Dutch Labor Party Resurges, Socialists Founder

The Netherlands’ two left-wing parties unexpectedly find themselves in competition.

Two weeks before parliamentary elections are due to take place in the Netherlands, the opposition Labor and Socialists Parties find themselves embroiled in an unexpected contest for left-wing voters while the country’s liberal prime minister Mark Rutte is far ahead in the polls.

Until this week, the far-left Socialists were neck in neck with Rutte’s liberals who have governed the Northwestern European country in coalition with the Christian Democrats for the last two years. Two disappointing debate performances by Socialist party leader Emile Roemer have apparently revives Labor’s chances.

Labor, which holds thirty seats in the lower chamber of parliament compared to 31 for the liberals, was engaged with Rutte’s party for a plurality of the votes in the 2010 election but appeared set to lose up to a third of its seats until recently. This week, it gained four seats in opinion polls while the Socialists lost three.

Party leader Diederik Samsom, a former Greenpeace activist who was seen as a bit of a hothead, not only managed to keep his composure in the debates; he conveyed the impression of being more familiar with policy than Roemer, the latter’s weakness. Several times, he bemoaned his Socialist counterpart’s plans as sympathetic but unrealistic. “We have to raise income before it can be redistributed.”

Liberal leader Mark Rutte, for his part, insists that there’s no discernible difference between what he describes as the two “socialist” parties. When it comes to employment and health-care policy, the two would indeed pursue similar policies, according to the country’s Bureau for Economic Policy Analysis, a government think tank that studied the effects of the platforms of the main political parties.

Although unemployment is expected to rise in the short term under the liberals’ spending plan, their proposed regulatory and tax reforms should enable up to 250,000 jobs to be created between now and 2040. Under the Socialists’ proposals, an equivalent number of Dutchmen would lose their jobs in the same period. Under Labor, 76,000 more people would find themselves out of work.

All the same, Samsom chides the premier because unemployment rose by 1 percentage point during his term.

Analysts expect the economy to contract another 1.8 percent over the next five years if the Socialists were to set policy. Under Labor’s plans, gross domestic product would shrink 2.3 percent, “the worst score of all political parties,” according to the Bureau for Economic Policy Analysis which released its finding on Monday.

The Dutch economy contracted 3.7 percent in 2009 and has seen sluggish recovery since, burdened by a high level of household debt and dependence on exports to other European countries that have more directly been impacted by the continent’s spiraling debt crisis. This year, the economy could shrink further but modest growth is expected in 2013.

The two left-wing parties both want to raise taxes on incomes over €150,000 to either 60 or 65 percent which would give the Netherlands the highest top income tax rate in Europe. They also call for tax increases on wealth but want to do away with a popular home mortgage interest deduction which the liberals have vowed to defend.

Rutte and Somsom fiercely debated Labor’s planned tax increases for business during a televised debate on Thursday. The prime minister warned that the party was taking a “huge risk” by letting taxes go up but Samsom insisted that he would lower taxes — even as he introduces a new tax on energy consumption.

According to independent figures, the claim is false. The tax burden on businesses would rise 2 percent under Labor’s plans which is part of the reason why the Bureau for Economic Policy Analysis expects unemployment to grow further it if comes to power. The liberals would have businesses pay an average 1 percent more in taxes.

Even if Samsom emerges as Rutte’s main challenger, there is a good chance that their parties will end up in coalition after the September 12 election.

If Rutte wins reelection, he is unlikely to form a government with either the Socialists or Geert Wilders’ nationalist Freedom Party which gave his previous government a majority. In April, Wilders walked out on budget negotiations with the two ruling parties which prompted Rutte to tender his resignation and call new elections. However, the Socialist and Freedom Parties could take up a third of the seats in the new parliament, forcing the remaining centrist parties into a coalition.