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REPORT | May 2013
Dutch economy in calmer waters
A macro-economic exploratory survey
SOCIAAL-ECONOMISCHE RAAD
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© 2013, Sociaal-Economische Raad
SOCIAL AND ECONOMIC COUNCIL
REPORT | may 2013
Dutch economy in calmer waters
A macro-economic exploratory survey
This is a translation1 of the original Dutch report
MAY 2013
1
The Dutch text does, however, contain more source references.
SOCIAAL-ECONOMISCHE RAAD
The Social and Economic Council in the Netherlands
The Social and Economic Council (Sociaal-Economische Raad, SER) advises
government and parliament on the outlines of national and international
social and economic policy and on matters of important legislation in the
social and economic sphere.
Employers, employees and independent experts are equally represented in
the SER. Their recommendations voice the opinion of organised industry.
In addition to its advisory function, the council is responsible for the
execution of certain laws.
A brochure on tasks, structure and procedures of the SER can be obtained,
free of charge, from its Sales Department. Please also visit the SER’s home
page on the Internet: (www.ser.nl) and its section in English. It offers a host
of information, such as the composition of the Council and its committees,
press releases and the latest news.
All rights reserved. Sections from the SER advisory reports may be used for
the purpose of quotation, with due acknowledgement of the source of the
publication.
This is a translation2 of the SER report:
Nederlandse economie in stabieler vaarwater: Een macro-economische
verkenning
2013, 64 pp., ISBN 978-94-6134-052-8
2 The Dutch text does, however, contain more source references.
Contents
1.
The Dutch economy: strong but volatile
1.1
1.2
1.3
2.
3.
5.
7
7
9
11
House prices under pressure
15
2.1
2.2
2.3
15
21
24
Owner-occupied sector up against limits
Lack of a rental market for higher and middle incomes
The role of housing corporations in the rental market
Banks after the crisis
3.1
3.2
3.3
4.
The Dutch economy has become more volatile
Reason for increased volatility
Macro-economic perspective necessary
High mortgage interest
Towards a more structurally stable mortgage market
Financing SMEs
27
27
30
34
Pensions in troubled waters
37
4.1
4.2
4.3
4.4
37
39
41
42
The distribution of investment risks across the generations
The new pension contract
Capital funding and also pay-as-you-go arrangements
Investments in the Netherlands by pension funds
What should be done?
45
Appendices
Appendix 1: Home loans in Denmark, Canada (and the Netherlands)
Appendix 2: Composition of Social and Economic Affairs Committee (SEA)
51
55
3
4
Abstract
0.1
Background
Report
6
THE DUTCH ECONOMY: STRONG BUT VOLATILE
1
The Dutch economy: strong but volatile
1.1
The Dutch economy has become more volatile
Consumer confidence at record low
Consumer confidence in the Netherlands is at an all-time low. This has to do with
the continuing recession, the worrying trends in the labour market, and the negative consequences for public finances. The same problem occurs in other European
countries too. What is new and unique where the Netherlands is concerned is the
negative interaction between the real economy and the financial world. This manifests itself primarily in the negative interactions between the housing market, the
banking sector, and the pensions sector. The present exploratory survey therefore
focuses primarily on those areas. The slump in house prices alone accounts for
approximately half the fall in consumption.
But the Netherlands has a solid position from which to start …
The structural bases of the Netherlands and its economy are good, and the country
stands up well in international comparisons. From an average performer within
Europe, it has risen over the past twenty years to be the most prosperous country in
the European Union other than Luxembourg, and in the latest Global Competitiveness
Index (2012/13) it has moved up from seventh to fifth position. Prosperity and wellbeing are high: in the OECD’s Better Life Index for 2011 the Netherlands shares fourth/
fifth position with Finland.
... due to a consistent reform policy since the “Wassenaar Agreement”
These leading positions are due to various structural reforms that have been implemented over the last twenty years in the markets for goods, services, and labour. The
level of labour market participation has increased strongly and the equilibrium
unemployment rate is one of the lowest in Europe. The high quality of the labour
force, good labour relations, social cohesion, and the good physical infrastructure
are among the strengths of the Dutch economy.
The Dutch economy has become more volatile, however
In the past twenty years, however, the Dutch economy seems to have become more
sensitive to macro-economic shocks. That greater volatility has been generated
domestically and has to do with the structure of the housing market, financing of
credit and mortgage lending via the banks, and the pensions system. Structural
reforms are necessary in order to render the Dutch economy more stable.
7
Consumers want financial and economic certainty
Confidence – or the lack of confidence – on the part of consumers and producers
are tending to further increase the underlying volatility of the Dutch economy. Targeted attention is therefore necessary for the question of how consumer and producer confidence can be strengthened. A widely shared understanding of the nature
of the problems and the overall solutions will be valuable in achieving this.
A recent survey clearly showed that Dutch consumers need financial and economic
certainty. Alongside more income, the certainty of affordable healthcare, job security and resolution of the euro crisis, a recovery of the housing market and certainty
about people’s pensions are vital if consumer confidence is to be strengthened.
Arduous recovery after the dotcom crisis …
The Netherlands was first confronted with an arduous recovery of its economy
when the Internet bubble burst in 2002–2003. As Figure 1 shows, the Dutch economy had grown faster in the preceding years than the economies of neighbouring
countries. Compared with Germany, for example, the difference was 5%. However,
the major fall in the stock market in 2002–2003 hit the Dutch economy relatively
hard, in particular the pension funds.
… even sharper downturn after the Big Recession
The period from 2006 to 2012 presents a similar picture to that from 1998 to 2004:
relatively strong growth in the years prior to 2009 but subsequently a relatively
sharp downturn, this time with the housing market being central. The fall in prices
in the Netherlands was initially limited but once it gained momentum, growth in
GDP stagnated in this country too.
Figure 1
8
Growth in GDP in the Netherlands relatively irregular compared to euro zone, Belgium, Denmark, France, and Germany
(left: 2001=100; right: 2008 = 100; the faster growth, the steeper the gradient of the growth curve)
THE DUTCH ECONOMY: STRONG BUT VOLATILE
1.2
Reason for increased volatility
The reason? Not the global economy but domestic expenditure.
In this recession, heavy dependence on the international economic situation is not
the reason for the stagnation of the Dutch economy. As Figure 2 (p. 10) shows, it is
the negative contribution of domestic expenditure (consumption and investment)
to economic growth that is causing us problems. Only in the crisis countries Ireland, Italy, and Spain does that apply to a greater extent. Why is this?
What explains the fall in expenditure? Wealth effects!
A major cause of increased volatility in expenditure – specifically consumption – is
the long-term balance sheet of our economy. The tax system has encouraged the
Dutch to build up both large amounts in savings and high levels of mortgage debt.
This has further extended households’ balance sheets (see Figure 3, p. 11). We are
obliged to save via pension funds and this has been made attractive by making the
related investment income exempt from tax. On the other side, taking out a loan to
buy a house is encouraged by making mortgage interest tax-deductible, without
– until recently – any obligation or incentive to pay off the mortgage. Instead, we
built up tax-facilitated savings elsewhere with which to ultimately do so.
Long-term balance sheets make households and banks vulnerable
Dutch households now have the highest level of long-term debt in the euro zone. In
1995, the debt ratio in Germany was at the same level as in the Netherlands (about
56%); for Dutch households, it is now twice as high as in Germany.
Since the 1990s, Dutch banks have also extended their balance sheets, for one
thing so as to be able to finance the high levels of mortgage debt. Due to the credit
crisis and the euro crisis, refinancing these mortgages has become more expensive
and less matter-of-course. The fall in house prices is not only bad for domestic
consumption (see below) but also has a detrimental effect on the collateral for
outstanding mortgages (see Sections 2 and 3).
9
Figure 2
10
Cumulative growth 2009–2014 in a number of European countries, categorised according to components (percentage changes and percentage points; the scaling for Ireland and Spain differs from that for the other countries)
THE DUTCH ECONOMY: STRONG BUT VOLATILE
Figure 3
Balance of households’ property and debts in percentage of GDP, 1981–2011
Source: Dutch central bank (DNB)
Volatility causes vulnerability and uncertainty
Viewed over the long term, the Dutch economy is well able to keep up with neighbouring countries; however, the pace of growth is more irregular – it increases
strongly when things are going well but is hit hard in times of crisis. This greater
volatility is a disadvantage because it leads to greater uncertainty: for people about
their jobs, their pension, and their income; for businesses about the return on their
investments. It would therefore be a good thing to curb this volatility. A volatile economy places particularly heavy demands on the adaptability and flexibility of individuals and businesses. This is one reason for the increasing use of flexible contracts on the labour market.
We feel this volatility most when the economy is in a downward phase, but the problem starts in the upward phase. The cause of the volatility is to be found in the
institutions in the area of the housing market, banking and our pensions, meaning
that the economy is stimulated excessively in an upward phase and inhibited too
strongly in a downward phase.
1.3
Macro-economic perspective necessary
A fall in house prices is detrimental to consumption by current house owners …
A fall in house prices is detrimental for the finances of current homeowners, leading to lower consumption. A study by the Netherlands Bureau for Economic Policy
Analysis (CPB) has shown that almost half the drop in private consumption can be
attributed to the effect of falling house prices. We are saving more, for example so
as to later pay off our mortgage. The next generation, however, does not need to get
11
so deeply into debt in order to buy these houses, meaning that they later have more
to spend. Sooner or later, therefore, consumption will bounce back. For the time
being, however, consumption is lower and the economy as a whole is – on balance
– saving more.
