real GDP 0.32.01.52.92.92.7
  - Domestic demand 0.40.60.92.72.52.5
  - CPI (harmonized) 2.21.41.51.71.82.1
  - Unemployment rate (in percent)  4.14.95.04.13.43.3
  - Gross national saving (percent of GDP) 24.828.225.726.727.528.5
  - Gross domestic investment (percent of GDP) 19.319.319.319.720.521.1
- Public finance (percent of GDP)
  - General government balance -3.1-1.8-0.30.6-0.10.7
  - Structural balance  -2.5-1.20.51.0-0.10.5
  - General government debt 52.052.753.853.253.352.7
- Interest rates (percent)
  - Money market rate 2/ 2.32.12.23.13.8...
  - Government bond yield 2/ 4.24.13.43.84.0...
- Balance of payments (in percent of GDP, unless otherwise indicated) 3/
  - Trade balance 6.67.17.07.78.28.2
  - Current account  5.48.96.37.17.47.3
  - Official reserves, excl. gold (US$ billion) 2/ 11.210.79.010.810.4...
  - Reserve cover (months of imports of GNFS) 0.40.40.30.3......
- Exchange rate
  - Exchange rate regime  Member of EMU
  - U.S. dollar per euro  1.131.241.251.261.301.31
  - Nominal effective rate (2000=100) 2/ 106.3107.6  107.7  108.2109.1...
  - Real effective rate (2000=100) 2/ 4/ 110.9113.0  112.6  113.0114.1...

*Source: IMF staff statement and Executive Board assessment as presented in the staff statement and Public Information Notice (PIN) for the 2007 Article IV Consultation with the Kingdom of the Netherlands — Netherlands.*

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