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Dutch PM's resignation over budget creates political chaos Add to ...

Dutch governments frequently collapse. But when Prime Minister Mark Rutte visited Queen Beatrix on Monday to announce the fall of his two-year-old government, it was a more significant event, a signal of Europe’s looming political and economic tensions.

In an effort to pass a budget that would have brought spending in the Netherlands in line with European Union requirements that require deficits to be less than 3 per cent of GDP, Mr. Rutte was forced to negotiate with the far-right politician Geert Wilders. Known for his opposition to Islam, Mr. Wilders, controls a small but deal-making bloc of votes in the parliament.

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The result, when those negotiations failed, was a microcosm of Europe’s economic and political crises. It brought together the continent’s quest for strict fiscal discipline as a solution to the euro crisis, and the rise of intolerant far-right parties. The result, in a country that had previously been known for fiscal restraint and political moderation, was a political train wreck.

Mr. Wilders, whose anti-immigrant Party for Freedom (PVV) controls 15.5 per cent of parliamentary seats, refused to accept the budget-cutting agreement because it would have raised the Dutch retirement age to 66 from 65. Many of his party’s supporters are seniors and he is ardently opposed to the EU. “We don’t want our pensioners to suffer for the sake of the dictators in Brussels,” Mr. Wilders said.

The result was not just the collapse of the conservative coalition government that had struggled to hold power since 2010 with the support of Mr. Wilders’s party which, while not a coalition member, had guaranteed 18 months of support for legislation.

It was also a signal that the fiscal and financial consensus that had governed the “core” European countries through the crisis had begun to collapse amid public rejection of spending cuts. It occurred only a day after French voters gave the largest share of their first-round presidential votes to François Hollande, who favours a growth-based approach to the crisis.

The Dutch had been among the most ardent defenders of the austerity-based approach favoured by German officials. Their own government spending had been restrained: The deficit in the Netherlands is 4.7 per cent, not far from the 3-per-cent EU target and far below the double-digit deficits of the Mediterranean countries.

It will probably take until September for the Dutch to organize another election. By that time, the world of European politics may have changed and the Netherlands may find itself part of this different world.

France may be poised to elect Mr. Hollande, a Socialist Party presidential candidate with broadly social-democratic views, in the May 6 final vote, and a number of other countries are teetering on the edge of political change.

Mr. Wilders, whose party marked the vanguard of a renaissance of extreme-right parties opposed to religious minorities, must have believed that his movement’s power had peaked when fellow anti-immigration extremist Marine Le Pen collected almost a fifth of all votes in the first round of the French presidential election.

But this government collapse could spell the end of this political world in the Netherlands. The governing Christian Democrats have seen their electoral fortunes damaged by their association with Mr. Wilders and may lose ground to the left-wing Labour Party. And Mr. Wilders’s own party, which appears to have been wounded by its proximity to mainstream politics, shows its support falling in half.

None of this was reassuring to markets, which dumped euro-related bonds and securities Monday as a result of the French election and the Dutch government collapse, both of which foretold a period of greater political insecurity.

But the Dutch budget may not be a lost cause, even if the parties behind it are doomed. Finance minister Jan Kees de Jager said he was confident he could get the parliament to agree on a reasonably austere budget, even without a government in place, by the end of April.

“We’ll show the financial markets, in consultation with parliament, that the Netherlands’ decades-long budgetary discipline will remain,” he said. It is not an entirely unlikely promise: Belgium, just to the south, managed to maintain its budgetary stability for close to two years, until nearly the end of 2011, without a government in place. There is a sense among some observers that the Dutch, if they can avoid panicking the markets, may be able to end a long period of political chaos with their next election – if the euro can remain stable that long.

Follow on Twitter: @dougsaunders

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