…but also leads to a shift between sectors
In the meantime, however, lower consumption leads to economic problems. What
happens when a country suddenly starts to save more? In a small, open economy,
that generally involves selling a greater proportion of production in other countries and a lower proportion on the domestic market. This necessarily leads to a
shift of employment from the sector that focuses on domestic demand (“non-tradable”) to the export sector (“tradable”). This explains the major increase in the country’s balance of payments surplus. Various studies have clarified this effect.1 In
about ten years time, the demand for domestic services will improve, but that does
not benefit people who currently work in the services sector – they cannot simply
switch to working in the export sector. Excessive rises and falls in house prices
therefore potentially lead to major economic and social costs. This illustrates the
earlier conclusion that uncertainty causes high costs.
A permanent adjustment is sometimes unavoidable …
A permanent adjustment in the relationship between the sectors is sometimes unavoidable. In Spain, for example, the share of employment represented by the building industry increased from 14% to 21% between 1997 and 2007. The latter percentage is quite simply too high. It was not without reason that employment in the
building industry then fell sharply to 13% in 2010.2 Sooner or later, that imbalance
had to be corrected, involving major social costs.
... but the size of that adjustment is crucial
A country can go too far, however, for example if house prices fall more sharply
than is structurally desirable. That risk occurs if the fall in house prices is no longer
in proportion to the underlying fundamentals and – via expenditure and the financial sector – becomes a vicious spiral.3 The high loan-to-value (LTV) ratios mean that
the Dutch housing market cannot effectively absorb falls in house prices (see
1
2
3
12
See, for example, Jauch, S. and S. Watzka (2012) The Effect of Household Debt on Aggregate Demand: The Case of
Spain, CESifo Working Paper, No. 3924 (August); Mian, A. and A. Sufi (2012) What Explains High Unemployment? The
Aggregate Demand Channel, NBER Working Paper Series 17830.
Bonhomme, S., and L. Hospido (2012) The Cycle of Earnings Inequality: Evidence from Spanish Social Security Data,
IZA Discussion Paper No. 6669.
That risk is penetratingly sketched by Bénétrix, A.S., B. Eichengreen and K.H. O’Rourke (2012) How housing slumps
end, Economic Policy, 72 (October), pp. 649–692.
THE DUTCH ECONOMY: STRONG BUT VOLATILE
Section 2.1 for a more detailed explanation). If house prices fall too far, consumption comes under unnecessary pressure. This means that employment in the
domestic services sector becomes temporarily lower than is structurally desirable.
We need to be well aware of that risk. Our structural balance of payments surplus
does not in any case suggest that we are currently consuming too much.
Our pensions system also leads to consumption being deferred
A fall in house prices is an important reason for current house owners to defer consumption and this benefits future house buyers. There are, however, more sources
of a drop in demand. The pensions system and budgetary policy can also have farreaching consequences for the distribution of consumption over time. We must
therefore not lose sight of the relationship between the various policy fields. If
restrictive measures are imposed simultaneously in all major areas – housing,
pensions, and budgetary policy – it is important to prevent employment in the
domestic services sector being hit harder than is necessary from the perspective
of healthy economic policy.
Macro-economic stability is crucial
Until the beginning of this century, our economy was prospering and the level of
unemployment was low. As a result, macro-economic problems received little attention and the overall equilibrium within the economy gave little cause for concern.
In recent years, however, that situation has changed radically. The housing market
is at a standstill, lending is under pressure, and pension rights are not being
indexed or are even being cut. At the same time, the government wants to get its
housekeeping in order. The question is how the perceived need to make rapid changes in all these policy areas relate to one another from the macro-economic perspective. For many years now, too little attention has been paid to that question in the
Netherlands.
Greater macro-economic stability – fewer high peaks and fewer deep lows – means
that major costs (for adjustments) can be avoided. A more stable economy will also
have a beneficial effect as regards balanced operation of the labour market.
13
14
2
House prices under pressure
2.1
Owner-occupied sector up against limits
The analysis in Section 1 shows that the trend in house prices and mortgage debt is
a major cause of the problems in the Dutch economy. As in most euro zone countries, prices peaked in the Netherlands in 2008.1 Between 1985 and 2007, Dutch
house prices had risen constantly; in the period from 1995 to 2000, that rise had in
fact been rapid. The prices of existing owner-occupied houses then fell by a nominal
17% between August 2008 and December 2012. The fall in real terms is even greater,
namely approximately 25%. That is a major fall but not at all bad when compared
to the housing market crisis in the first half of the 1980s. As Figure 4 shows, there
is a connection between the rise in house prices and that in mortgage lending.
Figure 4
Trend in house prices and mortgage lending
Source: Dutch central bank (DNB)
Much sharper price falls in Spain and Ireland
After a boom in the housing market there, much sharper price falls have taken
place in Spain and Ireland, and those countries now have a large number of vacant
properties.2 It is precisely these vacant properties that mean that house prices will
not simply recover, and new building is therefore also at a low ebb. In those coun-
1
See “Assessing the dynamics of house prices in the euro area”, in: European Commission’s DG EcFin (2012) Quarterly
Report on the Euro Area, 11 – No. 4.
15
tries, the building sector was quite simply too large. As a result, the educational
level of the workforce came under pressure: wages for unskilled work in the building trade were high, and it was therefore not worth it for young people to stay on
at school. Shrinkage of the building trade is now unavoidable and it will not be easy
for workers to find employment outside that sector.
Spatial planning: an advantage and a disadvantage
In the Netherlands, spatial planning imposes significant restrictions on new building. The disadvantage of this is that building production often lags behind
demand and that houses are built in locations that people do not really prefer. In
recent years, however, this has had the benefit of ensuring that not too many houses were built during a housing market boom. The Netherlands is not burdened
with major surpluses of unsold and unsalable homes. This means that it will be
more easy in this country for house prices to recover.
It should be noted that the Dutch building sector has also been too large in recent
years, particularly because of the bubble in the market for office buildings. Although fortunately less drastic than in Spain, structural shrinkage of the sector has
proved unavoidable. Against-the-tide attempts to apply incentives to the market for
office buildings only make the problems worse.
Major differences in house prices between regions
The focus on the sharp rise in Dutch house prices during the twenty years preceding the Big Recession has somewhat diverted attention from the major differences
between regions. Prices in Amsterdam, in particular, rose much more sharply than
in the rest of the country. The price of a home is determined by the attractiveness
of the local living and working environment, and such location advantages are
playing an increasingly important role.
House prices in Amsterdam comparable with other capital cities
The sharp increase in house prices in Amsterdam might cause one to assume that
this meant a bubble specifically in that city. In fact, however, the price level in
Amsterdam is closely comparable to that in similar cities in other countries (See
Figure 5). New homes are just as expensive in Copenhagen, Hamburg, and Frankfurt. Paris in particular, and to a lesser extent London, Lyons, Marseilles, Milan, and
2
16
Bénétrix, A.S. [et al.] (2012) How housing slumps end, Economic Policy, p. 672. This shows that the combination of
an elastic supply of houses and a major increase in house prices in the years prior to the crisis increases the risk of
a lengthy slump in house prices.
HOUSE PRICES UNDER PRESSURE
Rome are more expensive than Amsterdam, while Berlin, Brussels, and Vienna are
cheaper.
Figure 5
Average transaction price of new homes in EUR/m2
Source: Deloitte (2012) Property Index: Overview of European Residential Markets, May 2012, p. 9.
House prices are fairly explicable …
The housing market is a stockpile market, in which both confidence and also financing play a major role. The price that people are prepared to pay for a house depends on what they think they will be able to get for it when they sell it. The bank’s
readiness to finance the purchase is determined by this in the same way. A lack of
confidence in the future is consequently putting today’s house prices under pressure. Limiting mortgage interest tax relief and tightening up conditions for financing also have a downward effect.
The trend in house prices in the short term is difficult to predict. In the long term,
however, house prices are explicable on the basis of the laws of supply and demand,
given the readiness of banks to provide financing. The fall in house prices in recent
years follows on after previous major price increases. A reasonable explanation for
this involves changes in mortgage interest tax relief,3 restriction of the provision of
credit, and the decline in available income.
3
The CPB estimates the effect on house prices of changes in the tax treatment of people’s own home at approximately 10%. See CPB (2012) Gevolgen van het huurbeleid nader bekeken, Memorandum 10 December 2012, pp. 5
and 6.
17
... but Dutch loan-to-value ratios are extremely high
The high LTV ratios constitute a risk, however. Should the occupant no longer be
able to meet the monthly payments, then he will have a residual debt after the
house has been sold. In the Netherlands, it is fairly usual for 100% (or even more) of
the purchase price of a home to be financed by means of a mortgage. In neighbouring countries, that is not possible. In Belgium, Germany, Ireland and the UK, 80%
is often the maximum; in Germany, 60% is in fact usual.4
High LTV and high LTI problematical in declining housing market
High initial LTV ratios – certainly in combination with interest-only mortgages –
become problematical in a declining housing market. As Table 1 shows, in 2009 as
many as 22% of owner-occupiers had an LTV ratio of more than 100%. Of these, 40%
(i.e. 9% of the total population) also had a high loan-to-income (LTI) ratio, with the
outstanding loan amounting to more than seven times the available household
income.5 That combination poses risks because the likelihood of payment problems is greater in the case of a high LTI.
