Dutch crisis deepens as opposition rejects austerity
THE HAGUE (Reuters) - The biggest Dutch opposition parties refused on Tuesday to back austerity cuts needed to meet EU budget targets after the government fell, deepening the crisis in a nation probably facing a long period of uncertainty until elections.
Prime Minister Mark Rutte, whose minority government collapsed on Monday, must now turn to a clutch of tiny parties for help if he is to have any chance of forcing his plan for 14 to 16 billion euros (11.44 to 13.08 billion pounds) in budget cuts through parliament.
With doubts growing across Europe about the price of austerity, parties to Rutte's left said trying to meet the European Union's deficit target would hurt the economy and the Dutch people.
To Rutte's right, Freedom Party leader Geert Wilders - who brought down the coalition by refusing to support the cuts - declared that the elections would be a referendum on the EU and Dutch sovereignty.
Rutte, who remains acting premier, appealed to parliament for support in striking a deal on cutting the budget deficit to the EU's target at three percent of annual economic output.
The Dutch economy, traditionally one of Europe's strongest, was not in good shape, he told lawmakers, adding that he favoured waiting until September before holding elections.
"The problems are serious, the economy is stalling, employment is under pressure and government debt is growing faster than the Netherlands can afford," he said. "Those are the facts and nobody can run away from them. I'm standing here without pretences, it is up to parliament and the voters."
Rutte's appeal drew no sympathy from the major opposition parties. "I understand that you have to bring finances in order but you cannot cut rigorously because it hurts the economy and people. Three percent is not feasible," Socialist leader Emile Roemer told parliament.
The centre-right government tendered its resignation on Monday after only 18 months in power, worrying financial markets. Rutte's two-party coalition had relied on Wilders to get legislation through parliament, even though the Freedom Party remained outside the government.
Wilders withdrew that support at the weekend after seven weeks of negotiations on the extra budget cuts, without which the deficit is forecast to overshoot the EU target next year at 4.6 percent of gross domestic product.
Rutte said he must submit his budget plan to the European Commission by April 30, meaning he has less than a week to find backers among the smaller opposition parties in parliament.
His coalition of VVD Liberals and CDA Christian Democrats has 52 seats in the 150 member parliament, so he needs to win the backing of at least 24 opposition lawmakers.
The Dutch parliament is fragmented. It has 10 parties, including the Party for the Animals, plus one independent but opposition members may be reluctant to sign up to unpopular austerity measures before the elections.
Despite the crisis, the state debt agency held a successful sale of government debt on Tuesday and bonds rallied.
Dutch debt is proportionately below the euro zone average at about 65 percent of GDP and its budget deficit is modest compared with those of many of its peers.
However, the fact that even one of the best-managed euro zone economies is struggling to meet EU targets underlines the gravity of the bloc's troubles, and investors are watching closely for any sign that the Dutch crisis is getting worse.
Rutte played down talk of elections as early as June, suggesting the nation may have to wait five months for a vote.
"There is no automatic majority to have elections before the summer. Weighing all sides I come to September 12," he said, adding that the cabinet was expected to make a decision on the election date on Friday.
The euro zone's fifth-largest economy has been a haven of stability during the regional debt crisis and its officials have criticised countries struggling to get their budgets in order, notably Greece.
Wilders said he was fed up with demands from Brussels for cuts and funding for the European Stability Mechanism (ESM), which the euro zone will use for any future bailouts.
"We don't want to cut spending by 14 billion euros and at the same time transfer billions of euros to Brussels for the horrible ESM emergency fund and the weak Greeks," Wilders said.
"Elections are likely on September 12 and these elections will become, as far as I am concerned, a big referendum about the European Union, about Brussels, about our own sovereignty and specifically conserving it."
Dutch media characterised Wilders as irresponsible with one cartoonist depicting him as a toddler in diapers playing with matches and setting the country on fire.
Rutte said the package had been pretty much stitched up by Friday night to produce a budget deficit of 2.8 percent of GDP and that would have left about a billion euros of wiggle room to address Wilders's concerns about weaker purchasing power.
However, Wilders changed his mind overnight and the deal was off by Saturday, Rutte said.
Some opposition parties argued that the Netherlands could be given more time to achieve the budget deficit goal. "The 3 percent deficit target exists," said Diederik Samson, who leads Labour, the largest opposition party. But "you don't need to comply if there are exceptional circumstances in the economy."
But Rutte said Brussels was unlikely to allow extra time to meet the goal, or show any leniency.
An opinion poll at the weekend showed that many Dutch are fed up with their politicians.
"There have to be cuts," Geert Hogema, a 66-year-old pensioner, told Reuters as he sat reading a newspaper in an Amsterdam cafe.
"But instead of taking difficult decisions, they sat there just talking for seven weeks, telling the outside world nothing, until one of them decided to leave the table. We've had four cabinets in five years and none of them have acted," he said.
The crisis has also attracted the attention of credit ratings agency Moody's which said on Monday the government crisis was a negative factor for the country's credit but maintained its Aaa rating with a stable outlook.
But it said if the country weakened its commitment to fiscal discipline, the rating could face downward pressure.
"This development is clearly credit-negative for the Dutch sovereign given that it generates both political and policy uncertainty," Moody's analysts wrote. "Having said that, the Netherlands is entering this testing period from a position of relative strength."
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