At first sight these rules looked convincing, but they were clearly procyclical. When the reversal came, performance declined rapidly. This year, negative growth of 3/4 per cent is expected. At the same time the Netherlands has tightened fiscal policy considerably, including significant expenditure cuts.
This also reflects a procyclical approach, but the Dutch want to keep the budget deficit below three per cent in compliance with the Stability and Growth Pact. If only all euro area member states were as determined as the Netherlands. This example shows how succumbing to relaxation of fiscal policy in good times can lead to highly unstable development.