What does Wilders' defeat in Dutch euro elections mean?

For various reasons that we don’t quite understand, most of the UK press has deemed it illegal to report on the exit polls from yesterday’s European elections in the Netherlands - with the exception of the Telegraph and the Guardian. The Netherlands is the only country to conduct exit polls ahead of Sunday night (10pm GMT roughly) when the results from all 28 EU countries are announced.

Geert Wilders’ Freedom Party (PVV) took a clear a beating. If the exit polls stand, the party will have dropped from 17% in 2009 to 12.2% this time around, translating into a loss of 1 seat (the PVV had 5 seats in the last parliament but one MEP defected). This is no doubt an unexpectedly bad result for Wilders.

Source: Ipsos

Wilders’ defeat has given rise to a hilarious conspiracy theory in Brussels that the UK media isn't reporting on the Dutch elections since the result doesn't conform to its alleged anti-EU bias. Apart from the fact that the BBC and others genuinely worry about breaking the law (even though it’s a ridiculous law) this is also a wrong reading of the results.

Wilders screwed up. His controversial comments about Moroccan immigrants caused him real damage. Three of his four sitting MEPs even refused to campaign as a result. But to see this as a victory for the EU status quo in the Netherlands is pretty heroic.

- The strongly Eurosceptic Socialist party gained an extra 3% of the vote, translating into 1 extra seat, which sees it overtake the established centre-left PvdA. Together with the PVV, these strongly EU-critical parties are set to win 22.2% of the vote.

- While it's difficult to know what to read into this result, the parties that we've dubbed “critical reformers” have done relatively well. Prime Minister Mark Rutte's VVD party maintained a respectable share at 12.3%, despite leading an unpopular government, while the Christian Union/SGP increased its share by a percentage point. 

- The two biggest victors are the D66 liberals and the CDA, which are vying for first place on just over 15% of the vote. These parties are clearly pro-EU - and D66 is doing a lot of good work in the EP - however, please do resist the temptation to see this as an endorsement for more EU integration. Firstly, the D66, the great winner of this election, called on a freeze for transfer of powers just before the election, prompting Foreign Minister Frans Timmermans to post on his facebook page "D66 is suddenly also 'very euro critical'". Meanwhile, the CDA vote of 15% is down nearly 5% on its 2009 vote. It would be just as plausible to see the D66 and CDA vote as anti-incumbent vote against the PvdA-VVD coalition government.

- Lastly, turnout in the Netherlands remained stable, but at an incredibly low 37%. With Europe so much more in the headlines over the last few years and the Lisbon Treaty giving MEPs more powers, why in the world hasn't turnout gone up dramatically if it's true that more EP powers and greater awareness will lead to greater voter engagement?

These results certainly present a mixed picture. Wilders' failure to translate his polling into votes is notable but whether this pattern will be repeated elsewhere (in France, for example) remains to be seen - and probably has much to do how badly his campaign went.

Is an EU referendum back on the Dutch agenda?

Thierry Baudet

This week, the Dutch Parliament held a debate on whether it is necessary to hold a referendum on transferring new powers to the European Union. The debate was triggered by a campaign, called "Citizen's forum - EU" which managed to gather over 63,000 signatures, above the threshold needed (40,000 signatures necessary) to force it on to the agenda of the Lower House.

The campaign demands:

1. An end to the creeping transfer of powers to the EU.

2.  If powers are transferred to the EU, a referendum must be held so the Dutch population can have a say on this transfer of powers.

Two of the campaigners, Dutch academic Thierry Baudet (photo), and economist Ewald Engelen said in a speech to MPs: 

"The Lower House is about to lose its core competences...You won’t be able to decide policy any more. You abolish yourself. But you don’t have the right at all to do this. Because the sovereignty is with us, the people. You are merely the representatives of the Dutch people."

As De Volkskrant reported, the reception was more positive than expected. It was not only the "usual suspects", like Geert Wilders' PVV, the Socialist Party and the Party for the Animals that welcomed the idea. These parties have expressed support for a Dutch-style "referendum lock" in the past,

More interestingly, the social-democrat PvdAalso  came out in support, with its EU-spokeswoman Marit Maij MP, saying: "the PvdA wants to proceed quickly with a possible referendum" - albeit with a lot of qualifications,The party is only in favour of a non-binding referendum, and wants it to be held according to new rules currently being negotiated in the Dutch Senate, which would make it necessary to first obtain 300,000 signatures, a high threshold in the Netherlands (but something which the EU referendum campaigners are considering).

The Christian Union, which sits with the Tories in the ECR Group in Brussels, support the idea, with its spokesman, Gert-Jan Segers MP, saying that "by means of exception we accept an advisory referendum".

Dutch PM Mark Rutte's governing VVD reiterated its support for strengthening national parliaments (something which the PvdA also wants), but is against referendums as a tool of policy.

