Netherlands

Rising purchasing power is driving economic growth

After several turbulent years, Dutch economic growth will slowly normalise over the course of 2024, resulting in a modest recovery. The main driver for economic growth will be private consumption (43% of GDP) that is being propelled by a strong increase in purchasing power. Recently concluded collective labour agreements hint at significant wage increases of between 5% and 7% year-over-year in 2024. Consumer price inflation fell sharply in the second half of 2023. In 2024, the yearly price pressure is expected to stabilise and hover around 3% (+/-0.5 percentage points). This should result in real wage growth of 3.2%, one of the strongest increases in the last decade. Additionally, the minimum wage increased by 10% in early 2023 (comparable to the average inflation rate of 2022) and rose by a further 3.8% in January 2024 (again compared with the average inflation rate in 2023). Pension and welfare benefits are linked to the minimum wage and adapted accordingly as well. According to the Dutch Bureau of Economic Policy Analysis purchasing power should recover and return to the 2021 level by 2025. The government also introduced special measures in 2024 to reduce poverty and increased the employment tax credit by 115 euros for people receiving between the minimum wage and low income. The supplementary child benefit was increased by up to 750 euros per year for the first child, 883 euros for the second, and supplemented by 400 euros for each child between 12 and 17 years of age. Housing benefits have been increased as well. Many of these measures are financed by higher tax rates for high income households. As the latter have a strong propensity to save, and low-income earners usually translate the largest part of increases in their disposable income into higher consumption, this should cause private consumption to rise significantly. The government will also see higher expenditure in 2024. The 2024 budget includes more funding for climate protection, the transformation of the Dutch economy towards climate neutrality, and higher expenditure on research and development and on defense.

Conversely, the situation for investment is tricky. Interest rates should slowly decrease in 2024. Lower price pressure, also evident in other European countries, will push the European Central Bank (ECB) to consider its first interest-rate cuts. The ECB should cautiously lower them from June 2024. Up to three cuts could be in the pipeline during 2024. However, the number and scope of the cuts will clearly depend on the development of (core) inflation and nominal wages. At the same time, while the ECB will fully reinvest the principal payments from maturing securities purchased under the Pandemic Emergency Purchasing Program (PEPP) during the first half of 2024, it intends to reduce reinvestments by €7.5 billion per month in the second half and cease them completely thereafter. Even with the end of all Quantitative Easing programs, lower interest rates should have a positive effect on investment, albeit with a probable time lag. The number of construction permits reached its lowest level in 10 years in January 2024. However, the demand for housing remains high. The number of housing sales has again been on the rise since April 2023 and house prices were almost back to an all-time high in February 2024. As banks slowly adapt their interest rates on loans to those of the ECB, higher investment in construction (and also in other sectors) are not expected until the end of the year. Foreign trade of goods and services – exports account for 89% of GDP, and imports for 77% – should represent only a modest growth factor in 2024. While a timid recovery is expected in Western Europe around the second half of 2024, trade with the Netherlands’ main trading partners – the US and China – could lose momentum over the year.

Public deficit starts to widen again

The public deficit remained surprisingly low in 2023 due to improved balance in local governments, underinvestment, lower costs from the energy price cap, and surprisingly high income from dividend, payroll, income, and corporate taxes. These positive effects are not expected to continue in 2024. In addition to higher expenditures to fight poverty, military support for Ukraine should rise as well as costs for the reception of Ukraine refugees. In addition to that, social security expenditure will be higher due to the ageing population and to a slight increase in jobless numbers. On the income side, corporate tax receipts are set to fall owing to the fact that business income lags behind GDP growth and tax receipts reflect the previous year’s activity. Furthermore, one-off items from 2023 will not be repeated. Therefore, public debt will increase again, but will remain comfortably within the targets of the Maastricht criteria.

The Dutch current account registered a stronger surplus in 2023 thanks to the higher trade in goods surplus that benefited from improved terms of trade. In addition, the primary income deficit (the balance of received minus sent abroad labour and capital income) diminished due to favourable financial market developments abroad. In 2024, a modest improvement in trade should further enhance the current account surplus, while the service trade surplus should remain roughly unchanged. Despite significantly higher prices for package holidays and other travel, the Dutch and foreign visitors' desire to travel in the Netherlands is likely to continue unabated as purchasing power increases.

