The probability of the Netherlands joining EMU from the start date remains very high. The Dutch have displayed the most robust economic performance on the Continent over the past 4 years. While we do have some concerns that this may peak out by 1998, GDP growth in 1997 should come in around 2.8%. Inflation statistics remain stable at this time and may heat up in the second half of 1997 going into 1998. Nevertheless, the Netherlands should be a founding member of EMU even without fudge factors.The debt/GDP ratio in the Netherlands is currently well above the Maastricht Treaty reference point. Clearly, the Dutch government has made a major effort to reduce their debt/GDP ratio over the past several years with much success. The Dutch also currently hold the Presidency of the Council of Ministers. As a result, the Dutch are very eager to conclude the inter-governmental conference by the Amsterdam summit in June. To some extent, this has been a source of national political pride. Therefore, it is unlikely that the current government will change its course relative to EMU and should hold a parliamentary majority in the upcoming elections due in May 1998.
|Budget Deficit / GDP||4.0||2.6||2.3|
|Debt / GDP||79.7||78.7||78.2|
|10Y Bond Yields||6.9||6.1||5.8|
© Princeton Economic Institute