Table 1
Percentage distribution of house owners according to LTV and LTI ratios, 2009
LTV
0–50%
LTV
50–100%
LTV
>100%
total
LTI 0–3.5
25%
8%
1%
34%
LTI 3.5-7
4%
17%
12%
33%
LTI > 7
1%
6%
9%
16%
30%
31%
22%
100%
LTI = 0
total
17%
LTV: loan-to-value ratio, LTI: loan-to-income ratio|
Source: Denneman, A. (2011) Households’ risks in the Dutch housing market, CBS.
Precisely in a declining housing market, little can be done about high LTVs.
The fall in house prices meant that at the end of 2010 no fewer than one million
households had an LTV ratio of more than 100%. Further price falls result in that
number growing. The number of households that will be left with a residual debt,
allowing for the capital that they have built up, after the sale of their home (at market value) is estimated to be half a million.6
4
5
6
18
In Germany, this is done by means of Pfandbriefe. These are “covered bonds”, the value of which is covered by longterm assets such as mortgage loans. Denmark, France, Germany, and Spain have a fairly large market for covered
bonds; the Netherlands does not.
Denneman, A. (2011) Households’ risks in the Dutch housing market: Loan-to-Value and Loan-to-Income ratios, Discussion paper for OECD Working Party on Financial Statistics, CBS, 24 October 2011.
Schilder, F. and J. Conijn (2012) Restschuld in Nederland: Omvang en consequenties, ASRE. The authors say that a
further 10% fall in prices (compared to mid-2011) has led to more than 700,000 households having a residual debt.
HOUSE PRICES UNDER PRESSURE
With a view to the stability of the housing market, a substantial reduction in LTV
ratios is desirable. Precisely in a declining housing market, however, that is very difficult to achieve. It is very difficult to reduce existing high LTVs in a period when
V(alue) is falling because to do so L(oan) would need to fall even more. A number of
banks are now tightening up their loan conditions for new applications, partly
because of tighter legislation and regulations and more stringent monitoring of
these. Given the large “mortgage mountain”, that is to a certain extent unavoidable. In this phase, however, it must in fact gradually take place so as to prevent a
downward spiral taking effect. Efforts to lower LTV ratios require care; the negative
short-term effects must not be lost sight of and therefore demand that adjustments
be gradual. This in fact presents a major task for future macro-prudential policy.
New bubbles must be prevented by focusing in good time on reducing LTV ratios
when the housing market is overheated.
Problems become concentrated among young people, who consequently become immobile.
High LTV and LTI ratios become concentrated among young homeowners. Figure 6
shows the average LTV ratio for various age categories. The average LTI ratio also
decreases with increasing age, from 6.9 times disposable income for those aged up
to 25 down to 3.0 for those aged over 65. High LTV and LTI ratios are an obstacle to
changing where one lives and works. This is particularly important for young people because they are often still looking for a suitable combination.
Figure 6
LTV ratio according to age of main wage earner
19
Payment arrears are still low, however
Arrears of payment have risen somewhat since 2005. Banks’ lending losses on their
mortgage portfolio remain low, however, compared to banks in other countries
(less than 0.1% of the total mortgage portfolio).7
Mortgage interest much higher in the Netherlands in recent years than in other euro zone
countries
An additional complication for the Dutch housing market is that the mortgage
interest rate is 1% higher than in other countries. Due to the ECB’s liberal monetary
policy, the money market interest rate is currently very low. In other countries, the
fall in that interest rate has led to a reduction in the mortgage interest rate. In the
Netherlands, however, that reduction has been much less. If the interest rate in the
Netherlands had fallen in line with the fall elsewhere, house prices could consequently be 5 to 10% higher,8 which would counterbalance the current downward
pressure on house prices. We will return to possible explanations for the different
situation in the Netherlands in Section 3.
Risk of a downward spiral
The fall in house prices can get into a downward spiral. In a study of all housing
price crises in the OECD countries since 1971, Bénétrix, Eichengreen and O’Rourke
(2012) show that such crises lead to a drop in consumer expenditure, which in turn
places house prices under further pressure (capital-consumption-price spiral).
Lower house prices also lead to increased loan-to-value ratios, meaning that it becomes more difficult to finance a mortgage, the mortgage interest rate increases, and
house prices come under even more pressure (collateral-financing-interest rate
spiral). This definitely applies in countries such as the Netherlands with high LTVs
for first-time homeowners: when house prices fall, young families find themselves
with negative equity, and financing mortgages on the capital market becomes
more expensive. The above-mentioned authors indicate that in this situation it is
up to government to take action, to restore confidence, and to stop the negative
spiral.
7
8
20
DNB (2012) Overzicht Financiële Stabiliteit: Autumn 2012, p. 12.
Research indicates an elasticity of -5: a 1% higher interest rate leads to 5% lower house prices. See Kranendonk, H.
and J. Verbruggen (2008) Is de huizenprijs in Nederland overgewaardeerd?, CPB; CPB (2013) De Nederlandse woningmarkt – hypotheekrente, huizenprijzen en consumptie, Memorandum 14 February 2013.
HOUSE PRICES UNDER PRESSURE
2.2
Lack of a rental market for higher and middle incomes
The above analyses show that the Dutch housing market is a major source of instability and risks. One significant explanation for this problem is the faulty functioning of the rental market. In particular for a lot of young people and people on a
higher income, renting is not a viable alternative.
The Netherlands considers renting to be something for lower incomes
Socio-economic policy in the Netherlands has always assumed that renting one’s
home is an option for people on a lower income and that it goes without saying that
those at the higher end of the income scale will need to buy a house. As Figure 7
shows, the result is in line with this belief. People on a lower income generally have
to rent. In the highest income deciles, tenants form only a small minority. Between
1990 and 2010, the percentage of homeowners in fact increased significantly, from
45 to 54%. In the European context, the Netherlands occupies a middle-ranking
position in this regard.
Figure 7
Percentage of tenants per income decile (2005)
Source: CPB (2010) Hervorming van het Nederlandse woonbeleid.
Housing corporations dominate the rental market; lack of private rented accommodation
The Netherlands has the largest subsidised rented housing sector in the EU, with a
31.2% share of the housing market in 2011, i.e. 2,249,000 houses. In other EU Member States, that sector accounts for 10 to 20% of the market. These homes are primarily managed by housing corporations. In 2011, 609,000 housing corporation
homes were occupied by households with a taxable income of more than
EUR 33,000, with some 200,000 of these having a taxable income of EUR 50,000 or
more. The commercial rented sector (institutional investors and private individuals) accounts for only 13% of the market. It should be noted that a major proportion
of this is subject to rent regulation.
21
No favourable tax arrangements as regards rents …
Why has hardly any rental market developed for people on a higher income? There
are various reasons for this. Firstly, the tax arrangements regarding residential
accommodation are an incentive for people on a higher income to purchase a
home. According to the calculations in the Coalition Agreement, the new regime
for mortgage interest tax relief will lead to a structural reduction in the tax subsidy
on house purchases from 25.1 to 15.7%;9 however, for people who do not qualify for
a rent allowance (income limit: EUR 20,000 to EUR 30,000, depending on the family
situation and age), there is no tax subsidy at all for rented accommodation. For such
people, therefore, renting a home is relatively disadvantageous from the tax point
of view.
... rent regulation and the position of housing corporations can discourage private
investment.
But it was not only occupants who have had good reason to buy their own home;
the rental market is also not very attractive for investors. Rent regulation makes
renting out homes a risky business model and institutional investors in the regulated sector currently own fewer than 60,000 homes.10
In order for the rental market to function more effectively, a shift towards rents in
line with the market is desirable. This means that occupiers of high-quality but relatively cheap rented accommodation will need to pay higher rents, particularly in
regions where the demand for accommodation is concentrated. Together with supply responses on the part of landlords, this will encourage housing mobility. For
tenants on a lower income, appropriate income support will continue to apply.
The large subsidised rented housing sector – accounting for more than a quarter of
homes occupied by people on a middle income – has squeezed out the supply of private rented accommodation. Additionally, it is important that favourable conditions for the subsidised rented housing sector can influence competition in the unregulated free portion of the rental market. Corporations, for example, have cheap
capital at their disposal that is subject to little or no obligation to generate a yield.
In a capital-intensive sector such as housing construction, that constitutes a decisive advantage. In so far as these advantages trickle down to the free rented sector,
9
CPB (2010) Hervorming van het Nederlandse woonbeleid, Special publication No. 84, p. 60; CPB (2012) Actualisatie
analyse economische effecten financieel kader Regeerakkoord, Memorandum 12 November 2012, p. 24.
10 Since 2000, institutional investors have reduced their stock of rented homes from 300,000 to 130,000. See “Beleggers huurmarkt waarschuwen Blok”, Het Financieele Dagblad, 5 March 2013.
22
HOUSE PRICES UNDER PRESSURE
this distorts the level playing field in the market for new rented housing (see
further Section 2.3).
Lack of market for rented housing increases macro-economic instability ...
Is it a bad thing that the Netherlands lacks a free rental market for people on a
higher income? The simple answer to that question is yes! In the Netherlands, reference has always been made to the external effects of the value of one’s neighbour’s
house. Owner occupiers are supposed to maintain their home better and to feel a
greater responsibility for the quality of life in the neighbourhood; their neighbours
are also supposed to benefit from this. No evidence is available to substantiate this
kind of thinking, however. On the contrary, owning one’s own home involves a significant disadvantage. Owners undertake a large value risk, especially if they use
long leverage to finance it (something that expresses itself in high LTV and LTI
ratios). When house prices fall, they will adapt – indeed will need to adapt – their
consumption and will run the risk of ending up with negative equity (so called
“houses under water”).
... and leads to lower mobility and more unemployment
The major financial risks for homeowners have even more disadvantages, however.
