Dutch finance minister defends austerity approach

The Hague, NETHERLANDS (AP) -- Dutch Finance Minister Jeroen Dijsselbloem defended his strategy of cutting government spending and increasing taxes to reduce the country's budget deficit — despite a lengthy recession in the Netherlands that some economists believe is being worsened by the government's austerity policies.

Speaking to reporters in The Hague Tuesday alongside Olli Rehn, the European Union's top monetary affairs official, Dijsselbloem said he expects the Netherlands deficit to fall below 3 percent of annual gross domestic product, the limit mandated by European rules, in 2014.

"The approach is not failing," he said.

He added that he supports Rehn's recent decision to give countries including France and the Netherlands more time to reduce their deficits.

The Dutch economy has been in recession since last fall as the government cuts back on its spending. It is expected to shrink by 0.8 percent this year, and unemployment is rising.

In light of the recessionary backdrop, the Dutch central bank on Monday forecast that the country's deficit will be 3.4 percent of GDP in 2013 and rise to 3.9 percent in 2014 if no further action is taken.

The country's independent budgeting office has said that further spending cuts will do more harm than good and advised against them. Meanwhile it is not clear whether the Cabinet can find enough political support for further cuts in the upper house of parliament, where the governing coalition does not have a majority.

Rehn appeared to ease off an earlier position that the Netherlands must cut its deficit to 2.8 percent of GDP in 2014. "Experience shows it's better to have a safety margin" Rehn said.

However, Rehn said the targets could be reassessed if the Dutch economy worsens in the course of the year. But he said reducing the deficit by at "at least one percent" of GDP is a "crucial yardstick."

Dijsselbloem said that despite the European Commission's directions, the Dutch government intends to reduce its deficit only to 3 percent in 2014.

It will "cost a lot of trouble already to meet the three percent," he said.