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Dutch economy shrinks sharply in third quarter

AMSTERDAM (Reuters) - The Dutch economy shrank an unexpectedly sharp 1.1 percent in the third quarter, hit by declines in every business sector, falling exports, low consumer confidence and government austerity.

It also contracted by 1.6 percent year-on-year, the statistics agency said Thursday.

The Netherlands, one of the few remaining euro zone countries with a triple-A credit rating, emerged from recession in the first quarter this year. A contraction in the fourth quarter would now push the country back in.

"All in all we are balancing at the edge of recession," Rabobank economist Ruth van de Belt said.

Economists had expected the slow down, but the drop was greater than even the most pessimistic forecast. Rabobank, for example, had forecast a quarter-on-quarter contraction of 0.7 percent while ING saw -0.5 percent

"What we see is that the only thing that has kept us in the positive, exports, has also let us down this quarter," said Marten Van Garderen, an economist at ING. "It's disappointing."

Germany and France each grew by 0.2 percent in the third quarter but the euro zone as a whole slid to recession due to contraction in other places, including the Netherlands, Austria, Italy, Spain, and Greece.

"Lower house prices reduce the savings and assets of households and their purchasing budget, resulting in lower consumer spending," Statistics Netherlands (CBS) spokesman Peter Hein van Mulligen told reporters.

Higher Dutch unemployment, which rose to a 15-year high and reached 6.8 percent in October, also was weighing on spending, economists said.

Dutch exports fell by 2.4 percent in the third quarter compared with the preceding period, consumer spending fell by 0.6 percent, and investments by companies fell by 3.7 percent, the agency said.

The central bank has forecast the economy will clock its worst seven-year performance since World War Two in the period through 2014.

Another round of austerity announced by the new government of Prime Minister Mark Rutte will take total government spending cuts to 46 billion euros by 2017.

The fresh measures will dampen chances of a quick recovery for the Dutch economy, the fifth largest in euro zone.

"The Dutch government is still going for more cuts and more austerity, so we're thinking of a real slow recovery," said economist Van Garderen.

(Reporting by Gilbert Kreijger and Thomas Escritt. Editing by Anthony Deutsch/Jeremy Gaunt.)

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