In the case of the United States, Blanchard and Katz have shown that when a state
is hit by an economic downswing and falling employment, house prices fall drastically.11 Homeowners are not only affected by the loss of their job but are also faced
with being unable to sell their house. This reduces their chances of finding a job
elsewhere. A comparison between countries with rented housing sectors of different sizes shows that a small rented sector leads to higher unemployment.12
Housing market important for labour market mobility
This mechanism is also becoming increasingly important in the Netherlands. The
labour market has become more dynamic. Young people in particular are expected
to be geographically mobile when it comes to finding a suitable job. That is in itself
necessary with a view to the adaptability of the economy, but the housing market
will then need to allow for that necessary geographical mobility. A properly functioning rented housing market for those on middle incomes is therefore urgently
needed.
11 Blanchard, O.J., and L.F. Katz (1992) Regional Evolutions, Brookings Papers on Economic Activity, No. 1, pp. 1–75, in
particular pp. 44–48.
12 Høj, J. (2011) Improving the Flexibility of the Dutch Housing Market to Enhance Labour Mobility, OECD Economics
Department Working Papers, No. 833.
23
At the same time, it is undesirable for the self-employed and employees on a temporary contract to have to rely just on the rental market. These are not just young people. At some point, they need to be able to choose a place to live and will then need
to have a realistic choice between renting and buying. At the moment, a permanent
appointment is in most cases a condition for getting a mortgage. In a dynamic
labour market, it is relevant to determine whether other criteria for a mortgage are
more appropriate than solely that of having a permanent appointment.
Lack of a rental market drives young people into the owner-occupier sector prematurely.
Moreover, the limited supply available on the rental market forces young people to
buy a house prematurely. Borrowing to buy a house and saving for a pension both
receive tax incentives but saving for a house does not. Young people therefore have
every reason to buy a house with borrowed money, even when they are still young.
In this way, the policy pursued in the Netherlands encourages high LTV ratios. It
thus exposes young people to high financial risks. Equal treatment of renting and
purchasing is therefore an important precondition for reducing the volatility of the
Dutch economy.
Towards intermediate forms between renting and buying
Greater flexibility in the supply of housing by developing and strengthening intermediate forms between renting and buying and more gradual transitions between
these two makes it possible to respond better to the variety of people’s requirements, requirements that also vary according to the successive phases of people’s
lives.
At the moment, intermediate forms between renting and buying would also help
people who are finding it difficult to sell their house. It is worth exploring under
what conditions these homes could be rented out temporarily. One option might be
a system of rental agreements for a set period, with the right to then buy.
2.3
The role of housing corporations in the rental market
Rising house prices since the mid-1990s have led to substantial growth in the assets
of housing corporations. The exact extent of those assets depends to a great extent
on the way their property is valued. Assuming the market value when let, the estimated net assets come to some EUR 200 to EUR 300 billion.
24
HOUSE PRICES UNDER PRESSURE
Rent deregulation leads to a further increase in assets
The value of the property and thus the net assets is greatly dependent, however, on
rental policy and thus on the return that can be realised on those assets. After all,
the higher the rents, the greater the assets of the housing corporations. The Dutch
Government wishes to provide greater scope for rent increases so that the rents
charged are more in line with the market rent. That is good for the functioning of
the housing market. The Government wishes to deploy the instrument of a levy on
landlords in order to cream off additional rental income. The risk associated with
such a levy is that it will lead to a further tax disadvantage for the rented sector
compared to the owner-occupier sector. That disadvantage will make itself felt
when commercial owners of rented housing are required to pay a levy to which
builders of owner-occupied homes are not subject. Attention needs to be paid to this
problem when working out the measure.
Corporations at a crossroads
As explained in the previous section, it is desirable for a properly functioning market for rental property to be developed. Commercial parties are cautious about entering this segment of the market because the playing field is not level both for them
and for housing corporations, with the latter having access to cheap capital due to
their extensive assets and the system of credit guarantees. The European Commission has imposed a requirement on the corporations which roughly means that a
distinction has to be made between subsidised and commercial rentals.
This means that the Netherlands is faced by a choice as regards the structure of the
housing corporations sector. One option is to dispense with the distinction between
a subsidised and a commercial rented sector and to allow corporations to compete
in both segments, with one another and also with commercial parties. In that case,
the corporations will need to be reformed, however, so that there is a level playing
field for both parties.
The second option is to continue the current policy of hybrid corporations. It is
then important to separate the subsidised and commercial segments as effectively
as possible. Amongst other things, this means that advantages of scale from the
subsidised segment should not be allowed to feed through to the commercial segment.
Better governance desirable for corporations
When a sector is only subject to limited competition, this is often at the expense of
efficiency. Studies suggest that the housing corporations are also subject to this
25
phenomenon. Burger13 identifies major differences in efficiency between corporations. He estimates that inefficiency at some of the corporations has led to some
EUR 5 billion leaking away over a three-year period for the corporations as a whole,
and that this problem could be remedied by organisational improvements. One particular problem is the lack of a clear owner of assets that imposes profitability
requirements. Dreimüller, Gruis, and Snoeijs14 reach similar conclusions. Reform
of the housing corporation sector can lead to greater efficiency and can provide a
boost to a thriving rental market for people on higher and middle incomes.
13 Burger, M.A. (2012) Maatschappelijk gebonden vermogen: Een onderzoek naar indicatoren die weglek van maatschappelijk gebonden vermogen bij woningcorporaties verklaren (Master’s degree thesis), Amsterdam School of
Real Estate.
14 Dreimüller, A., V. Gruis and C. Snoeijs (2013) De regie-corporatie: Naar een doelmatige maatschappelijke verhuurder,
Discussion paper.
26
3
Banks after the crisis
Despite the recent major shrinkage in foreign business, the Dutch banking sector,
with a balance sheet total of 400% of GDP, is still a large one in international terms.
Mortgage lending in the Netherlands accounts for some 108% of GDP, more than
double the average for the euro zone. Sections 3.1 and 3.2 focus on mortgage financing. Financing of SMEs is dealt with in Section 3.3.
3.1
High mortgage interest
Dutch mortgage interest is relatively high
Since the peak in 2008, Dutch mortgage interest has fallen to the same level as in
early 2005. Figure 8 shows, however, that the Dutch mortgage interest rate is still
significantly higher than in Belgium, Denmark, France, and Germany. By easing
monetary policy, the ECB has caused the risk-free interest rate to fall to an historically low level, but Dutch households have hardly benefited from this, if at all.
Recent studies suggest three explanations for this:1
■ the difficulty of financing Dutch mortgage debt: where financing mortgage
loans is concerned, Dutch banks rely to a large extent on the international
capital market;
■ the reduced competition on the Dutch mortgage market;
■ the more stringent capital requirements.
Figure 8
International comparison of mortgage interest rate
1
CPB (2013) De Nederlandse woningmarkt - hypotheekrente, huizenprijzen en consumptie: Op verzoek van minister
Blok van Wonen en Rijksdienst, CPB Memorandum 14 February 2013 and DNB (2013) Financieringsproblemen in de
hypotheekmarkt , DNB Occasional Studies, vol. 11 – No. 1, 1 March 2013.
27
Given the interaction between these three explanations, it is difficult to properly
interpret the weight to be assigned to each of them. The more stringent capital
requirements primarily affect commercial loans, for which relatively high solvency
requirements apply (see also Section 3.3).
1. Mortgage debt increasingly difficult to finance
Since the mid-1990s, an increasingly wide gap has arisen between the mortgages
provided by banks and the deposits and other long-term assets that they hold. For
a long time, that gap – the financing gap – could easily be bridged by means of
financing on the public (international) money and capital market. However, the
financial crisis has made market financing less accessible or more expensive,
meaning that refinancing and liquidity risks have become apparent.
One important underlying reason is that mortgages with high LTV ratios discourage investors. Since the start of the financial crisis, international investors have
also been looking at the Dutch housing market more cautiously. These worries
increase the financing costs of banks. In addition, financing on the international
capital markets (due to the high LTVs) also makes banks more susceptible to fluctuations in sentiment on the capital markets. Especially in times of market turbulence, Dutch banks need to take account of higher financing costs, simply because
they need to finance (or refinance) a relatively large proportion of mortgage loans
on the international capital market.
The greater uncertainty of market funding – with the risk of sharply rising financing costs in times of market turbulence – has made savings more attractive as a
source of funding for the mortgage business. This is reflected in upward pressure
on deposit interest rates, which are currently higher than in neighbouring countries. This has the effect of driving up the mortgage interest rate.
With a view to the increased refinancing and liquidity risks, rating agencies are
now paying close attention to the ratio between loans provided and savings attracted, i.e. the loan-to-deposits ratio (LTD ratio). If that ratio deteriorates, the bank’s
rating is at risk. The bank will therefore try to keep the ratio of mortgage loans to
(stable) deposits within limits. It will do so by raising the mortgage interest rate
(which will reduce the demand for credit), by increasing deposit interest rates (so as
to attract more savings), or by means of a combination of the two. If banks inhibit
the demand for mortgage loans by raising prices, the link between mortgage interest rates and financing costs will be broken either wholly or partly.
28
BANKS AFTER THE CRISIS
2. Competition between banks has declined since the banking crisis
A study by the Netherlands Competition Authority (NMa) shows that the margins
that mortgage lenders earn have on average risen since the financial crisis. This has
been accompanied by decreased competition on the market.2 Because a number of
providers (including foreign providers) have withdrawn from the market, the market share of the four largest providers – ABN AMRO, Rabobank, ING, and AEGON –
now amounts to more than 80%.
