Fitch doubts Dutch AAA as property slump reaches `coma`
Baku, April 20 (AZERTAC). Fitch Ratings has issued the clearest warning to date that Holland faces losing its AAA rating if it fails to deliver austerity cuts or lets political conflict intrude on economic management. The warning comes as Dutch property tips into deeper slump, with the inventory of unsold homes nearing South European levels. Household debt is the eurozone`s highest at 249pc of income, compared with 202pc in Ireland, 149pc in the UK, 124pc in Spain, 90pc in Germany, 78pc in France and 66pc in Italy - according to Eurostat data from 2010. The Netherlands is caught in a "negative feedback-loop" as recession and house price falls feed on each other. Building permits have dropped 9pc from a year ago, the lowest since 1953. The stock of unsold properties has doubled to 221,000 since 2008 as "Te Koop" signs proliferate on Dutch streets, almost double the declared level in the US on a per capita basis. Low unemployment (4.9pc) has kept arrears below Irish, UK or US rates, but job loses are creeping up. The economic woes are infecting state debt dynamics. Public debt will climb to 76pc of GDP by 2015, according to the official Bureau for Economic Policy Analysis (CPB).
The Netherlands has been a vocal critic of fiscal excess in Greece but is now in breach of EU rules itself, an unexpected casualty of the eurozone`s contractionary policy mix. Critics cite the troubles in Holland - and Belgium - as evidence that the European Central Bank has been too tight, asphyxiating credit for the whole bloc. The M3 money supply contracted over the winter on a month-to-month basis.
The report said credit outgrew the deposit base of lenders during the property bubble, leaving banks dependent on fickle capital markets. "Short-term funding may dry up overnight, as in 2008 when the interbank market stalled and again in the summer of 2011. A drop in house prices will compromise the issue of mortgage-covered bonds, while significant loan losses may lead to margin calls by the owners of such bonds," it said. Fitch Ratings said the Netherlands has the cushion of a current account surplus above 7pc of GDP and a history of credible governments. "The country has been run for a long time by sensible parties and this allows us to be a bit more generous."
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