Prinsjesdag, the third Tuesday of September, is nearly upon us and the Dutch government is set to present next year's budget. This will be the first annual budget since the onset of the global recession and many, including its own advisory board, are questioning the government's strategy.

During the 1970s and 80s, the Dutch economy went into a serious slide. This was due to a combination of factors that came to be known as 'Dutch Disease'. Despite an increase in revenues from natural resources, both the country’s industrial output and its competitiveness went down after the government raised the exchange rate of its currency, the guilder.

Of course, now we have the euro and lots of other things have changed too. But that doesn't mean the Dutch Disease is gone for good. In that sense, we can draw a parallel with the current flu pandemic: while the symptoms are similar to previous flu strains, the latest one is entirely new, meaning no one knows how quickly it might spread.

By the same token, no one knows how quickly the problems facing the governments running huge deficits will spread. Dutch Finance Minister Wouter Bos is dotting the last i's and crossing the last t's in next year's budget.

New strains?
Meanwhile, the fate of his previous budget plans looms large. The ink was barely dry on the 2009 proposals when they were made obsolete by the global recession. How carefully is Minister Bos protecting this country from a new sort of Dutch disease?

For one thing he's playing fast and loose with loan guarantees to banks. He wants to raise the ceiling for those guarantees to 300 billion euros. That's a lot of debt to come onto the books if things go wrong. And deficit spending is an important contributor to what might become a new Dutch disease.

In different parts of the world, there’s some optimism about a delicate recovery of the global economy. Likewise, the Mexican flu is said not to be so dangerous as it was expected to be. But many have been warning that the danger from the H1N1 virus is not over. It could come back this fall with a vengeance.

The same can be said for those who are complacent about the Dutch economy. Over the years, the Dutch government has taken a number of precautions to protect this country from the woes of the 1970s and 80s: strict budgetary rules, some of them imposed when the euro was adopted.

Debt ratio
But the main restraint on deficit spending, the European Union's stability and growth pact limiting countries to overspend their budgets by no more than three percent, is now out the window. In addition, another important indicator, the debt ratio, is climbing fast.

The H1N1 virus provides health care workers around the world with a challenge in the coming months. The budgetary dangers lurking on the horizon provide financial experts a challenge for years to come.

Next year's budget will have cuts across the board. But no major changes - the government is facing stiff resistance just trying to implement raising the age of retirement from 65 to 67. But an optimistic outlook for recovery may leave the Netherlands vulnerable.

This recession may not be just a dip; the economy may have shrunk permanently. In which case, the few budget-cutting measures currently on the table will not prove to be an effective Tamiflu against a new kind of Dutch Disease.