Access has become more difficult for new providers because it is more difficult for
mortgage providers to attract financing (see point 1). Moreover, a number of banks
receiving state support are not permitted to compete on the basis of lower mortgage
interest rates. It is also relevant that the biggest providers – given their current
share of the market and the size of their mortgage portfolio in relation to their
balance – do not wish to increase their share of the market.
According to the NMa, the high concentration in combination with limited (potential) accession means that banks are more able to increase their prices for mortgages. This might explain why, specifically in the Netherlands, the ECB’s interest rate
reduction has not resulted in a lower mortgage interest rate.
3. Stricter capital requirements put the provision of loans under further pressure
Since the credit crisis, regulators have been keen internationally to strengthen the
capital (the capital position) of the banking system. As long as the risk weightings
for mortgages are quite low (much lower than average), a relatively large mortgage
portfolio still makes only a limited demand on the available capital. From the international perspective, the risk-weighted capital ratio of Dutch banks is excellent.
Compared to the first two explanations for the high mortgage interest rate in the
Netherlands – i.e. greater difficulty of financing mortgages and reduced competition on the mortgage market – stricter capital requirements are of only minor
importance. That is different in the case of commercial loans because of the relatively high risk weightings.
2
NMa (2013) Visie hypotheekmarkt , 5 February 2013.
29
3.2
Towards a more structurally stable mortgage market
What the relative contribution is of the above-mentioned causes of the high Dutch
mortgage interest rate compared to neighbouring countries is not exactly clear.
Nevertheless, it is important to do something about it. After all, a high mortgage
interest rate puts consumption under pressure. Ideally, measures should be found
that tackle all the possible causes of the high mortgage interest rate. In that context, it is important to distinguish between necessary structural changes and temporary transitional measures.
Condition: reform of the housing market
As we saw in Section 2, creating a more stable mortgage market demands reform of
the housing market as a whole. LTV ratios are too high in the Netherlands, partly
because young families find it difficult or impossible to enter the middle segment
of the rental market. That needs to change. At the same time, young families need
room to be able to save so that they can later finance a home of their own partly
with their own money. Reducing LTV ratios to levels that are usual in neighbouring
countries (a maximum of 80%) would strengthen investor confidence and thus significantly reduce the credit and refinancing risks for banks.
Transitional measures necessary
The above-mentioned necessary reforms cannot be achieved simply at the drop of a
hat. It is not easy to do a great deal about the current high LTV ratios in the short
term because in a market in which V (i.e. the value of one’s home) is falling, L (i.e.
the outstanding loan) needs to fall even more in order for progress to be achieved.
In the current circumstances, that is undesirable. For the present, therefore, the
Netherlands finds itself stuck with a legacy of high LTV ratios from the past and
new mortgages with – despite the downward trend – still relatively high LTVs.
Suitable transitional measures therefore need to be identified. Those measures will
only be useful, however, if they are embedded within structural reform. The excessive LTV ratios do need to be reduced because otherwise a future wave of price falls
will again lead to major problems. Credible transitional measures are therefore
only feasible if they fit in with a consistent overall strategy for the long term.
Financing for home mortgages
A major proportion of mortgage loans are currently financed on the international
money and capital markets. A better match between the term of mortgages and
30
BANKS AFTER THE CRISIS
how they are financed reduces the refinancing risk.3 In addition, extensive standardisation of financing instruments and guarantees for Dutch mortgages is appropriate. Institutional investors with long-term money (such as pension funds and insurance companies) will then be more inclined to finance Dutch mortgages. Van Dijkhuizen has made a number of valuable proposals for this.4
Van Dijkhuizen’s solution: clearer presentation of guarantees for investors
Van Dijkhuizen proposes removing the investment risk for investors in Dutch mortgages by
setting up a National Mortgage Institution (NHI) that would issue state-guaranteed National
Mortgage Bonds. The bank would remain responsible for timely payment, even if the debtor
failed to pay the interest and repayments on time, and would therefore continue to bear the full
liquidity and credit risk. In this construction, it is in fact the State that bears the risk of both the
debtor and the bank defaulting. In the case of mortgages that are subject to the National
Mortgage Guarantee, that extra risk is only small because the underlying credit risk has already
been shouldered by the State (in part). Moreover, the bank continues to bear the first-loss risk,
meaning that the losses on the mortgage portfolio are in the first instance charged to the bank’s
assets. Basically, the main point is a clearer presentation of guarantees vis-à-vis the investor, so
that the latter can be satisfied with a lower return and the homeowner therefore pays, on
balance, a lower mortgage interest rate.
Solutions focusing on the financing problem …
Currently, the marketability of Dutch mortgage portfolios is not optimal because
of a lack of standardised financial instruments and types of mortgages. A national
intermediary can play a useful role in this regard: as a transitional measure by
taking over part of banks’ mortgage portfolio in return for appropriate payment;
structurally by issuing standardised and liquid mortgage bonds and thus ensuring
a better match between the demand for financing by banks and the supply from
investors at home and abroad.5
3
4
5
Appendix 1 explains how Canada and Denmark have structured mortgage financing.
See Voortgangsbericht Verkenning rol van institutionele beleggers bij hypothecaire woningfinanciering, 11 March
2013 by K. van Dijkhuizen, who was requested by the Minister for Housing and the Central Government Sector, Stef
Blok, to investigate whether the role of institutional investors in financing home mortgages can be increased on a
voluntary basis.
Inflation indexing can further increase the attractiveness of mortgage bonds. That definitely applies in the case of
Dutch pension funds that can acquire secure cover for their obligations by means of inflation-indexed mortgage
bonds.
31
… state guarantees for investors and the National Mortgage Guarantee
Another measure involves focusing the existing state guarantees more clearly on
investors. In this way, one can contribute to reducing the financing problems, and
consequently (in principle) to reducing the mortgage interest rate for homeowners.
The trick here is not to increase the overall risk position of the State. At the
moment, the National Mortgage Guarantee (NHG) plays an important role on the
mortgage market.
For investors (including international investors), however, the NHG is not very
transparent, meaning that they may take insufficient account of this guarantee
when arriving at their risk versus return assessment. The NHG scheme has complicated conditions, such as an annually decreasing insured amount for the bank and
the possibility of the administrator of the NHG rejecting the claim for compensation because a subsequent check reveals that the bank’s intake procedure was not
in accordance with the NHG rules. The fact that the current NHG guarantee is
incomplete, does not always pay out, and only insures investors indirectly meets
with incomprehension on the part of investors.
In addition, the high LTVs and the falling house prices are making investors (including international investors) cautious. Investors will show greater interest in the
new mortgages if it is clear that the interest and repayments are wholly or partly
guaranteed by the State. It is likely that such products will also be interesting for
foreign parties.
In the long term, it remains to be seen to what extent government guarantees are
structurally necessary so as to ensure a stable funding structure for the mortgage
market. It is a good idea to consider an exit strategy for when LTV ratios have fallen
sufficiently and bank balances are once more in order. This will prevent the State
and the financial sector becoming structurally too interwoven with one another.
Structurally necessary: cost-covering premiums
It is in any case important for the State to provide guarantees at premiums that
cover the costs to a greater extent. The CPB has shown that the current NHG premium does not cover the costs. Just how high the premium should be is difficult to
say. For many years, there was hardly any loss, but in the case of major price falls
large payouts need to be made. A 2% premium would cover the State’s costs in 99%
of the future scenarios that have been investigated. Even that is still attractive for
the consumer. It is true that the consumer will only have recovered the costs after
four years, but most mortgages run for considerably longer. An insurance premium
32
BANKS AFTER THE CRISIS
that – as in Canada – increases along with the LTV and the term of the mortgage
would, incidentally, reduce the incentive to undertake a large debt.
… and incentives for effective credit assessment
In all of this, it is important not to introduce any wrong incentives at banks. Losses
on mortgages must in the first instance be borne by the banks because this will be
a sufficient incentive for them to properly screen and mitigate the credit risk. Van
Dijkhuizen therefore rightly advocates a significant first-loss tranche for the banks.
Greater attention to macro-prudential policy
In a structural approach it is necessary to reinforce macro-prudential policy. For the
future, anticipating and mitigating potential bubbles, for example in the housing
market, is viewed as an important responsibility of regulators of the financial sector. Initially, this involves further tightening up LTV ratios in periods of rising
house prices and increased lending. As soon as the LTV ratios are at a structurally
healthy level, it becomes possible to pursue a symmetrical policy. Such a macro-prudential policy will further restrict the risk profile and importance of the guarantees
mentioned.
Solution focusing on promoting market forces
One problem with the operation of market forces is that at the moment new players
come up against high obstacles to entry. Substantially lowering (initial) LTVs would
help lower those obstacles, but that is still largely in the future. On the way to such
a situation, it is important to put measures in place – such as standardisation and
rearrangement of guarantees – that improve the transparency and marketability of
mortgage obligations. In a transparent and liquid market, there is also room for
small players.
Solutions focusing on shortage of capital at Dutch banks
Banks not only have a financing problem but are also facing the challenge of strengthening their solvency. Given that attracting capital in the current market situation is extremely expensive – if not impossible – banks prefer to strengthen their
capital by retaining earnings. The fall in economic growth makes this a long-term
process, so that balance recovery also takes place by means of rationing credit.
Government guarantees reduce the problem of the Dutch banks’ shortage of capital. Any new government guarantees will, however, need to be coordinated with the
existing NHG, which also, after all, limits the risks for the banks.
