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Dutch Government Falls, What is Next?

April 23, 2012

Dutch Prime Minister Mark Rutte leaves the Queen's Palace after his tendering his resignation : Michael Kooren (NRC Handelsblad)

The Dutch government has collapsed this morning, the latest in a series of governments (Spain, Italy, Greece) fallen victim to the Euro Crisis. Prime Minister turned in his resignation today in his weekly with the queen, who must approve each cabinet composition. The Dutch government has been under criticism from the EU for not following the new, more accountable, system of EU budgetary restraints. The Netherlands has been considered part of the Eurozone’s core: The Netherlands, with Germany, Finland and Luxembourg, was one of just four euro zone countries to keep a Triple-A credit rating when France and Austria were stripped of theirs earlier this year. Their standing among the Eurozone, makes today’s all the more astounding and worrisome to investors.

While the EU has not been issuing sanctions, except for Hungary, it has warned Belgium and other countries not abiding by rules established in December’s economic agreement. The EU still has been issuing statements that look quite toothless; just as the Dutch government was about to collapse this morning, European Commission spokesman Amadeu Altafaj said, “The European Commission trusts that the Dutch government will continue to seek budgetary solutions that are important for the country,” continuing, “There is room for discussion, for explanation, for correction. But once again, the aim is to have a system that works with anticipation, that enables the institutions to exert this peer pressure to prevent, rather than correct.”

The Dutch government has been under pressure for some weeks. Then, as now, the issue has been between Prime Minister Mark Rutte’s coalition-leading party, the People’s Party for Freedom and Democracy (VVD) and coalition partner, the Party for Freedom (PVV), led by Geert Wilders. Wilders argued that proposed budget cuts would hamper economic growth. The BBC article on the event notes that, “Mr Rutte’s government lasted just 558 days. Only three other Dutch administrations since World War II have been in office for shorter periods.” While Dutch concern austerity is not new – the Dutch have been known for penny-pinching long before the Netherlands existed as a country – it is unprecedented that debate over such austerity could cause serious damage to the Dutch economic engine. Already today, Dutch bond spreads that normally equal the rates for German bunds have slipped.

What is next? Given previous instances of similarly rushed elections, the UK Guardian says we should not expect an election before September. The current cabinet would remain in an interim role, though severely hampered in its decision-making abilities. Although Rutte’s party remains strong, it will need the support of opposition parties to pass the controversial annual budget. The Wall Street Journal writes that if an election were held today, Rutte’s VVD party would stand to gain seats. It would however, need to find new replacements for the PVV party – turning a Center-Right coalition into a Center-Left one. This move mirrors the expected turn of French politics, as Socialist candidate François Hollande took a roughly 1.5% victory over incumbent president Nicolas Sarkozy in yesterday’s first-round election. Though, in an important side note, note far-right National Front party leader Marine Le Pen, won a record 18% of the vote.

2 Comments leave one →
  1. April 23, 2012 11:44 pm

    Reblogged this on and commented:
    Europe on the rocks.

  2. piereportnews permalink
    April 24, 2012 2:04 am

    Reblogged this on PieReport-News.

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