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Despite relatively low levels of national debt, the Dutch economy is in a mild recession and the government deficit is forecast to run at 4.6 percent in 2012. Knot said that if the Netherlands lost its triple A credit rating, it would likely see interest rates on its own bonds rise by around 1 percent. Many economists -- including the head of the Dutch government's own economic think-tank
-- have said further spending cuts would be a mistake and the Netherlands will cause structural damage to its own economy by severely curtailing spending during a recession. Knot conceded the downturn is likely to be worse than otherwise due to the cuts, but said the potential fallout if the Netherlands loses the confidence of financial markets poses the greater risk.
[Associated
Press;
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