The Netherlands’ caretaker government reached a budget deal with three opposition parties on Thursday, mere days before an April 30 deadline when the country is expected to submit its spending plans to the European Commission for review.
Finance minister Jan Kees de Jager had shuttled between coalition and opposition parties in parliament in The Hague for two days to find a majority for a budget that will reduce the deficit to under 3 percent of gross domestic product as is required by European fiscal treaty.
The last-minute negotiations were necessary because budget talks between the ruling Christian Democrats and liberals with populist Freedom Party leader Geert Wilders collapsed over the weekend. Prime Minister Mark Rutte subsequently tendered his cabinet’s resignation.
Wilders said on Saturday that he refused to abide by a European “diktat” to implement some €14 billion worth of austerity measures which, he believes, would have disproportionately affected the elderly.
The three right-wing parties had agreed to €18 billion in reductions when they launched their coalition in 2010.
The main Labor and Socialist opposition parties also lament that low-income earners will bear the brunt of the planned spending cuts and tax increases even if there will be a one time €500 billion employers’ tax and an increase in taxes on extraordinary pay packages from 30 to 75 percent.
The left-wing two parties, which were not involved in De Jager’s talks, are also critical of the 3 percent deficit cap.
Labor leader Diederik Samsom said Thursday night that “the 3 percent is not a principal question” for his party. He insisted that high-income earners should contribute more to deficit reduction.
The Socialist Party’s Emile Roemer was also disappointed. “These aren’t the social and humane measures that, in the eyes of the SP, the Netherlands is waiting for,” he said.
The liberal Democrats, the centrist Christian Union and the Green party, economically to the left of Labor but socially liberal, did join the coalition to concoct a spending plan for 2013. These parties previously supported the Dutch military training mission in Kunduz, Afghanistan when Wilders’ Freedom Party would not.
In exchange for opposition support, the government will repeal cuts in development aid and health care and revise a home mortgage interest deduction policy that is popular on the right. Liberal Prime Minister Rutte had campaigned on a promise to keep the policy in place. Many other political parties as well as independent observers say that it effectively subsidizes borrowing.
In 2010, Dutch household debt was more than 240 percent of GDP, among the largest private debt burdens in the developed world.
The pension age will be raised faster under parliament’s plan to reach 67 years of age in 2024 while unemployment insurance is partly privatized. Employers will have to finance jobless benefits for six months after a dismissal.
In a clear concession to the Green party, there will be new taxes on coal and natural gas although it isn’t yet clear whether they will be levied on consumption or production.
The public-sector pay freeze that the coalition had proposed will be enacted. So will a 2 percentage points raise in the value-added tax rate and increases in alcohol and tobacco excises.
This article was updated as the Dutch parliament debated the budget deal on Thursday evening.