Dutch Liberal, Christian Parties Start Talks to Form Government

The hope is that the four parties can take office before the next fiscal year starts in September.

Former Dutch finance minister Gerrit Zalm speaks at an event in Rotterdam, March 10, 2016
Former Dutch finance minister Gerrit Zalm speaks at an event in Rotterdam, March 10, 2016 (Rotterdams Philharmonisch Orkest)

Parties in the Netherlands have asked former finance minister Gerrit Zalm to lead negotiations for forming a government, signaling their seriousness to do a deal before the start of the fiscal year in September.

Zalm succeeds Herman Tjeenk Willink, a retired Labor Party politician and seasoned negotiator who was appointed last month to break the gridlock that followed the election in March.

Prime Minister Mark Rutte’s center-right liberal party placed first in the election but won only 33 out of 150 seats. No other party won more than twenty seats, as a result of which at least four parties are needed for a majority.

Tjeenk Willink could not persuade any parties from the left to join a government led by the right, forcing the liberals, liberal Democrats and Christian Democrats into a pact with the socially conservative Christian Union.

This is far from the liberal Democrats’ first choice. They campaigned on expanding euthanasia rights and legalizing soft drugs. The Christian Union could block both.

But on economic and fiscal policy, the four parties do see eye to eye.

Tax reform

Tax reform should be their priority. The Dutch revenue service has warned that the system is now so complex it makes efficient tax collection impossible.

Zalm, who served under both left- and right-wing prime ministers, could help the parties bridge their differences.

The liberals, liberal Democrats and Christian Democrats agree on the outlines of tax reform: harmonizing rules for full-time employees and the self-employed, easing the burden on (small) businesses and possibly converting health and rental subsidies into tax credits.

The Christian Union can probably live with these proposals so long they add up to a tax cut for families.

Labor reform

Labor reform is another area where the center-right parties are better paired with the Christian Union than the left. Both the Greens and Labor Party oppose making it easier to fire workers.

The liberals and Christian Democrats argue the law is now too hard on employers. Layoffs can take months and arbitrators often decide in favor of workers when they challenge their dismissal. If an employee falls ill, their employer must continue paying 70 percent of their salary for up to two years. This is why many small companies think twice about expanding.

Reforms that were meant to discourage abuses of zero-hours contracts have also made life more difficult for the self-employed. They can only work under a government-approved type of contract anymore, which doesn’t give freelancers the flexibility they say they need.

The trouble is voters don’t agree. Polls show that the vast majority feel the labor market is already too flexible. The liberal Democrats and Christian Union are ambivalent about what to do.

No room for error

Whatever they decide, the parties better be sure of their plans, because they have no room for error. The Christian Union is a small party and only gives the coalition a majority of one.

The hope is that four will do a deal over the summer, which would give them enough time to work with the outgoing government on adjusting its 2018 spending plan. That is due to be unveiled on September 19, when the king opens parliament.