Dutch Prime Minister Mark Rutte
Michele Tantussi/Bloomberg
Mark Rutte, Dutch prime minister. Rutte, who ran out of room for maneuver after budget talks with Geert Wilders's Freedom Party collapsed, is battling for domestic support to dispel investor concerns the Netherlands can regain control of its finances.
Mark Rutte, Dutch prime minister. Rutte, who ran out of room for maneuver after budget talks with Geert Wilders's Freedom Party collapsed, is battling for domestic support to dispel investor concerns the Netherlands can regain control of its finances. Photographer: Michele Tantussi/Bloomberg
Dutch Prime Minister Mark Rutte is set to test opposition backing for fresh austerity measures aimed at shielding the Netherlands from the debt crisis after he pulled the plug on his government and offered early elections.
Rutte will speak during a debate in parliament in the Hague at 2 p.m. tomorrow, less than 24 hours after he tendered his Cabinet's resignation to Queen Beatrix in a bid to break a budget deadlock over additional cuts of at least 9.5 billion euros ($12.5 billion) needed to satisfy European deficit limits.
Rutte, who ran out of room for maneuver after budget talks with Geert Wilders's Freedom Party collapsed, is battling for domestic support to dispel investor concerns the Netherlands can regain control of its finances. With the two-year crisis again rippling across Europe, equities slumped today as Rutte offered to quit, triggering election uncertainty and fresh doubts about his country's ability to retain its AAA credit rating.
"Most important is to show financial markets you're good for the money," with efforts to strengthen the economy, raise growth and increase tax revenue more important than cutting the deficit, Charles Kalshoven, an economist at ING Groep NV in Amsterdam, said in an interview. "Now it looks like neither is going to happen as there doesn't seem to be a parliamentary majority willing to cut the deficit below 3 percent."
Caretaker Cabinet
The Dutch government said that the Queen will consider Rutte's offer and requested that the Cabinet handle current affairs in the meantime. Rutte may propose to parliament that the government carry on in a caretaker capacity until elections are held, while being charged with presenting a budget for 2013, Wim Voermans, a professor of constitutional and administrative Law, said in a televised interview.
The parliamentary debate will focus on what happened during the failed budget negotiations that began March 5 as well as a possible date for the elections and a budget for 2013, said opposition Labor Party leader Diederik Samsom.
Samsom denied reports that there's a majority in parliament to hold elections on June 27. The Dutch electoral council has said that Sept. 5 would be the earliest possible date for new elections.
"I'm sure that behind closed doors work is being done to prevent the Netherlands from losing its credit rating, because that would only aggravate problems for the next government," Andre Krouwel, an associate professor of political science at VU University in Amsterdam, said by phone. Even so, there's "no way" an accord can be reached before the election, he said.
Dutch Predicament
The Dutch government's predicament complicates policy making in the 17-member euro region at a time when Spain's borrowing costs and the French election are causing renewed concerns about Europe's crisis-fighting stance. The Dutch economy entered its second recession in three years during the second half of 2011 and unemployment increased from 5 percent to almost 6 percent in 12 months.
The premium that investors demand to hold Dutch bonds over bunds rose to the highest since 2009 today, while the yield on Germany's five-year bond fell to a euro-era low of 0.62 percent. The cost of credit-default swaps on Dutch government debt climbed 11.5 basis points to 130, the highest in five months.
The euro fell 0.7 percent versus the dollar and the Stoxx Europe 600 Index sank 2.4 percent to a three-month low as indexes for nine nations, including Germany, France and the Netherlands lost at least 2.5 percent.
'Disciplined' Policy
"We'll have to find majorities to prepare the 2013 budget but also in the short term, to submit a stability program to Brussels," Finance Minister Jan Kees de Jager told reporters in The Hague today. "The Netherlands, in every circumstance, will maintain disciplined budgetary policy."
Uncertainty in the Netherlands, a traditional crisis ally of Germany, adds to the turmoil springing from the debt crisis as it reverberates throughout Europe. In France, presidential election candidates are pushing the European Central Bank to be more pro-growth, a stance at odds with Chancellor Angela Merkel, while in the Czech Republic Prime Minister Petr Necas is seeking to avoid snap elections and push through deficit cuts after the breakup of his coalition.
In the Netherlands, the euro-area's fifth biggest economy, the 2013 budget shortfall is currently forecast at 4.6 percent of gross domestic product. To pare it to 3 percent as specified by the European Commission, Rutte needs to find at least 9.5 billion euros of extra cuts to submit to Brussels by April 30.
'Bad' Package
"The package is way too rigorous and it's bad for the economy," Emile Roemer, head of the Socialist Party, which would double its seats to 30 according to latest polls, said in broadcast remarks. "We need to have elections and clarity as soon as possible."
With budget deliberations dragging on for seven weeks, the fate of Rutte's minority government was thrown into doubt on April 21 when Wilders and his Freedom Party unexpectedly withdrew its support over efforts to narrow the shortfall. That prompted Rutte to cite new elections as "an obvious scenario" to try to resolve the deadlock.
The Liberal Party, led by Rutte, would win 33 of the 150 parliamentary seats if general elections were held now, up from the 31 seats it currently holds, according to a poll of about 4,500 people by researcher Maurice de Hond and No Ties BV published yesterday.
The Freedom Party's seats would drop to 19 from 24, while the second governing party, the Christian Democrats, would fall to 11 from 21. The Socialist Party would double its seats to 30 while the Labor Party would drop to 24 from 30, according to the poll, which was conducted late April 21 and yesterday. No margin of error was published.
Opposition leaders like Labor's Samsom and Alexander Pechtold, the head of the D66 Democrats, both called for an early ballot. The nation last held a general election in June 2010 and the next wasn't due to be held until 2015.
"I think it can be done before the summer so we can make a new start for the Netherlands," Samsom told NOS television.
To contact the reporters on this story: Fred Pals in Amsterdam at fpals@bloomberg.net; Jurjen van de Pol in Amsterdam at jvandepol@bloomberg.net
To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net
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