Introductory statement at the press conference for DNB’s Annual Report 2013

Press release
Date 13 March 2014

In 2013, the global economy showed signs of recovery. Economic growth gained momentum particularly towards the end of the year and the world economy is expected to gradually pick up further. Strikingly enough, the growth acceleration this time is attributable to the developed countries, led by the United States. The BRICS countries, which are contending with growing vulnerabilities, may be expected to witness weaker economic growth. This is a favourable development for the Netherlands, whose exports to developed countries exceed those to emerging countries, including BRICS.

Persconferentie JV

In the euro area, we should continue on the chosen path. Significant steps were taken in 2013 to permanently overcome the crisis. Buffer restoration, debt reduction and structural reforms remain high on the policy agenda. Fortunately, the climate in which the adjustments are being made has improved considerably  

  

But the fragile economic recovery is no reason to slacken in our efforts. On the contrary, we should regard it as an incentive to make headway on the chosen path in Europe. The speed at which the banking union is being set up boosts hopes that the restored market confidence is structural. However, this requires the simultaneous establishment of an adequate, independently financed European resolution mechanism, including backstop. If this is not done properly, the required buffers are higher than strictly necessary.

In addition, a thorough and rigorous health check of the banks in Europe is essential to ensure that the recovery of the European economy is sustainable. Transparency of the risks in the European banking industry will help restore confidence and improve the provision of credit to the real economy, creating a solid foundation for future economic growth.

In the Netherlands, it is clear that the economy has taken a turn for the better and has found its way up again. In retrospect, the turnaround occurred sooner and more vigorously than indicated in the initial realisations, but we are not yet out of the woods. Far from it, this is the time to take to heart the lessons from the crisis and seize the opportunity to implement further structural improvements. 

To that end, we must prioritise further budget balancing with a view to building the required buffers. Moreover, efforts must be made to remove incentives that unnecessarily exacerbate the economic cycle. This should urge the government to return to a stricter interpretation of its trend-based budget policy. Essential elements in that context include a conservative growth forecast and the agreement to allocate any budgetary windfalls to the Treasury. This will create buffers as well as political tranquillity, given that the need for immediate austerity measures in the event of future setbacks is eliminated. 

The pensions and health care dossiers also deserve additional attention. In this context, the fundamental debate on the pension system envisioned by the Cabinet is a prerequisite. A new system must meet many requirements, including greater freedom of choice, a prominent role for capital funding and a broad support base across all ages. In addition, the pension system must be set up in such a way that it does not independently reinforce economic fluctuations.  

Another urgent point is the financial sustainability of the care sector. Health care spending is increasing rapidly, also on an international scale. Providing incentives that emphasise public health results rather than number of treatments could help. 

In conclusion, in spite of all the measures that need taking, the Dutch economy is essentially in good shape. The most important source of prosperity is our labour force, whose quality is high by international standards. The same holds true for the financial assets of the Dutch. This strong starting position compels the Netherlands to take up the ever significant challenges with vigour and steer the economy into calmer waters. Sustainable welfare is based on a stable financial and economic system, which is what De Nederlandsche Bank has promoted for 200 years now.