Only a few years ago, the strong performance of the Dutch economy that had started in the mid-1990s was still referred to as the Dutch ‘miracle’. However, retrospectively, the prolonged economic boom appears to have been mainly the result of an overheating economy, fuelling the build-up of economic imbalances. The subsequent economic slowdown accompanying the unwinding of the imbalances – an adjustment process which in a monetary union typically is deeper and more prolonged than an ordinary business cycle – seems to have been both initiated and exacerbated by the combined impact of the global economic downturn and the turmoil on financial markets. The reversal of economic fortune was characterised by fading balance sheet effects on consumption and investment, losses in confidence among consumers and producers, losses in competitiveness requiring growth-costly downward price and wage adjustment, and worsening government accounts. As estimates of potential growth have been gradually revised downward, economic policies have to focus on facilitating the adjustment of the economy to overcome protracted weakness in the current spell of ‘overcooling’.