Dutch Government Heads For Breakdown As Austerity Talks Collapse

April 22, 2012Netherlandsby EW News Desk Team

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The Netherlands could be the latest eurozone member forced into an early election later this year, said the BBC on Saturday, after the nation’s political parties failed to agree on a fiscal austerity package that would have brought their budget deficit in line with the EU target of under 3 percent of its GDP.

Leaders from the Dutch coalition government – compromising of the free-market Liberal Party, the centre-right Christian Democrats and the right-wing freedom party – had been locked in negotiations for close to seven weeks over the budget deal; but talks broke down on Saturday following a walkout by the Freedom Party’s leader Geert Wilders.

Wilders, who is known for his strong anti-immigration and anti-EU stance, then later claimed that package of cuts would "damage economic growth and... severely effect the spending power of many people, especially pensioners,” and accused the EU central government for wanting to “take away the economy built up by the elderly.”

"We don't want to bow to Brussels. We don't want our pensioners to suffer for the sake of the dictators in Brussels,” argued Wilders as cited by Bloomberg BusinessWeek, who also called for elections to come “as soon as possible.”

According to Dutch Prime Minister and Liberal Party leader Mark Rutte, early elections were indeed the “next logical step” for the country, though he blamed the Freedom Party leader for “lacking political will.”

Christian Democrat leader Maxime Verhagen chimed in by accusing Wilders of “political cowardice,” and said that the Dutch economy was now at risk of losing its coveted AAA credit rating, which could greatly raise the government’s borrowing cost.

Presently, The Netherlands is one of only four remaining AAA-rated countries in the eurozone, along with Germany, Finland and Luxembourg. “If the country loses its AAA status, then even larger cuts may be necessary,” said Dick Houtman, a sociology professor at Erasmus University in Rotterdam, to the New York Times.

Dutch Prime Minister Mark Rutte is now expected to hold a crisis meeting with his cabinet before handing in his resignation to the queen by as early as Monday evening.

Although many eurozone nations also face similar situations in their own government, the Netherlands is in a particularly embarrassing position given its previous public stance on fiscal discipline as well as its alignment with Germany on austerity-related issues.

Related: Netherlands Economy

Related: Netherlands Economic Statistics and Indicators

Related: Europe’s Policy Problem: Balancing Austerity With Economic Growth

If the Prime Minister resigns and the coalition government breaks up, a caretaker government will have to be set in place before the election occurs. Most analysts expect the elections to happen within the next few months, with the fate of the Dutch membership in the EU at risk depending on the results.

Wilders has already lobbied for the Netherlands to abandon the euro and return to the guilder, and has promised to tackle immigration – not only of Muslims but also of Poles and other central and eastern European members of the EU.

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