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Dutch windmills grind slowly but still they do
by Newropeans-Magazine
2012-04-30 07:35:21
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On April 21, leaders of the Dutch minority government announced that talks to strike a deal with the eurosceptic PVV (party providing parliamentary majority to the government) had reached a dead end. The talks were necessary to agree a new round of austerity measures and lasted already for seven weeks. 

New elections are thus needed. It is said these will be held soon after parliament’s summer break. 

In European perspective the event is remarkable. The eurozone crisis has until now torpedoed five  governments, most of them ‘garlic countries’, as Dutch populists like to call the more profligate Mediterranean member states. This criticism now flies right back into the face of Dutch criticasters.  The European Commission had initially put a deadline for several member states to submit draft reform plans by the end of this month. This recently granted power to the Commission was always supported stridently by the Dutch. As it turns out now, the domestic political situation obstructs the Netherlands to practice what it preaches. So the state of play now is equal to Germany's breach of it's 'own' Stability and Growth Pact in 2005. Opposition pressure is growing to relax the 3% deficit rule by 2013, agreed in the EU arena. 

For at least the coming six months, The Hague will be embroiled in discussions over austerity measures. Several leftist politicians, most outspokenly Diederik Samsom (new leader of PvdA/ S&D), argue for more government stimulus for the economy. Will the money come from the development aid budget, or from exceeding the 3% deficit rule? How much can still be saved from the unique Dutch pension system? More than ever before the national fiscal priorities will depend on the stance the election candidates take in the larger Euroland.

Expected consequences of the collapse of Cabinet Rutte 1 include the following. Most evidently, the xenophobic PVV could suffer significant losses in the next elections (political commentators and polls already suggest so). Second, The Hague still wants to present a solid economic reform package (around 10-15 billion euro) as soon as possible. Voices in the Commission say the sanction of 1.2 billion euro for missing the official EU deadline will be not be issued this time. Government can do so with several opposition parties, but political bickering remains over a possible deal on the date of the imminent elections. Finally, the credit rating agencies will shift their attention to the Dutch economy, where rough reform patches need to be fixed. Loss of the AAA rating is possible, for the same reasons as with the Belgian care-taker government situation in 2011. They then downgraded that country.

Thijs de Wolff

Den Haag

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