33
3.3
Financing SMEs
Loans to SMEs are crucial
It is desirable for the provision of loans to SMEs to remain at a satisfactory level.
Rationing of credit to this sector must not be allowed to create a major bottleneck
for recovery in growth. Empirical research shows that the provision of loans to businesses by the banks has major macro-economic benefits.6
Capital requirement for business loans is relatively large
We referred in Section 3.1 to the fact that the capital requirements of Basel III mean
that the banks must strengthen their capital. In the case of business loans, the risks
where the banks are concerned are significantly greater than in the case of mortgage loans. Because of these high-risk weightings, banks need to hold a relatively
large amount of capital to cover business loans. A lack of capital leads to the banks
restricting loans to businesses.
If we consider the unweighted capital ratio (total assets divided by capital), the long
financial leverage of Dutch banks means that they lag behind their international
competitors (see Figure 9). This means that banks are under pressure to hold more
capital vis-à-vis their credit portfolio. If it is difficult to strengthen their capital,
banks can decide to ration credit.
Figure 9
Average financial leverage of banking sector in various countries
Source – ECB, calculations CPB
6
34
Beck, Th. [et al.] (2009) Who gets the credit? And does it matter?, CentER Tilburg University discussion paper, May
2009.
BANKS AFTER THE CRISIS
Guarantees for loans to SMEs
If the associated capital requirement leads to banks restricting the provision of
business loans, then it is primarily small and medium-sized enterprises (SMEs) that
are hit. More than large companies, SMEs rely on bank loans. In order to keep up
the provision of loans to them, the government makes use of guarantees such as the
SME Credit Guarantee Scheme (BMKB) and the Large and Medium-sized Companies
Credit Guarantee Scheme (Garantie Ondernemingsfinanciering – GO). These guarantees
reduce the banks’ credit requirement.
Study of loans to SMEs
It is important to keep track of the provision of loans to SMEs. Consideration should
be given to exploring how to optimise this. Such a study could focus both on the
options for bank loans and on supplementary financing channels.
Supplementary financing channels for SMEs
Bank loans could be supplemented by a revival of a private capital market for loans
to SMEs.7 On the private capital market, institutional investors provided direct
loans to companies for long-term credit (5–20 years). In this way, the private market
gave businesses an alternative to financing by means of bank loans. Since the 1980s,
however, the private credit market has dried up. The financial crisis means, however, that interest in this kind of “relationship investment” is increasing once more.
In this context, it is up to institutional investors themselves to get a good idea of the
quality of businesses that are requesting a loan.8
7
8
Another option would be to set up credit unions.
Duffhues, P. (2012) Financiële infrastructuur en de onderhandse leenmarkt, VBA Journaal, No. 110 (Summer 2012),
pp. 25–28.
35
36
PENSIONS IN TROUBLED WATERS
4
Pensions in troubled waters
For a long time, the Dutch pensions system had an excellent reputation. Everyone
was confident that the system would provide them with a stable post-retirement
pension amounting to 70% of their final salary. In the second half of the 1990s, the
premiums were for a long time below the level needed to cover the costs. The return
on investments was systematically estimated too high. The lower pension contributions also led to higher tax revenues and thus contributed to a lower EMU balance.
With hindsight, the conclusion must be that the Netherlands was living beyond its
means. If the Dutch economy is to recover effectively, it will be necessary for confidence in the pensions system to be restored. The system should no longer promise
what it cannot deliver because that only serves to undermine confidence.
4.1
The distribution of investment risks across the generations
Sharing risk between the current generations
One of the foundations underpinning the system was the belief that sharing the
risk between the generations would lead to a better result, primarily because young
people are better able to absorb investment risks than older people. One way of
achieving this is for young participants to invest at a higher risk than older people.
This is only beneficial for both groups if the young people then receive payment for
taking over the risk from older people and also profit more than average from positive shocks. The new pension contract (see below) provides possibilities for a more
even spread of shocks.
However, sharing risk between generations does not work when it involves absorbing macro-economic risks; macro-economic risks affect all current generations
simultaneously. When share prices fall, all generations that are currently participating in the pension fund are affected. The risk for one generation is not therefore
counterbalanced by the risk for another.
Sharing risk with future generations pays off
Sharing risk with future generations brings major prosperity benefits.1 It therefore
concerns generations that are not yet participating in the pension fund. The best
pension results can be achieved by shifting some of the windfalls and setbacks on
the financial markets onto them. This works best if the current generations have
built up a buffer that the fund can eat into when there is a setback. That is a much
more difficult matter if there is no buffer. Eating into the budget could turn it nega-
37
tive, and new participants would enter the fund with an unpaid account from the
past.
Mandatory participation
In theory, it is not a problem that newcomers are confronted by an unpaid account,
because participation is mandatory. In practice, however, there are two restrictions.
Firstly, some pension funds are shrinking purely because of dwindling employment
in their sector. In these cases, the possibility of shifting burdens is rapidly diminishing. Secondly, despite mandatory participation, the influx into a pension fund
with a capital deficit will sooner or later come under pressure, certainly where
smaller funds are concerned. Employers will then attempt to switch to a different
collective bargaining agreement or to set up their own company pension fund.
Mandatory participation provides only partial protection against a dwindling number of participants in a pension fund that has a negative buffer.
Buffers have disappeared
The problem is that buffers have disappeared, and once they have gone they will
not easily come back again. Pension funds have their backs to the wall. Because of
the principle of nominal security in the existing pension contract, they will need
to invest at lower risk. That is bad for younger generations. Moreover, the accrued
pension reserves are constantly increasing compared to the income from future
contributors, making it harder to recover setbacks from future generations.
Cushion macro-economic shocks as regards pension contributions and pension benefits…
It is a good idea to spread out shocks in pension reserves over a long period. Older
people can limit shocks by investing at lower risk. Young people can bear more risk
because they still have a lengthy period ahead of them in which to absorb a shock.
Young people therefore need to cushion shocks mainly by applying a long recovery
period. This will lead to smaller fluctuations in the available incomes of pensioners
and working people, which will benefit macro-economic stability.
1
38
Bonenkamp and Westerhout provide an overview of studies of the prosperity gain of intergenerational risk sharing.
The outcomes of most studies are between 6% and 9% of certainty-equivalent consumption (i.e. in the consumption level that provides the same benefit in a world without uncertainty as in a world with certainty). The lowest
estimate of the prosperity gain is 2.3% and the highest is 19%. See Bonenkamp, J. and E. Westerhout (2011) Pensioenen na de grote recessie: einde intergenerationele risicodeling?, TPEdigitaal, 5 – No. 2, pp. 83–99, in particular
p. 91. See also: Bonenkamp, J.P.M. (2012) Risk, redistribution and retirement: The role of pension schemes (dissertation).
PENSIONS IN TROUBLED WATERS
… without mixing this up with redistribution between generations
The problem with the current pensions system is that processing shocks more gradually is immediately mixed up with redistribution between generations because
the generations’ property rights are not clearly defined. Within the current system,
cushioning shocks leads mainly to a transfer from young to old because in practice
the deduction in the payouts to older people is delayed somewhat, whereas younger
people only receive a payout when the shocks have been entirely dealt with. Without a clear allocation of the assets to generations, every change in policy will therefore lead to the question of which generation will foot the bill.
4.2
The new pension contract
The current unconditional pension contract makes the problems worse
In the current unconditional pension contracts, pension funds are compelled, as it
were, to increase macro-economic instability. In these contracts, the nominal riskfree interest-rate is used as the discount rate. That rate is extremely sensitive to cyclical trends. In times of crisis, it falls because of increased risk perception. At the
same time, the risk premium on shares rises, meaning that there is a fall in the
value of shares.
The heavy emphasis on nominal pension entitlements leads to pension funds deciding to cover the nominal interest rate risk. That cannot be desirable for long-term
obligations. Moreover, valuation of the liabilities with the nominal interest rate
during a recession in which nominal interest rates are usually low can lead to an
increase in the value of the obligations and therefore to a restrictive policy if consumption is already under pressure: higher contributions, lower benefits. And
because the higher pension contributions are tax deductible and because paid-out
pension benefits are taxed and lower pensions therefore lead to less tax revenue,
this also reinforces the sensitivity to economic cycles of the EMU balance.
New pension contract partially solves these problems…
In the new pension contract, major steps are taken towards solving the problems.
It is true that capital is not explicitly allocated to generations, but the contract is
gradually made explicit in such a way that the entitlements of each generation can
be determined. This contributes to restoring confidence. It is logical that this process of making explicit will continue in the years ahead. The new contract also contributes to making the pensions system better able to absorb shocks on the financial markets. Pension rights are explicitly conditional and this offers possibilities
for making the pensions system more stable.
39
The transition to the new contract makes it desirable to include old entitlements in
the new contract. Pension funds are concerned about the risks associated with this.
This can form an unwanted barrier to making the transition to the new more stable
pension contract. Government must shoulder its responsibility by as far as possible
removing this barrier by means of legislation.
… by spreading shocks more widely and by means of a more stable discount rate
A decision has now been taken to introduce a so-called “policy funding ratio”, with
one-year averaging of the actual funding ratio.2 In addition, the Outline Memorandum [Hoofdlijnennota] by the Minister of Social Affairs and Employment provides for
a number of mechanisms to cushion the cyclical impact of the pensions system, for
example the option of spreading out shocks over ten years. It is a good thing that
these mechanisms for cushioning against the consequences of the economic cycle
are now available.
