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Dutch Government Postpones Decision for 2014 Budget Cuts

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04/12/2013 | 02:50am EDT

By Robin van Daalen

AMSTERDAM--The Dutch government late Thursday said it will postpone a decision to make additional budget cuts until later this year, as part of an agreement with unions and the Dutch employers organization which aims to revive the Dutch economy.

In March the government decided it won't seek extra austerity measures to meet European Union budget targets for 2013, but instead said it would target 4.3 billion euros ($5.63 billion) of budget cuts for 2014 to bring the country's deficit down to below the EU target of 3% of GDP. It's now hoping the economy will recover and additional measures won't be needed.

"If the recovery continues and the economy strengthens this year, the cabinet expects that additional savings won't be needed in 2014 to bring the deficit down to or below 3% of GDP," the government said.

The plans to further cut the Dutch deficit in 2014 were postponed in order to gain support from labour unions and the employers confederation for measures to fight unemployment and simplify legislation to lay-off employees. "This deal can make an important contribution to the recovery of confidence [in the economy]," said Lodewijk Asscher, the Dutch minister of social affairs.

The Dutch deficit is seen hitting 3.3% of GDP in 2013 and 3.4% in 2014, the CPB Netherlands Bureau for Economic Policy Analysis said in March.

In addition to the housing market slump and government austerity measures, the economy is also suffering from slowing export growth. Unemployment has increased rapidly in recent months, hitting 7.5% of the workforce in January, and consumer sentiment is at historic lows. More cutbacks or tax increases would deal another blow to the economy, according to experts.

Write to Robin van Daalen at robin.vandaalen@dowjones.com

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