Dutch Budget Talks Fail, Elections Likely

Nationalists pull out of budget talks with the ruling parties in the Netherlands.

Negotiations between the Netherlands’ three ruling parties about future budget cuts collapsed on Saturday. Elections are expected to be scheduled for September at a time when the country is under pressure from its European peers to deliver a credible austerity package.

Geert Wilders, whose Freedom Party supports a minority administration of Christian Democrat and liberal parties but did not provide cabinet members, walked out on the budget talks, citing his unwillingness to abide by a European “diktat” to bring the government’s deficit under 3 percent of gross domestic product next year.

“We don’t want to obey Brussels,” said Wilders. The €14 billion in cuts which were necessary to reduce the shortfall to under 3 percent in 2013 would have followed €18 billion in savings that were achieved in this year’s budget.

Wilders said he believed such reductions would have curbed economic expansion and employment. He also complained that the elderly, a key constituency for his party, would have been hit especially hard if the pension age had been raised to 66 years of age in 2015.

The Netherlands was perhaps staunchest among European core nations in pushing for stricter budget discipline in the wake of the continent’s spiraling debt crisis. If it fails to meet the 3 percent deficit target in 2013, there is a fear that the more heavily indebted countries in the eurozone’s periphery, including Spain, could feel free to break the rules as well, even if the European Commission was empowered by last year’s treaty revision to fine profligate member states.

If there are no further cuts, the Netherlands’ deficit will likely reach 4.6 percent of GDP next year, or €28 billion.

Credit rating agencies have warned that they may have to adjust the Dutch’s creditworthiness if they fail to rein in spending. Currently, they can afford to borrow cheaply because the Netherlands is considered one of the few safe havens for bond investments in Europe.

Prime Minister Mark Rutte lamented the lack of “political will” on Wilders’ part during a press conference in The Hague on Saturday afternoon. He said that an accord had nearly been reached, one that was composed of austerity measures and labor market and pension reforms, but that Wilders walked out at the last minute.

Christian Democrat leader and economy minister Maxime Verhagen, whose party was decimated in 2010’s parliamentary election, was all the more forceful in his criticism of Wilders. “He’s abdicating his responsibility,” he said.

The conservative party is the junior partner in Rutte’s coalition and hasn’t done well in government. According to recent opinion polls, it would lose more votes to both the liberals and Wilders’ nationalist Freedom Party if there were elections soon.

The three right-wing parties command a one-seat majority in parliament today. In the surveys, they lose that majority, although Rutte’s liberal party grows.

Newly-elected Labor Party and opposition leader Diederik Samsom said there could be elections as early as September.

The caretaker minority government would have to present its budget that same month. It is unclear whether it could secure a parliamentary majority for its spending plans however. With Wilders’ defection, most political parties are now opposed to the 3 percent deficit rule and unwilling to balance the budget as fast as the government had planned.