Prosperous year for the economy
Caspian Energy (CE): Mr. Kamp, what do you think about the results of the outgoing year for the economy of the Netherlands and the EU in general? Which developments, in your opinion, helped the European economy get out of the prolonged debt crisis, and which ones on the contrary fostered its development?
Henk Kamp, Minister of Economic Affairs of the Netherlands: 2016 proved to be a prosperous year for the Dutch economy. With quarterly growth of 0.7% in the first three quarters of 2016, growth in the Netherlands compared favorably to economic growth in the Euro Area as a whole, which grew by 0.5, 0.3 and 0.3% respectively. For 2016 in total, economic growth in the Netherlands is projected to be 2.1%. As a consequence, GDP per capita is now back at pre-crisis levels while unemployment has reached its lowest level in over 4 years. Looking ahead, economic growth is projected to be robust and broad based. Consumer confidence is at a 9-year high, while producer confidence remains positive despite political uncertainties. In 2017 unemployment is projected to drop further below half a million, with economic growth projected to be 2.1%.
Regarding the EU in general, the economic recovery is getting more robust. Last year, economic growth in both the EU and the Euro Area were at the highest since 2010. In addition, Eurozone unemployment in September for the first time dropped below 10%. Looking forward, economic growth is projected to continue, albeit at a somewhat lower pace. In addition, unemployment in the Euro Area and in the EU as a whole is expected to show a downward trajectory in the coming years.
Prolonged uncertainty played a key role in the duration of the financial crisis and the relatively slow recovery. During the financial crisis there was a lot of uncertainty about the banking system, public finance, and even the future of the euro. Along with several other euro member states, the Dutch government restored the confidence of financial markets by taking measures to adhere to the Stability and Growth Pact. In addition, we have taken several policy measures that played a role in the recovery of the Dutch economy. We have taken steps to reform the housing market by lowering the maximum loan-to-value ratio’s and by gradually phasing out interest rate deductibility on mortgages, while we have also made efforts to bolster the banking system. In addition, we decided to lower the tax burden on labour by 5 billion in total, supporting domestic demand and boosting economic growth by 0.2%-points and 0.3%-points in 2016 and 2017 respectively.
The production has been capped by me in order to increase the safety of the people
CE: The Netherlands has exhausted its gas resources by 80%. Moreover, the Parliament imposes artificial restrictions on production. Production in Scotland, UK, is also decreasing. How will it affect the energy security of the European Union and the Netherlands? Does this mean that the domestic gas production in the European Union is not effective currently?
Henk Kamp: The gas production from the largest Dutch gas field, the Groningen gas field, has been capped by me in order to increase the safety of the people living in the area. This has got nothing to do with the effectiveness of the domestic gas production and will only have a very limited impact on the energy security of the European Union in general and the Netherlands in particular. The remaining reserves are still of such a level that the gas production can continue for years to come, while the Dutch gas market is an extremely liquid and well-functioning market which is attractive for suppliers. This, combined with a much greater emphasis on renewable energy and energy efficiency, will ensure that the energy supply will remain at the current high level.
Gas will deliver the flexibility needed to phase in renewables in an efficient way
CE: How do you see the energy market of the European Union and the Netherlands and the role of such projects as the Southern Gas Corridor in it?
Henk Kamp: The implementation of the COP21 Paris Agreement is of the utmost importance for both the European Union and the Netherlands. The extensive Winter Package from the Commission which was published on 30 November is a clear example of this and gives further guidance.
In the Netherlands we’ve launched our Energy Agenda on the 5th of December. This agenda puts a single focus on reduction of the CO2 emissions to almost zero in 2050. Renewable energy and energy efficiency will be very important drivers in achieving this goal.
Gas can and will also play a role in this energy transition towards an (almost) CO2 neutral energy household. Gas will deliver the flexibility needed to phase in renewables like wind and solar energy in an efficient and cost-effective way. The Southern Gas Corridor will be one of the supply corridors which will make this gas available to the European Union and in particular to South-Eastern and Central Europe.
CE: What do you think about possibilities of expanding LNG supplies by means of new gas hubs in South-Eastern Europe?
Henk Kamp: For the next years a lot of LNG liquefaction facilities will come on line in the United States and elsewhere in the world. This will make additional quantities of LNG available on the world market and thereby also accessible for Europe. It is however up to the market to determine if and where this LNG, which will at least in Europe be in competition with pipeline gas, will reach the European gas markets.
The infrastructure to receive this LNG is already to a large extent available, not only in South-Eastern Europe, but also in other parts of the European Union such as the Baltic States and also the Netherlands.
CE: What impact will Brexit have on the Dutch exporters? How will this process affect the foreign trade relations of the European Union and its trade partners?
Henk Kamp: The impact on Dutch exporters could be substantial. In 2015 the export to the UK amounted to 38 billion euro of goods and 16.5 billion euro of services. It equals around 9 percent of our total exports. Our economic research institute – the CPB Netherlands Bureau of Economic Policy Analysis – estimated in July 2016 that the costs of a hard Brexit (WTO) will add up over time to 10 billion euro in 2030, or 1,2 percent of GDP. CPB estimated that the negative shock to exports could be 3.2%. The negative shock to the economy might increase to 2% GDP in the long run when dynamic effects (e.g. via innovation and competition) are taken into account. Brexit could thus potentially have a substantial negative effect on our economy. The extent to which the economy will be affected in the future depends on the outcome of the negotiations between the EU and UK.
Thank you for the interview