Stress model shows weaknesses of Dutch cities

Amsterdam is highly vulnerable to a real estate crisis, which would cost the city about 400 million euros in the following years. Rotterdam on the other hand is sensitive to a financial crisis.

These are the results of a stress model which was applied to four cities: Amsterdam, Rotterdam, The Hague and Eindhoven.

The possible effects of five different scenarios were investigated: government budget cuts, a real estate crisis, a financial disaster (such as the collapse of the Icesave bank, where many Dutch towns had large amounts of money invested) social-economic mishap and a humanitarian disaster such as the Enschede fireworks disaster.

The test showed that a real estate crisis would have the most impact in cities where a lot of construction work is going on. The model also shows what measures should be taken. In the case of Amsterdam this would be a real estate tax hike.

Rotterdam’s susceptibility to the effects of an economic crisis is the result of the city relying on long-term loans for much of its financing. A rise in interest rates would lead to higher costs totalling about 150 euros a year per person over a five-year period.

(gsh/imm)