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Dutch economy takes nosedive

By Adriana Stuijt     Feb 17, 2009 in Business
Two months ago, Dutch economists still were cautiously optimistic that the US credit crunch would not hit this European gateway-trading nation as hard as it did other parts of the world. However, the Wall Street malaise is hurting the Dutch economy.
In fact, says the cabinet's advisory council, the Central Plan Bureau, the Dutch economy hasn't been this bad since the 1980s - and is now collapsing with 'unprecedented speed'. Top Dutch companies such as DAF trucks and Philips electronics in Eindhoven are working hard to keep as many workers on the assembly lines as possible - however they just announced that some people would have to be laid off after all.
The Central Plan Bureau predicts that Dutch unemployment levels will reach 8,75 percent of the workforce by 2010 - i.e. 675,000 people will be out of work by then, representing a huge drain on the treasury from unemployment benefits. the country has 17-million residents.
Two months earlier, the CPB wasn't nearly as somber, believing that the multifaceted Dutch economy could still ride out the storm. Dutch companies then were working hard to keep their valuable, well-trained workforce by reducing working hours and even closing deals with to lower wages temporarily.
DAF trucks lays off 1,373 workers in Holland and Belgium
However, the malaise has now set in in earnest at the Gateway to Europe -- and top Dutch companies such as truck manufacturer DAF in Eindhoven now are forced to lay off workers, the company said on Tuesday.
The trade unions agreed with the company's plans to lay off about 400 workers at DAF's Eindhoven factory, and 873 in Belgium, but only after June.
The Dutch trade unions are also unusually cooperative about the issue, because the wishes of the labour force and the management are identical at the moment: they are all trying to keep as many people on the labour force as they can, often working shorter hours and cutting down shifts.
However, DAF management informed its trade union representatives in a formal meeting that they would have to phase out 400 workers in The Netherlands factory after June, and 873 in Belgium.
The agreement reached was that no-one would be fired until July, said trade-union negotiating council chairman Bouke Wijnia of DAF-Eindhoven.
He said the union leaders weren't surprised - and indeed if the trucking industry 's sales figures don't improve soon, there might even be a third wave of layoffs by the end of the year.
DAF saw its production of large trucks drop from a weekly 245 last year, to the present weekly 100. At the moment, it has 3,000 production-line workers in Eindhoven - 30% less than usual. DAF also plans to lay off another 873 in neighbouring Belgium at their Westerlo factory. At the moment, 2,300 people are employed there.
And Philips electronics in Eindhoven already announced late last year that it may be scrapping jobs throughtout all their multinational divisions. Its Chief Financial Officer Pierre-Jean Sivignon didn't want to elaborate on exactly how many jobs would be lost as yet. see
Based on projections from such newly emerging industrial woes, the CPB now predicts that the Dutch economy will shrink by 0.75% this year, and make only a slight recovery next year.
The Dutch and indeed also neighbouring Belgium and Germany's economies do not rely on only one economic field. The Dutch economy is resilient because it's so multifaceted and does not solely rely on the fact that it's the import/export gateway to most of Europe through the trade and industry generated by the harbours of Rotterdam and Amsterdam.
The high-yield small farms of the Netherlands also generate the largest crops of produce, dairy- and floral exports in Europe, they also have natural gas- and oil reserves and another important key to their success if the highly-educated, multilingual workforce. The agricultural economy generally always is more stable: people do after all, still have to eat -- although there's a considerable drop in sales in luxury food items and top restaurants are beginning to close their doors as business lunches are being scrapped enmasse from corporate budgets.
The CPB predicts that the Dutch economy is expected to shrink by 0.75% in 2009, but possibly make a meagre recovery by 2010. In fact, they warn that the global credit crisis is causing a drop in economic activities in the Netherlands that has not occurred since the early 1980s.
"Exporting firms are being hit particularly hard by the international economic malaise. And private non-residential investment is being inhibited not only by diminished production but also because the sources of financing are drying up.: Europe's traditional lenders, the Swiss banks, are suffering from multi-billion Euro losses and aren't lending nearly as much as they used to.
The Dutch cabinet's advisory agency does however project a modest recovery of both world trade and the granting of credit by the second part of 2009. The CPS says this will stimulate Dutch economic growth almost at once -- and would raise the GDP by 1% by next year.
"The uncertainties about the timing of the recovery are considerable, however. Due to the slackening economy, unemployment will rise markedly in the next two years, to 6,50 in 2010.
"Lower prices of energy and raw materials will push down inflation, which will help to sustain purchasing power," they said.
Research on financial crises in the past decades in Spain, Sweden, Norway, Finland and Japan shows that crises such as the one we are now experiencing usually last longer than normal cyclical downturns.
Furthermore, the present crisis stretches worldwide. To take account of the risk of even more severe developments,
The government's budget, which showed a healthy surplus in 2008, will drop to a deficit -- 2.4% of the GDP in 2010. The CPB says this is not due to poor budget management, but rather to the growing joblessness, which reduces tax revenues, increase social-security (unemployment) benefits sible in the government balance.
The budget surplus in 2008 will change to a deficit of 2.4% GDP in 2010. This deterioration can mainly be attributed to lower taxes, social security contributions anda drop in the country's sizeable revenues from the sale of its natural gas, mainly to Russia and the rest of Europe. see
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