Davos WEF
Davos WEF

The Netherlands is 'spending tremendously,' minister says as pressure builds to boost growth

Key Points
  • The Netherlands and Germany are facing increasing pressure to spend more money to boost economic growth.
  • Dutch Finance Minister Wopke Hoekstra told CNBC that the government has been "spending tremendously" in recent years.
The OECD expects GDP growth in the Netherlands to remain strong in 2018 and 2019. House prices have recovered and in major cities have surpassed the level reached before the financial crisis. That's a sign of economic sentiment but does make the mortgage market vulnerable.
Tristan Fewings | Getty Images

The Netherlands and Germany are facing increasing pressure to spend more money to boost economic growth but the former's finance minister rebuffed those calls, telling CNBC that the Dutch government has been "spending tremendously" in recent years.

Asked by CNBC whether the Netherlands should boost public spending, Dutch Finance Minister Wopke Hoekstra said the government has already done so.

"It is often said but it is not backed up by the numbers, at least not for the Netherlands. In the last couple of years, this has been a government that has been spending tremendously on all sorts of (things) that the government can spend on, from defense to schools, to roads and police and of course, also on climate change," he told CNBC at the World Economic Forum in Davos, Switzerland.

Richer, northern European countries like Germany and the Netherlands have been facing increasing calls to boost public spending in order to boost the wider European economy.

On Monday, even the International Monetary Fund's Chief Economist Gita Gopinath joined the list of people calling on the two countries to use their "fiscal space."

"So to support the recovering growth, it's important for policymakers to do no harm. Monetary policy should remain accommodative and countries that have fiscal space should use it to improve social and human capital and climate friendly infrastructure," she said.

Climate change and sustainability have been key themes at the World Economic Forum this week. President Donald Trump, whose administration has moved away from environmental pledges, and climate activist Greta Thunberg have both made keynote speeches in which they indirectly attacked each other's stances on the matter.

VIDEO3:1403:14
Low interest rates hurting our pension system, Dutch finance minister says

Hoekstra told CNBC that the Netherlands would be spending more money and that it was vital to engage citizens on the subject. "The task for politicians is to tackle this problem but to do it in such a way that we do take our populations with us. There is this divide that we do need to bridge. This is a time of transition and it's imperative that we take action."

Last week, the government announced a 1.7 billion euro ($1.8 billion) investment fund, Invest-NL, aimed at making it easier for Dutch companies to attract investors and to promote innovation and sustainability.

Hoekstra said the fund was in place "if the private sector cannot do some things in terms of innovation, or climate change investments, the government can actually help and bring parties together and co-invest basically."

Some analysts have questioned the timing and role of the investment fund and its potential as an investment vehicle for the country's pension funds that face increasing pressure from a continuation of negative and record low interest rates in Europe, prompting uncertainty around the entire pension system.

Hoekstra said low and negative interest rates were a double-edged sword but refused to comment on European Central Bank policy direction, as the central bank meets Thursday to decide its latest interest rate (no change is expected).

"Frankly speaking, this very low interest environment has been there for a while and you're absolutely right, it is hurting our pension system, it is difficult for regular savers. For me, as a finance minister, there's a different side to that whole picture as it has never been cheaper to get access to money."

"So, I'm in the weird situation as a finance minister of a triple-A country (in terms of credit rating) when I borrow billions of dollars, even when it is for a 10 or 20-year period, I actually get money in return for lending," he said.