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Tags: Dutch | Budget | Cuts | Crisis

Dutch Opposition Rejects Budget Cuts, Crisis Deepens

Tuesday, 24 April 2012 01:09 PM EDT

The biggest Dutch opposition parties said on Tuesday they would not back the prime minister's budget cuts, deepening a political crisis after the government lost the support of its main ally and collapsed.

The Netherlands must show how it will meet the European Union's deficit limit or it risks creating new turmoil in financial markets. It must also pick a date for new elections, the fifth in ten years.

The eurozone's fifth-largest economy has been a haven of stability during the regional debt crisis and the officials criticized countries struggling to get their budgets in order.

But there is growing resistance to austerity in Europe and some economists are questioning whether drastic spending cuts will help the region get back on its feet.

Several opposition leaders rejected Prime Minister Mark Rutte's appeal for help in getting his 14 to 16 billion euros ($21.12 billion) savings package through.

"I understand that you have to bring finances in order but you cannot cut rigorously because it hurts the economy and people. Three percent is not feasible," Socialist leader Emile Roemer said in parliament on Tuesday.

The country was thrown into political turmoil on Monday when the government tendered its resignation following an abrupt split with Geert Wilders' populist Freedom Party.

The news worried financial markets but the state debt agency held a successful sale of government debt on Tuesday and bonds rallied. Investors are watching closely for any sign that the crisis is getting worse.

"The problems are serious, the economy is stalling, employment is under pressure and government debt is growing faster than the Netherlands can afford," Rutte told parliament.

"Those are the facts and nobody can run away from them. I'm standing here without pretences, it is up to parliament and the voters."


The budget package is the result of weeks of negotiations. It was not clear exactly why the Freedom Party, which backed the government for the past 18 months, suddenly withdrew its support. Wilders said he was fed up with Brussels' demands.

"We don't want to cut spending by 14 billion euros and at the same time transfer billions of euros to Brussels for the horrible ESM emergency fund and the weak Greeks," Wilders said.

The Dutch media have characterized Wilders as irresponsible with one cartoonist depicting him as a toddler in diapers playing with matches and setting the country on fire.

The Netherlands must bring its deficit to 3 percent of gross domestic product, the EU's limit, next year but it is forecast to be 4.6 percent unless extra cuts are made.

Rutte said the package had been pretty much stitched up by Friday night to produce a budget deficit of 2.8 percent of GDP and that would have left about a billion euros of wiggle room to address Wilders' concerns about weaker purchasing power.

He said Wilders changed his mind overnight and the deal was off by Saturday.

Some opposition parties argued that the Netherlands could be given more time to achieve the budget deficit goal.

"The 3 percent deficit target exists with the addition that you don't need to comply if there are exceptional circumstances in the economy," said Diederik Samson, leader of Labour, the largest opposition party.

But Rutte said he must send his plans to Brussels by April 30 and that the Netherlands was unlikely to be allowed extra time to meet the goal, or be shown any leniency.


Rutte must also try to agree an election date with other political parties. Some are pushing for one as soon as June while most have said September is the earliest possible.

A poll at the weekend showed that many Dutch are fed up with their politicians.

"There have to be cuts" said Geert Hogema, a 66-year-old pensioner, as he read a newspaper in a cafe in Amsterdam.

"But instead of taking difficult decisions, they sat there just talking for seven weeks, telling the outside world nothing, until one of them decided to leave the table. We've had four cabinets in five years and none of them have acted," he said.

The crisis has also attracted the attention of credit ratings agency Moody's which said on Monday the government crisis was a negative factor for the country's credit but maintained its Aaa rating with a stable outlook.

But it said if the country weakened its commitment to fiscal discipline, the rating could face downward pressure.

"This development is clearly credit-negative for the Dutch sovereign given that it generates both political and policy uncertainty," Moody's analysts wrote.

"Having said that, the Netherlands is entering this testing period from a position of relative strength."

© 2023 Thomson/Reuters. All rights reserved.

Tuesday, 24 April 2012 01:09 PM
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