Dutch central bank says deficit set to worsen

AMSTERDAM (AP) -- The Netherlands' central bank is warning that unless the Dutch government cuts spending, the country's budget deficit will widen from 3.5 percent of its economy in 2013 to 3.9 percent in 2014.

The country was recently granted a one-year reprieve from meeting Europe's 3 percent deficit limit. Dutch Prime Minister Mark Rutte has been one of Europe's strongest backers of austerity policies, following the line set by German Chancellor Angela Merkel.

The trade-focused Dutch economy is expected to shrink by 0.8 percent this year, and unemployment is surging.

The central bank said in a statement Monday the Cabinet must cut spending to meet the target. Many economists, including some at the country's independent economic planning office, argue that further cuts will do more harm than good.