Netherlands

Robust GDP growth thanks to higher consumer spending and private investment

After experiencing a sharp slowdown between Q3 2022 and Q1 2024 that was chiefly caused by the weakness in global trade, lower private investment and reduced household consumption, the Dutch economy recovered in 2024 and is set to be more robust in 2025. Several factors should contribute to the uptrend. Private consumption (43% of GDP) is expected to be one of the main drivers. Contractual wages are set to increase by 6.4% in 2024, and current negotiations suggest slightly slower growth estimated at 4.2% year-over-year in 2025. Together with an increase in welfare benefits, real purchasing power is expected to increase by 2.5% in 2024 and by 0.7% in 2025, according to estimates by the Netherlands Bureau for Economic Policy Analysis. A tax cut for very low-income households has been included in the estimate. The loss of purchasing power caused by the inflation shock of 2022-2023 should therefore be reversed in 2025. Additional support for private households is also coming from the real estate sector. Real estate prices recovered in the first half of 2024 and are above their previous peak of Q3 2022, registering the strongest quarterly growth rates of the past decade. This is supporting the wealth effects of private households.

In addition to prices, construction activity recovered in 2024 and should rebound further in 2025. The number of building permits rose noticeably in the first half of 2024 to a mere 7% short of the peak of H1 2021. Construction activity is following suit but with a certain time lag, suggesting stronger activity in the following quarters. One reason for the recovery is probably also the fall in interest rates during the past months. According to De Nederlandsche Bank, the borrowing capacity of first-time buyers already improved in 2024. By end-October of 2024, the ECB had reduced its key interest rate (i.e., the deposit rate) by 25 basis points on three occasions. Another similar interest rate cut is expected in December, ahead of further cuts in 2025 to a “neutral” level of 2-2.5%. This interest-rate level should neither slow down nor act as a boost to the European economy. At the same time, however, the ECB is also set to continue trimming back its balance sheet from 2025; the maturing assets of all QE programmes will no longer be reinvested.

Overall, the interest rate environment should support private investment. While public investment growth should remain subdued and be mainly devoted to infrastructure and defence projects, the development of external trade in 2025 is not so clear, with the possibility of US blanket tariffs of 10% to 20% looming on all imports. Only 5% of all Dutch exports are destined for the US (the country’s No. 5 export destination), but as the Netherlands operates as a main trade hub for all of Europe, the effects on the Dutch economy could be noticeably negative. This would also depend on the price elasticity of demand in the US and on the capacity of the US economy to produce substitutes. Moreover, given the recovery of private consumption and investments in the Netherlands, Dutch imports should improve in 2025.

Public deficit will widen again, but respect the Maastricht targets

The public deficit is expected to have increased in 2024 and should reach its highest level in 12 years in 2025 (barring 2020 when the deficit was 3.6% of nominal GDP). While the Netherlands continues to be seen as frugal, with the deficit and debt remaining within Maastricht criteria targets, it appears that the government is becoming comfortable with higher levels of net new borrowing due to lower tax revenues on back of tax cuts for the lowest income group, while expenditures for the war in Ukraine and for defence continue, and social security and health care spending costs are rising.

The Dutch current account should register another strong result for 2024 thanks to the improvement in the trade in goods surplus that benefited from favourable terms of trade. The trade in services surplus also improved. However, amid the high interest rate environment, the primary income deficit (the balance of in and outgoing labour and capital income) widened further. No significant changes are expected for 2025. While it is unclear if and by how much the trade in goods surplus is going to be negatively impacted by policy of the new Trump administration, an improved primary income deficit could level this effect out thanks to lower interest rates.

First far-right conservative government coalition in the Netherlands

The November 2023 general election turned the Dutch parliamentary system upside down after the landslide victory of the far-right "Party for Freedom" (PVV). The party led by Geert Wilders doubled its seats in the lower house of Parliament and is the largest parliamentary group after winning 37 out of 150 seats. The runner-up in the election was the social-democratic-green electoral alliance (GL/PvdA, 25), followed by the newly-founded centrist New Social Contract (NSC, 20 seats). The losers were the former government parties with the conservative-liberal VVD (down by 10 to 24 seats), the social-liberal D66 (down by 15 to 9 seats) and the Christian-democratic CDA (down by 10 to 5 seats), as well as the Socialist 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 seats in total but fell short of expectations. Besides these, seven other parties are represented by up to three members each in Parliament 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 due to his extreme anti-Islamic stance that deterred potential coalition partners. In the end, Wilders admitted defeat and a coalition out of the PVV, VVD, NSC and BBB was formed in July 2024 under the leadership of Prime Minister Dick Schoof, an independent technocratic politician.

However, the coalition seems to be shaky. As one of its first decisions, the government wanted to declare a migration crisis which would have prompted the passing of drastic measures without parliamentary consent. The government also asked the EU Commission for an opt-out on EU asylum and migration policies, which was denied. The PVV wanted to go ahead with the migration crisis against the will of its coalition partners. In the end, the NSC convinced Geert Wilders to scrap the plan and instead propose a draconian refugee policy that was endorsed by the Cabinet and will be passed by the lower house. This includes reducing residency rights for asylum seekers from five to three years, authorizing the return of people to parts of Syria, scrapping housing quotas for refugees and reintroducing border controls.

Other PVV ministers have also attracted negative attention through solo political efforts that were not approved by the Prime Minister or the Cabinet. Furthermore, given that the BBB party is now a member of the government, no progress is expected in terms of reducing nitrogen in the Dutch agriculture sector (the level is far higher than EU regulations allow). It is uncertain whether the coalition will manage to stay in power until the general election scheduled for November 2027.

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: November 2024