The stabilising role of supplementary pensions can be further reinforced by applying a more stabilising discount rate, with that rate naturally needing to be a reflection of the pension contract. Amongst other things, this means that the set-up of
the discount rate should not have any unintended generation effects and that the
sustainability of the pension contract should continue to be guaranteed. The discount rate will have a more stabilising effect if it can take account of inflation forecasts and the risk premium. During a recession with low nominal interest rates, the
inflation margin could be low and the risk margin high, depending on how they
are determined. In a period of buoyant economic activity, things are just the opposite. This could prevent too much being paid out to older people in good times and
pensions needing to be cut too much in bad times.
Consideration must be given to whether it is possible to ensure a macro-stable discount rate for the underlying new pension contract. Because the expected inflation
and the risk premium are not directly observable quantities, there is a risk of different interpretations and selective application. A new discount rate must also be feasible from the regulatory point of view. A mechanism is therefore needed to determine the new discount rate independently and to ensure that it is applied consistently in both good and bad times.
2
40
Minister of Social Affairs (2012) Hoofdlijnennota herziening financieel toetsingskader pensioenen, 30 May 2012.
PENSIONS IN TROUBLED WATERS
New role of supervisory authority
In a sustainable system, the role of the regulatory authority is not only to monitor
the financial situation of a pension fund but also whether the fund is not using
assets from one generation to solve the problems of a different generation. It goes
without saying that monitoring the risks that different generations need to bear
and the feasibility of the agreed target pensions continues to be important. The
risks that are communicated must correspond to the risks that funds actually take.
4.3
Capital funding and also pay-as-you-go arrangements
Capital-funded pensions have advantages …
Where capital funding is concerned, the Netherlands is head and shoulders above
other countries. Table 2 shows the extent of households’ capital for a number of
countries. Pension reserves in the Netherlands are by far the highest of any of the
EU Member States. Pension obligations are therefore far more capital-funded than
in those other Member States. A pure system of capital funding has two advantages.
Firstly, everyone saves for him/herself. In pay-as-you-go arrangements, ageing is a
problem because fewer and fewer working people have to cover the cost of more and
more pensioners. Secondly, a country with capital funding has more risk-bearing
long-term savings available.
Table 2
Financial assets of households as a percentage of GDP in 2011
Gross financial assets
Euro-17
NL
BE
DEN
DU
FR
IT
SP
197
304
258
264
182
202
219
160
currency and deposits
72
71
83
49
74
61
71
80
shares and other equity
43
33
78
69
32
45
60
41
securities other than shares
14
7
28
9
10
3
45
7
9
8
8
8
4
22
4
9
59
185
61
128
62
72
38
23
pension funds reserves
not available
151
4
59
not available
8
12
10
life insurance reserves
not available
35
57
69
not available
64
26
13
Minus:long-term loans
61
124
53
134
56
55
42
79
short-term loans
3
4
2
6
3
2
4
3
other financial liabilities
5
7
1
9
1
10
6
6
128
170
203
114
122
135
168
72
other financial assets
net equity in life insurance
and pension funds reserves
Net financial assets
Source: Eurostat
41
… but also contribute to macro-economic instability
The system of capital funding also has a disadvantage, however. The value of investments varies greatly, far more than the value of GDP. This high volatility of financial assets makes sharing risk with future generations attractive. Because the profit
ratio is more or less constant, share prices tend over the long term towards a kind
of average percentage of GDP.3 The recovery period is a long one, however: it takes
10 to 20 years to eliminate half the difference with long-term equilibrium. As a
result, the spread of investment risks across several generations is valuable. Favourable returns in good years, as in the 1990s, can then be saved up for the lean years
that inevitably follow.
Pay-as-you-go arrangements less vulnerable to financial shocks
In a pay-as-you-go arrangement, the current contributions that are paid in are used
to help pay the current pensions. Every percent of GDP paid in as a contribution is
therefore paid out as pensions in the same year. Shocks on the financial markets
have no effect on the pay-as-you-go component of the pensions system.
It is a good thing that the Dutch system is a combination of a pay-as-you-go arrangement for the basic state retirement benefit (the “AOW”, the first “pillar”) and capital funding for pensions (the second “pillar”). Over the years, the second pillar has
gradually become more important due to restriction of the increase in the basic
state retirement benefit and the further maturation of pension funds. Given the
desire to make the Dutch economy less volatile, it is therefore important to keep an
eye on a good balance between pay-as-you-go funding and capital funding.
4.4
Investments in the Netherlands by pension funds
In order to minimise the financial risks of the pension funds, investments of Dutch
pension reserves have been spread out across the whole world. This makes it possible to achieve the highest possible return for a given risk appetite. The importance
of the Netherlands in the portfolio has been overweighted in relation to the Dutch
share in the world economy (1%). This means that the Dutch pension funds have
now invested some 15% of the invested reserves in the Netherlands, especially in the
form of corporate bonds and treasury bonds. A good international spread of investments continues to be important but that does not need to stand in the way of some
3
42
Cochrane shows that there is convergence (in the long term) towards a fixed share price/profit relationship. Assuming a constant long-term earned income ratio, the share price/profit relationship will tend towards a fixed value.
Cochrane, J.H. (2008) The Dog That Did Not Bark: A Defense of Return Predictability, The Review of Financial Studies,
21 – No. 4 ( July), pp. 1533–1575.
PENSIONS IN TROUBLED WATERS
expansion in the importance of the Netherlands in the portfolios.4 There are two
kinds of considerations in favour of such expansion.
Pension obligations are correlated with the Netherlands’ GDP …
Firstly, the obligations of Dutch pension funds correlate closely with the country’s
GDP. If the Netherlands is doing well, then wages rise and – because we prefer to
link our pensions to wages – an increase in GDP therefore automatically leads to an
increase in pension obligations. It is therefore an obvious step to consider investing
in the Netherlands, certainly with the new realistic pension contract.
… and demand financial instruments that are coordinated with it
A realistic pensions system demands financial instruments that offer a realistic
return. For example, rental bonds that offer the holder a share of the future rental
income of corporations are very interesting for a pension fund. The size of this flow
of income is closely related to future GDP and therefore to the future obligations of
the pension fund.
The international capital market continues to entail a high risk …
The second reason for reconsidering spreading out investments is that the international capital market functions less flexibly than used to be thought. Ultimately,
investing in one’s own country is safer than investing elsewhere. That is partly the
result of political risks. If losses need to be written off, good links with local politicians are desirable; these are always better in one’s own country than in other countries.
… and domestic pension investments provide support for sensible economic policy
The same can be said for domestic pension investments. There is a major temptation to solve social problems by withdrawing funds from profit income. This has a
detrimental effect on growth capacity and jobs. If pension funds take a sufficiently
large interest in investments within the Netherlands, that temptation will be limited.
No investment compulsion for pension funds
It is in the interest of pension fund participants for there to be a good return at the
lowest possible risk because it is from that return that their pensions will later be
4
A recent position paper produced by the Dutch Association of Insurers [ Verbond van Verzekeraars] shows that the
Dutch insurance companies have invested more than half their capital in the Netherlands. If the Civil Service Pension
Fund [ABP] were to increase the share of its investments in the Netherlands to a quarter of its reserves, it would
mean that an extra EUR 19.5 billion would be invested in this country.
43
paid. Pension funds can be encouraged to invest more in the Netherlands, for
example by creating long-running financial titles for which the interest and payments are certain, or that offer protection against the inflation risk in the Netherlands (see Section 3.2). However, we reject investment compulsion, which is also
prohibited by the EU’s pensions directive.
44
5
What should be done?
The Netherlands finds itself confronted by the triple challenge of finding a solution
for the structural problems in the housing market, the banking sector, and the pensions sector. Reducing the current vulnerabilities and volatility of the economy and
investing in countercyclical institutions helps to reduce the uncertainty among the
public and businesses, and thus contributes to restoring confidence. It can also contribute to equilibrium on the labour market.
However, it will take a number of years to achieve a sustainable equilibrium in the
economy. It is therefore important to first analyse the nature of the imbalances and
how they relate to one another, and to persuasively promote that analysis in public
debate. A widely shared understanding of the nature of the problems and of the
overall solutions will boost confidence that a sensible policy based on that understanding will lead to sustainable recovery of growth and employment.
The primary aim of the present exploratory study is to offer such a combined diagnosis. The measures that we then suggest do not constitute a fully elaborated plan
or blueprint. It is up to the politicians to determine the measures, work them out
in detail, and select the right road towards making the necessary transition. What
we suggest here is simply the direction in which to search.
Housing market
■
■
■
More stable financing for mortgages. Given the fact that mortgages normally
run for a long period, it is important to attract more long-term financing for
them. This will create greater stability and certainty for households, banks, and
financiers.
Lower LTV ratios so that there is a buffer for absorbing falls in house prices.
Where new mortgages are concerned, the initial step in this direction has
already been taken in recent years. Ultimately, a further reduction in LTVs is unavoidable, but the recession means that the timing is crucial. A fall in LTVs also
requires that there be more options for saving to buy one’s own home.
A properly functioning rental market. This is a necessary complement of lower
LTVs. The lack of a middle segment on the rental market means that many households take on mortgage debt too early and too deeply. The conditions for such a
properly functioning rental market are equal tax treatment for rented accommodation and a level playing field for both housing corporations and commercial
landlords. In the short term, intermediate forms between renting and buying
45
■
can be helpful, for example by permitting unsold homes to be rented out while
retaining entitlement to mortgage interest tax relief.
A solution for problem mortgages. The number of households with a potential
residual debt is estimated to be half a million. That constitutes a risk for both
households and the financial sector. That problem will not be solved in the short
term. The new tax arrangements regarding residual debt are a step in the right
direction. It is important to continue to monitor this problem.
