'Emergency financial support is unprecedented but wise’
The Dutch government has come up with a package of financial support to help businesses and the self-employed make it through the corona crisis. Economist Wimar Bolhuis sees it as a clear signal that the government is prepared to bear the brunt of the economic blow. ‘For the time being it has sufficient budgetary firepower.’
The government is setting up a package of financial support for businesses facing economic problems due to the coronavirus. What strikes you most about the plan?
‘For three months, the government is to take on the costs of businesses and ensure they receive some turnover and income, in the hope that the private sector will then have sufficient liquidity to make it through the corona crisis. One important aspect is the Temporary Emergency Bridging Measure to Preserve Employment (NOW), which will ensure that 90% of salary costs will be covered for businesses that have lost more than 20% of their turnover. More than 80,000 companies have already applied for this.’
What does the government hope to achieve with its plan?
‘That as few healthy companies as possible go bankrupt, with as few redundancies as possible. Economists view this corona crisis as a temporary shock to the world economy that will be over in about three months’ time. It won’t help the Dutch economy’s level of production and recovery capacity if healthy companies go bust or have to let go of qualified staff, only because they have insufficient liquid funds while their financial obligations continue relentlessly.’
Other notable government plans
- An emergency portal for businesses that have had to stop most of their activities. They can receive 4,000 euros to finance current costs.
- The government is also extending its business loan guarantee scheme concerning the provision of bank loans to all companies, in the hope that more bridging loans will be provided.
- The self-employed will have easier access to minimum social benefits.
- Companies will be able to postpone their payment of tax and premiums. The package of support is intended to safeguard sufficient liquidity and cash in the private sector to bridge this period.
On Twitter you complimented the government on its plan. Can you explain?
‘The Dutch government has taken fast and far-reaching measures adopting stimulating budgetary policies to stabilise the economy so that the coming recession will be less severe. It has provided a clear signal and countercyclical budgetary policies that will address the greatest economic pain points: these lie with businesses on the supply side of the economy. In the past, the Netherlands implemented a budgetary policy that was actually procyclical. As a result, recessions were often deeper and lasted longer. This package of emergency measures is unprecedented in its scope and wisdom. So it deserve my compliments’
'It’s a good package that helps where the economic pain is felt most'
The plan will cost possibly 10 to 20 billion euros per quarter. How long can this be kept up?
‘Certainly up to the end of the year. At the end of 2019, the Dutch national debt was 48.8% of the gross domestic product (GDP), which amounted to 810 billion euros. The maximum cost of this package of emergency measures is around 2.5% GDP. Due to the decline in the economy, the national debt will rise significantly, because fewer taxes and premiums will be paid and the amount of unemployment and social benefits claimed will rise. Also, it is likely that extra government capital injections will be needed for Schiphol and KLM. But budgetary firepower is not a problem as public finance is sound.’
Are there possible bottlenecks?
‘If there’s going to be a problem, it will be the speed with which liquid funds reach businesses and companies. Transferring money can take longer than expected because the new legislation has put a lot of pressure on the digital, administrative and staff capacity at the Employee Insurance Agency (UWV), the tax authorities, municipalities and banks. Since in response to coronavirus measures many employees are now working from home, administrative capacity has dropped.’
'The self-employed could ask clients to pay now, perhaps as an advance payment.'
The self-employed in particular have been very worried these past few weeks because they saw their source of income dry up and they often have less financial reserves. What do you have to say to them, in relation to these measures?
‘Contact your municipality, to arrange a financial advance now of the minimum amount in social benefits that you will eventually be entitled to through the extension of the social assistance for self-employed persons decree (Bbz). Municipalities have already indicated that they would proceed to making payments, even though the necessary national legislation has not yet been set up or adopted. Also consider what you can do to maintain some level of income while lowering your overhead costs. Ask clients if they can pay you now, perhaps as an advance payment. Contact your bank, your power and water supply companies and your Owner’s Association (VVE) to arrange payment deferrals. Request a provisional income tax refund from the tax authorities. There are a lot of steps self-employed persons can go ahead and take now.’