Dutch Lash Out at Negative ECB Rates as Pension Funds Suffer

(Bloomberg) -- The Dutch government has spoken out against the latest stimulus measures by the European Central Bank as lawmakers in the country worry about the fallout on their pension industry.

Finance Minister Wopke Hoekstra told reporters on Friday that the ECB’s decision to cut its deposit rate could have “huge consequences for a lot of things that we think are important in the Netherlands.”

The comments come amid broader Dutch protests against the latest round of ECB easing, with central bank President Klaas Knot calling the stimulus “disproportionate to the present economic conditions.” The Dutch were joined by the French and the Germans in their misgivings over the ECB’s latest package of support measures.

On Thursday, the president of the Dutch parliament sent a letter to the ECB, referring to a motion put forward by a lawmaker that also raised questions around the fairness of tiering. The motion, which was backed by a majority in the parliament, made the point that tiering provides relief to banks but does nothing to help Europe’s pension firms.

A “neutral monetary policy” must not make a distinction “between people who put their pension savings on a bank account and people enrolled into a pension scheme,“ Dutch lawmaker Pieter Omtzigt wrote in the letter, which was published by broadcaster NOS.

The Netherlands boasts one of the world’s best functioning pension systems, according to Melbourne Mercer. A large part of its funds are invested in low-risk sovereign bonds, whose yields have already plunged to historic lows, threatening payments available to pensioners. Meanwhile, the industry is being forced to build up bigger cash buffers in order to meet future liabilities.

President Mario Draghi told reporters on Thursday that the ECB is “very concerned” about the pension fund industry. But he also pointed to the need for governments to share some of the burden of providing stimulus: “How do we speed up these effects so that interest rates can go up again? And the answer is once again: fiscal policy. I understand that the Dutch government has a 50 billion investment program and that’s a good time to activate it.”

According to local media, the Dutch government is looking into creating a special investment fund with up to 50 billion euros ($55 billion), and will present its decision on Tuesday. The purpose of the fund will be to invest in key corners of the Dutch economy, such as infrastructure, education and innovation.

--With assistance from John Hermse.

To contact the reporter on this story: Ruben Munsterman in Amsterdam at rmunsterman1@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Tasneem Hanfi Brögger, Shelley Robinson

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