Financial sector
■
■
Greater clarity and certainty for investors in Dutch mortgages. Temporary government guarantees can help to create a liquid market for mortgage paper; the
existing “mortgage mountain” will then put less pressure on bank balances.
Further scope for financing SMEs. If economic growth picks up in the near
future, credit rationing will create a major bottleneck in this area. Partial government guarantees can help here. A revival of the private capital market for loans
to SMEs would also be welcome.
Pensions
■
■
■
■
46
Fewer fluctuations in pensions by means of the transition to the new pension
contract with longer recovery periods and, within certain constraints, a more
stabilising discount rate. Shocks on the financial markets will consequently have
less impact on pension contributions and benefits.
In the new pension contract, the supervisory body must also ensure that assets
from one generation are not used to solve the problems of a different generation.
Monitoring will remain necessary of the risks and feasibility of target pensions.
Given the desire to make the Dutch economy less volatile, it is therefore important to keep an eye on a good balance between pay-as-you-go funding and capital
funding.
Make it attractive for institutional investors (i.e. pension funds and insurance
companies) – within their autonomous risk-return assessment – to invest more
of their assets in the Netherlands.
WHAT SHOULD BE DONE?
Institutions for countercyclical policy
■
In preventing another crisis, policymakers should be able to put on the brakes in
the next upswing phase in order to prevent overheating of the economy and/or
the emergence of new bubbles. Macro-prudential supervision must continue to
play an important role in this regard.
The Hague, 19 April 2013
W. Draijer
President
V.C.M. Timmerhuis
Secretary-General
47
48
Appendix
50
APPENDIX 1
Home loans in Denmark, Canada
(and the Netherlands)
Denmark and Canada both have a transparent and efficient method of mortgage
financing. In both countries, the mortgage interest rate is significantly lower than
in the Netherlands.
Like the Netherlands, Denmark has extensive collective pension savings and a large
financing gap. Two core features of the Danish mortgage system are ring fencing
and the balance principle. In Denmark, mortgage activities have been separated off
from the rest of the bank balance sheet into separate mortgage banks (ring fencing).
The mortgage banks finance mortgages solely on the capital market by direct issues
of mirrored mortgage bonds with the same cash flows as the mortgages provided
(balance principle). As a result, the refinancing risks for the bank balance sheet disappear; investors do not need to worry about refinancing because the cash flow for
the bond corresponds precisely with the mortgages that have been provided as collateral. The credit risk is, however, covered by the bank: there is full recourse to the
mortgage bank if the consumer defaults on payment. This is possible because the
balance principle means that banks no longer run any refinancing risks; they
therefore concentrate on their core task, namely selecting creditworthy customers.
The necessary buffer resources for the credit risk and any extra collateral required
for this (“overcollateralisation”) is financed on the capital market with subordinated bonds and own capital so that no demand is imposed on savings and the deposit
guarantee system.
Canada has a system of mandatory insurance for mortgages with higher LTV ratios
(from 80% up). As in the case of the Dutch NHG, this reduces the risk for the bank.
Unlike in the Netherlands, the insurance premium depends on the level of the LTV
ratio: a higher LTV means a higher premium. The Canadian government also guarantees prompt and full payment of the interest and principal for the insured mortgages with securitisation, thus guaranteeing prompt payment for investors and
enabling banks to finance mortgages on AAA conditions on the capital market
(Canada also has a deposit financing gap). The government purchases the insured
and securitised mortgages by issuing mortgage bonds (Canada Mortgage Bonds,
CMBs). These have the same payment structure as government bonds. This too contributes to reducing the financing costs for mortgages.
51
In Denmark and Canada, there is a much stronger correlation between risk-free
interest and mortgage interest. Separate treatment of mortgages means that this is
not burdened with the sentiment on the capital market as regards the non-mortgage activities of the banks. The risk premium relates solely to mortgage activities.
The table below provides an outline comparison of home loans in the Netherlands,
Denmark, and Canada.
Max. LTV ratio
The Netherlands
Denmark
Canada
Existing building: 105%
New building: 103%
(difference = 2% transfer tax)
80%
With an LTV of >80%, credit insurance is obligatory.
No insurance is provided when the
LTV is >95%.
Exception: financing for sustainable
energy-saving investment in home
Households can
finance the remaining
20% by means of a
second mortgage, if
desired. These mortgages feature a significantly higher interest
rate.
The Netherlands
Denmark
Canada
De facto 30 years in connection with
mortgage interest tax relief
30 years
Reduced in 2012 from 30 to 25 years.
A further reduction to 100% has been
announced: 1% point per year in
period 2013–2018
Maximum term
There is no maximum term for a
second loan (see below).
Insurance policies are issued by the
Canada Mortgage & Housing Corporation or a private insurer certified
by the Minister of Finance.
Until 1996, all mortgages were fixed-interest, generally for the
full 30-year term.
Max. LTI ratio
NIBUD standards based on income,
interest rate percentage, and age
(65+/65-).
Banks bear the credit
risk and have an incentive to only provide
mortgages to solvent
households.
There are rules for the ratio between
housing debt/income (39%) and
total debt/income (44%).
Max. interest-only portion of mortgage
50% (GHF code)
Repayment was traditionally compulsory.
Postponement of
repayment for 10 years
has been permitted
since 2003.
Complete repayment over a maximum of 25 years is compulsory. Prohibition on interest-only in first few
years of term.
With effect from 2013, mortgage
interest tax relief applies only when
the mortgage is to be fully paid off.
The repayment portion can be reduced to 50% by taking on a second
loan.
National Mortgage
Guarantee (NHG)
Voluntary
Premium: Once-only 0.85%, regardless of LTV ratio
Upper limit: EUR 320,000
Up to 2014 gradually reduced to original amount of EUR 265,000.
52
Interest-only only possible with LTV
up to 50%.
Since 1996, variable
interest rates have also
been permitted.
None
Obligatory from LTV of 80%
Premium depends on LTV ratio:
0.5%–2,75% (LTV high, premium also
high)
Upper limit: CAD 1 million (approx.
EUR 820,000)
APPENDIX 1
The Netherlands
Denmark
Canada
Transfer tax (ODB)
Permanently reduced to 2%
1% on assessed value
up to DKK 3,040,000
(EUR 407,660), 3% on
higher values
Determined and levied locally. Percentages range from 0.57% to
2.56%.
Special points
Mortgage interest tax relief encourages building up mortgage debt and
maintaining it as much as possible.
The central element is
the balance principle:
financing mortgages is
via bonds with equal
term, fixed-interest
period, and repayment
profile.
Government securitises insured
mortgages and transforms them
into bonds guaranteed by the State
(NHA-MBS, CMB)
Danes can at any time
buy back the bond with
which their mortgage
is financed at the market value, including (in
fact, precisely) in the
case of a rise or fall in
interest (“callable
bonds”).
Mortgage interest
Mortgage interest in the Netherlands
is approx. 1% point higher than in
other countries in similar situation.
Clear link between
market rate and mortgage rate.
Reduction in ECB policy rate does not
really affect mortgage interest.
With an LTV of 80%, the
mortgage rate is
approx. 2% points
lower than in the
Netherlands; above
that level, the difference is smaller but still
significant.
Home Buyers’ Plan (HBP) that enables first-time homeowners to use
pension money tax-free as a down
payment on their own home (max.
CAD 25,000 per person per year).
State-guaranteed mortgage bonds
return 25 to 35 basic points above
normal Canadian government bonds
(AAA). Mortgage interest rate is
based on this.
Application in the Netherlands
would mean a fall in mortgage interest rate of 40 to 50%.*
* Berg, P. van den, L. Bovenberg and D. van den Brink (2012) Het Canadese hypotheekmodel, ESB, 97 – No. 4649/
4650 (14 December), pp. 2–4.
53
Figure A 1
Trend in house prices 1994–2011
(index: 1994=100, nominal change compared to previous year)
Source: OECD key tables, edited by secretariat
54
APPENDIX 2
Composition of Social and Economic Affairs
Committee (SEA)
Independent members
W. Draijer (chair)
Prof. A.W.A. Boot
Prof. A.L. Bovenberg
Prof. J. Swank (DNB)
Prof. C.N. Teulings (CPB)
Members representing employers
G. Dolsma (VNO-NCW, MKB-Nederland)
G.A.M. van der Grind (LTO Nederland)
M.S.M. Grondhuis (VNO-NCW, MKB-Nederland)
C. Oudshoorn (VNO-NCW, MKB-Nederland)
Members representing unions
C.C.H.J. Driessen (FNV)
A.P.C.M. van Holstein (MHP)
M.H.J. Limmen (CNV)
C.E. Passchier (FNV)
J. Visser (FNV)
Prof. B.E. Baarsma
Prof. J.H. Garretsen
Prof. C.G. de Vries
J.A.M. Klaver
W.M.J.M. van Mierlo
W.J. Lubbers
M. Nijlant
E. Tasma
Advisory members
Dr J.M. Berk (DNB)
J.F.P. Hers (CPB)
Ministerial representatives
E. Afman MSc (Finance)
D. Hagoort (Interior and Kingdom Relations)
M. Klok MSc (Economic Affairs)
F. de Koning MSc (Economic Affairs)
Secretariat
N. Achterberg
M.G. Bos
Dr A.G. van Riel
A.R.G.J. Zwiers
55
56
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60
REPORT | May 2013
Dutch economy in calmer waters
A macro-economic exploratory survey
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