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What does the 3 percent standard mean?
Lately the news often mentions the euro and the 3 percent standard.
3 percent deficit, but 3 percent of what,
and what does that mean for the Netherlands?
Well, it's like this:
In 1992, we decided to adopt the euro.
We also agreed that euro countries may not incur major deficits in the future,
because that puts the stability of the euro at risk.
These deficits occur in times of crisis when a government spends more than it receives.
This difference is called a deficit in the state budget.
The euro countries agreed that this state budget deficit should not be more than - yes:
3 percent of the gross domestic product.
This is what we call the 3 percent standard. Now how is it calculated?
The gross domestic product, or GDP, is the sum of all value a country adds.
Willy Wonka, for example, turns milk and cocoa into chocolate.
That chocolate is more valuable than milk and cocoa separately,
so by creating chocolate Willy Wonka has added value.
The added value of all companies and public authorities put together is the gross domestic product.
The government should not spend more than 3 percent on top of that amount.
So what does the 3 percent standard mean for the Netherlands?
Despite budget cuts and strict rules, we still spend more than we should.
The standard will not be met in 2013.
For 2014, the Cabinet will look for new budget cuts to balance their books.
Their necessity is not just up to us, but Brussels as well.
The Ministers of Finance and Economic Affairs of all euro countries discuss it in the ECOFIN Council.
It may be that the ECOFIN Council once again makes an exception for us,
but basically, the government should get the deficit under three percent before 2014.
If we do not achieve this, we jeopardize the stability of the euro
and the council can give us a hefty fine.