Obstacles thwarting a government coalition

At the time of writing, Mark Rutte of the conservative-liberal party VVD was still leading a caretaker government in place since July 2023. His government coalition composed of the VVD, the Social-Liberal D66, the Christian-democratic CDA, and the Centrist CU broke up over a dispute on immigration. In November 2023, early elections took place, where the far-right "Party for Freedom" (PVV) secured a surprise landslide victory. The party, led by Geert Wilders, doubled its seats in Parliament and now represents the largest parliamentary group with 37 out of 150 seats. The runner-up of the election was the social-democratic-green electoral alliance (GL/PvdA, up by 8 to a total of 25 seats), followed by the newly founded centrist New Social Contract (NSC, 20 seats). The election losers were the former government parties with the VVD (down by 10 to 24 seats), D66 (down by 15 to 9 seats) and the CDA (down by 10 to 5 seats) together with the Socialists Party (SP, down by 4 to 5 seats). The result of the Farmer-Citizen Movement (BBB) surprised on the downside as well. Their number of seats increased by 6 to 7, but missed expectations considering its very strong result in 2023’s regional elections. In addition, seven other parties are represented by up to 3 persons each as there is no vote threshold for entering Parliament. Geert Wilders as leader of the PVV started coalition talks, but failed to form an alliance that would support him as the future Prime Minister. During the election campaign, Wilders called for mosques to close and the Koran to be banned from the Netherlands. His harsh anti-Islamic stance deterred potential coalition partners like the VVD, the NSC, and the BBB. After Wilders publicly announced he no longer wanted to be Prime Minister, talks between the potential coalition partners and the PVV resumed with a new target: the formation of a technocratic government, whose members have only loose ties to the parties. This would mean the cabinet would comprise political veterans or outside experts, with the loose support of an alliance of the PVV, VVD, NSC, and BBB, but must find a majority for each political project and law. It is not clear how long it will take until the new government is formed. In 2017, it took 225 days to form one. It would seem that the last months in office for the current PM can be counted on one hand as he is in the race to become Jens Stoltenberg’s successor as NATO Secretary General. Stoltenberg’s office ends in September 2024. If Rutte is appointed and no new government is formed, then the current Deputy Prime Minister and Minister for Climate and Energy, Rob Jetten, from the D66, would take over as a caretaker Prime Minister.

Payment

In the Netherlands, bank transfers are by far the most common payment method for both domestic and export business-to-business transactions. All Dutch banks are linked to the SWIFT electronic network, which provides low-cost, flexible and rapid processing of international payments. Direct debit and different centralised local cashing systems are also widely used. Online sales are increasingly popular and most companies now use digital banking software. Cash payments are gradually disappearing and other payment methods, like cheques and bills of exchange are rarely used.

Debt Collection

Amicable phase

A debt collection process usually begins and ends by sending the debtor a (sometimes registered) collection letter. Sending letters (only) by email is becoming more and more customary. Besides the principal claim amount, the collection letter usually also includes a demand to pay accrued interest and extrajudicial costs. If the interest rates and/or costs have not been agreed by contract, Dutch law regulates the limits for both. If amicable actions, which include reminders by phone and possibly a debtor visit, do not result in full payment, the creditor can initiate legal action, in accordance with Dutch civil law.

LEGAL PROCESS

Fast-track procedures

In urgent cases, claims can be submitted for a fast track procedure (kort geding). These proceedings resemble those of the regular civil court but, if convinced of the plaintiff’s arguments, the judge (ruled by the President of the district court) delivers a verdict within a very short period of time – usually between two to four weeks. During this somewhat simplified procedure, the judge often makes a temporary or provisional ruling for more urgent matters. If, subsequent to this provisional decision, the parties do not reach a final settlement on all issues, they then need to obtain a final judgement in a “regular” civil suit (bodemprocedure).

The fast track procedure in the Netherlands differs from the (European) payment order procedure used in many other European states. It always requires the assistance of a lawyer and personal appearances by all parties before the judge. As this makes the fast track procedure rather expensive, it is not often used in regular collection cases.

