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All non-essential shops and services, including restaurants, hairdressers, museums and gyms will be closed from Sunday until January 14. All schools will be shut until at least January 9.
Prime Minister Mark Rutte announced on Saturday evening: “The Netherlands is again shutting down.
“That is unavoidable because of the fifth wave that is coming at us with the Omicron variant.”
Other measures include the recommendation that households have no more than two visitors. Outdoor gatherings are also limited to a maximum of two people.
A failure to act now would lead to "an unmanageable situation in hospitals", which have already scaled back regular care to make space for Covid-19 patients, Rutte said.
The average number of new infections reported each day in the Netherlands has fallen by more than 7,500 in the last three weeks.
Currently, 14,700 new infections are reported each day.
There have been 2,966,744 infections and 20,420 coronavirus-related deaths in the country since the pandemic began.
More than 85% of the Dutch adult population is vaccinated but fewer than 9% of adults have had a booster shot, one of the lowest rates in Europe.
The government said on Saturday said it would accelerate the administration of booster vaccine shots after a slow start of the campaign, and now aims to deliver extra shots to everyone over the age of 60 before the end of the month.
Omicron cases have increased rapidly since the beginning of December and the strain is expected to become dominant before the end of the year.
Hospitality workers demanded compensation for lost income in the holiday season, while gym owners stressed the importance of exercise during a health crisis.
"Closing all bars and restaurants in such an important month is incredibly painful and dramatic. We need compensation and an exit strategy", the Dutch association for hospitality services said.