Dutch shun closer Europe as election looms

AMSTERDAM Tue Jun 26, 2012 6:58am BST

AMSTERDAM (Reuters) - In the Netherlands, two people matter when it comes to the euro zone crisis: Henk and Ingrid. And they're not happy.

The mythical Mr and Mrs Average, conjured up by populist politician Geert Wilders, have taken on a life of their own. Married with two children, they live in a typical suburban house, and take one or two holidays a year.

According to Wilders, they resent seeing their taxes squandered on foreigners - whether as welfare handouts to immigrants, overseas development aid, or bailout funds to profligate Greeks and debt-ridden Spanish banks.

So when the Dutch vote in a general election on September 12, Henk and Ingrid will be not just choosing a new government but also making a statement about Dutch membership of the euro and the European Union.

The election is shaping up as close contest between centrist pro-European parties and strident populists such as Wilders, who heads the anti-Islam, anti-euro Freedom Party, and the far-left Socialist Party.

What happens between now and then - a fight with Greece over more aid and less austerity, a crisis in Spain or Italy or both, or a return to some semblance of normality - could determine the outcome in one of the euro zone's few remaining triple-A states.

The frugal Dutch have long been considered fiscally responsible, and closely aligned to Germany on most euro zone matters. But they are facing a recession, hurting from austerity measures to meet tough fiscal targets, and feeling grumpy.

"It's a debate between emotion and rational thinking," Bernard Wientjes, who heads the largest employers' organisation in the Netherlands, told Reuters in an interview.

"Mr Wilders will do everything to make Europe an important issue in the elections. And then it depends what happens in Europe...if there is a catastrophe in Spain or Italy, if there is a disaster, you never know what will happen. But it will be extremely difficult to form a working coalition."

Latest opinion polls show no single party in the fragmented political landscape may win more than about a fifth of the 150 seats in parliament, meaning it could take months to form an ungainly coalition from a handful of parties.

Some surveys put the far-left Socialists, who reject austerity and euro zone bailouts, in the lead. Headed by former school teacher Emile Roemer, they draw strong support from lower-income groups who fear cuts in social benefits.

The two populist parties - the Socialists and Wilders' anti-immigration Freedom Party - have steadily climbed at the expense of the mainstream Christian Democrats, Liberals and Labour, and together could win more than a third of the seats in parliament.

That foreshadows months of political uncertainty or weak government, which may make it extremely difficult for a core euro zone member to push through more austerity measures or to approve crucial euro zone policies.

Although the Netherlands was one of the six founder members of the European Economic Community in 1957, the Dutch have soured towards EU integration over the last decade and voted down a European Union constitution in a 2005 referendum.

Taxpayers who pride themselves on frugality and clean government have been outraged by having to pay for fellow euro zone countries' perceived overspending and sleaze.

They are particularly allergic to the idea, driven by Germany and France, that the best and possibly the only way to save the euro is through much closer fiscal and political union.

FRUSTRATION

The last government, under Prime Minister Mark Rutte and his tough-talking Finance Minister Jan Kees de Jager, was committed to keeping Greece and other peripheral members in the euro, while demanding measures to placate angry voters such as the involvement of the IMF and tougher oversight.

Rutte's caretaker centre-right administration won parliamentary support for the European Stability Mechanism (ESM), the euro zone's permanent bailout fund, and for a 100 billion euro aid package for Spain's crippled banks.

But public support for such deals is waning and there is a deep distrust, mainly directed at Greece due to corruption, misreporting of economic data, and the duration of the crisis.

"There is of course some frustration about the time it takes to fix all the shortcomings of the euro zone and there's also a general conviction that there is no alternative to fixing this," Ben Knapen, state secretary for foreign affairs whose portfolio includes EU matters, told Reuters in an interview.

"As for Greece, the crisis has been on the table for two years now and it has shown that everything from governance to the economy has failed and this creates a sense of frustration."

Wim Kok, prime minister of the Netherlands when the euro was launched in 1999 and when Greece joined in 2002, now says Athens should never have been admitted to the single currency.

"The major mistake we made is that too many member states failed to adjust their economies to the new economic and social realities in Europe and the world," he told Reuters.

While it's hard enough for Rutte and his government to defend the costly bailout for Greece to Dutch voters, it would be almost impossible to sell them German Chancellor Angela Merkel's proposal for political union.

Rutte has rejected that notion outright, a rare instance of the Netherlands being at odds with Germany. But he risks appearing two-faced as he calls for a solution to the euro zone crisis when on the European stage but rules out a closer political union when talking to his domestic audience.

Former Prime Minister Kok said he agrees with Merkel's call for "more Europe". But polls show a majority of Dutch do not want to give up more sovereignty to Brussels.

A Maurice de Hond poll published on June 10 found that 64 percent were against Merkel's proposal to gradually move towards political union, and just 20 percent felt the only way to overcome the crisis was to transfer more power to Brussels.

About four-fifths, or 82 percent, said the issue of Europe would play a major role in the coming election, while 70 percent wanted to see less saving and more economic stimulus next year.

RETURN TO THE GUILDER?

Previous polls have found that a substantial minority hanker for a return to the guilder. That has fuelled the populists.

The Netherlands is going through its own economic crisis, and has been in recession since the middle of last year.

The Dutch are nowhere near as badly off as the Greeks or Spanish, but many are feeling the pinch and this is hurting consumer confidence and spending.

Accustomed to a high standard of living and generous state benefits, they feel their familiar way of life is under threat. Pensions have been cut already and are due for further reform, unemployment has topped 6 percent and is still rising, house prices have fallen and are have further to go.

Organisations ranging from the Central Planning Bureau, which advises the government, to the OECD have highlighted the need for reform of the pension system, housing subsidies, healthcare costs and labour market rigidities.

"People feel material uncertainty," Kok said. "But the whole debate on the euro zone should not be mixed up with these. The euro zone debt crisis is not the only explanation for the fact that standards of living and employment levels are affected."

The euro zone debate highlights a deep divide in Dutch society - with the political and business elite arguing for more Europe, while populists clamour for a withdrawal from the European experiment.

As head of the Confederation of Dutch Industry and Employers, Wientjes represents businesses at home and abroad. His organisation normally steers clear of politics, focusing instead on economic and social policies, but he was eventually moved to speak out publicly about Wilders.

"Wilders' party has influence. We said this party is extremely dangerous for the country because of our international position," Wientjes told Reuters.

"Ten years ago no one had any doubts about the future of the Netherlands inside Europe. But now they do."

(Reporting by Sara Webb; editing by Paul Taylor and Philippa Fletcher)