Ordinary proceedings

The regular civil court procedure, held in one of the eleven district courts (Rechtbank), is the most frequently used recourse of action. Claims of €25,000 or less are heard by a judge of the cantonal sector of the district court (kantonrechter), while claims in excess of €25,000 are presented before the civil law sector. The main difference in the civil law sector is that both the plaintiff and the debtor have to be represented by a lawyer, whereas in the cantonal sector parties are permitted to argue their own cases. Both types of procedures begin with a bailiff serving the debtor with a writ of summons. In many cases, debtors do not contest the claim or appear in court. This results in a judgment by default being given, usually within six to eight weeks. If the debtor does appear in court, the judge sets a date for them or their lawyer to prepare a written statement of defence (conclusie van antwoord). However, when appearing before a cantonal sector judge, debtors can represent themselves and plead their cases verbally. After the first plea, it is standard procedure for the judge to schedule personal appearances by both parties to obtain more information and to see if a settlement is possible (comparitie van partijen). If not, the court can either pass judgement immediately or, in more complex cases, give the plaintiff the opportunity to deliver a replication (conclusie van repliek). The defendant can then reply by rejoinder (conclusie van dupliek). These proceedings take, on average, six to twelve months.

Winding-up proceedings

A third and often effective procedure for collecting payments is by filing a winding-up petition at the district court. This type of petition must be filed by a lawyer and the applicant needs to submit evidence of a payment default on an undisputed debt and of the existence of at least one other creditor having an undisputed claim of any kind (for example, commercial debt, outstanding alimony or taxes). The debtor is then formally notified by a bailiff that a winding-up petition has been filed. To avoid bankruptcy, the debtor can choose to appear in court to dispute the claim (or the fact that there are other creditors) or propose an out of court settlement. As most debtors try to reach a settlement, these proceedings are often cancelled before the date of the court hearing. Otherwise, and if there is sufficient evidence, the debtor is then declared bankrupt. Approximately 95% of all bankruptcies result in no payment being received by non-preferential creditors.

Retention of title and right of reclamation

Besides initiating legal action or claiming retention of title (if stipulated), sellers of goods can often exercise their right of reclamation (recht van reclame) for unpaid goods. This entails sending the debtor a registered letter which invokes this right. The contract is thus terminated and by law, ownership of the goods returns to the creditor. However, this recourse of action does require the goods to be in their original state. The registered letter must be sent within 6 weeks of the claim being due and within 60 days of the goods being delivered. 

Enforcement of a Legal Decision

If a debtor does not voluntarily comply with a court decision, the creditor can initiate actions to enforce the judge’s ruling. As most court decisions become effective immediately, creditors do not need to wait for the three month period of appeal to expire. Enforcement laws lay down statutory rules on coercive measures and how these measures can be applied. In the Netherlands, only bailiffs are authorised to levy enforcements and are instructed by the creditor. Two conditions need to be met before coercive measures begin. The bailiff must be in possession of a writ of execution (an original and enforceable judgment) and the party on which the enforcement will be levied must have prior official notification of the writ.

Court decisions rendered by other EU countries benefit from specific enforcement mechanisms, including the EU payment Order and the European Small Claims procedure. Decisions issued by non-EU countries can be recognised and enforced on a reciprocal basis, provided that the issuing country is part of a bilateral or multilateral agreement with the Netherlands. In the absence of such an agreement, an exequatur procedure can be carried out in the Dutch?courts. 

Insolvency Proceedings

RESTRUCTURING PROCEEDINGS

Corporate debt restructuring entails using the suspension of payments (surseance van betaling) procedure. The debtor is granted temporary relief from creditors, in order to allow them to reorganise, continue with business operations and ultimately satisfy their creditors’ claims, all under the supervision of a court-appointed administrator. A plan is proposed and must be approved by two-thirds of the creditors representing three-quarters of the total outstanding?debt.

BANKRUPTCY PROCEEDINGS

The debtor’s assets are liquidated by the court-appointed trustee. This procedure commences when the debtor has ceased payments and the District court has declared the debtor bankrupt. If a creditor makes a request for the debtor to be declared bankrupt, there must be at least two creditors with overdue claims. However, when liquidation is requested by the debtor, evidence of additional creditors is not mandatory.

The trustee establishes a list of creditors, the debtor’s assets are auctioned and the proceeds then distributed between the creditors.

Last updated: April 2024