Meanwhile, a new poll, by prominent pollster Maurice de Hond, reveals that 67% of Dutch citizens want a referendum in the event of new powers be transferred from the Netherlands to the EU:

Ja = Yes, Nee = No

This is against a tricky backdrop: current opinion polls show that Geert Wilders' PVV would have almost as many seats the governing VVD and PvdA combined, if an election was held today (though that goes far beyond Europe as an issue). With the Dutch government's campaign to set limits on the powers of the next European Commission shows, the European election campaign could prove interesting in the Netherlands.

The Dutch coalition is facing stormy waters

According to prominent pollster Dutch Maurice de Hond, just one year on from last year's elections, the Dutch government coalition of the centre-right VVD and centre-left PvdA would lose more than half of its parliamentary seats if elections were held now. They would only retain 30 of their 79 seats, representing 12% (in the case of the VVD) and 7% (in the case of the PvdA) of Dutch voters.

Geert Wilders’ right-wing populist PVV remains the most popular party, which it has been since late last year, and would double its number of seats from 15 to 32, representing one in five Dutch voters. We commented after the elections last year that the relatively bad results for Wilders and the eurosceptic Socialist Party - which would also see an increase in its seats from 15 to 24 according to the latest poll - was hardly the victory for the centre that some had suggested.

The opinion poll also reveals that 48% of respondents do not believe that the coalition will still be in power in 6 months time, while 37% believe it will.

While there is a majority in the Lower House, the coalition doesn't have one in the Dutch Senate. The Dutch government has already announced that there is an agreement within the coalition on €6 billion in extra austerity measures and that the details will be unveiled by Finance Minister Jeroen Dijsselbloem on "Prince's Day" on 17 September. The plans would see the Netherlands closer towards the EU budget deficit target.

Although the Senate does not traditionally reject the government budget - the last time this happened was in 1907 - the VVD-PvdA coalition has reportedly approached two opposition parties, the D66 and CDA, to see whether they'd like to join the coalition in order to obtain a majority in the Senate. The D66 have refused.

The Dutch economy faces huge challenges, with a housing bust which saw house prices falling 20% below their 2008 peak, while no less than one million Dutch households find themselves in negative equity. That's one in four households with a mortgage. The ECB has expressed concern that mortgages are putting enormous pressure on the financial positions of Dutch banks, while the world's largest bond investor, PIMCO, has noted the Dutch economic crisis may spill over to government bonds, suggesting it will no longer buy Dutch government paper and that the triple A country may face French borrowing levels in future.

The Dutch economic advisory council of the Dutch government has a stark warning:

"Dutch households now have the highest level of long-term debt in the euro zone. In 1995, the debt ratio in Germany was at the same level as in the Netherlands (about 56%); for Dutch households, it is now twice as high as in Germany"

At the same time, the newspapers continue to run stories about the ongoing eurocrisis, with extra assistance to Greece on the horizon. This is something Prime Minister Mark Rutte said would not happen. In addition, as we report in today's press summary, immigration has become a heated topic; according to a recent poll, 81% of the Dutch population are opposed to the lifting of labour market restrictions for Bulgarians and Romanians in January 2014.

In an attempt to address the public's sense that things are out of control, the Dutch government has published its EU “subsidiarity review”, an assessment of what the EU should and shouldn't be doing, which it will present to other EU governments in the coming months.

However, the above would suggest that the Dutch electorate will need a lot of convincing if it is to put its faith in the mainstream parties again at the next election.

Three months is a long time in Dutch politics

Since the elections in September, international attention on the political situation in the Netherlands has faded.

But, over the weekend, a new opinion poll by Maurice de Hond revealed a big change. Only three months after his defeat, the party of right-wing populist Geert Wilders (photo), who campaigned on a platform in favour of the Netherlands leaving both the eurozone and the EU, is resurgent.

Wilders' PVV would be the country's most popular party were these results repeated at an election. That this would be with only 16% of the vote illustrates how volatile Dutch politics has become (it should be noted that at the last election many voters made their minds up at the last minute). But it is still striking that Wilders' Party for Freedom would jump from 15 seats in the September elections to around 24 now, according to this poll.

The two governing parties, the liberal VVD and social democrat PvdA, would fall from 41 to 22 and from 38 to 23 seats respectively, after only a few months in power.

The far left SP, which is also critical of the EU, has likewise profited from the fall in support for the government parties, increasing its number of seats to 22 from 15. The opposition D66, 50PLUS and the Christian Democrats would also see a large increase in votes.

The September election squeezed out the centrist CDA and forced together the VVD and PvDA, which are not natural political bedfellows (besides their shared 'pragmatic' attitude to Europe). The coalition has therefore resulted in several unpopular decisions among each party's supporters. The VVD had to backtrack on the agreed introduction of an extra healthcare levy which would have hit the Dutch middle class hard. In return, it was also forced to sacrifice a number of tax cuts which the party thought it had secured.

However, another important conclusion we can draw from the renewed success of both Wilders and the SP is that criticism of the eurozone bailouts and the EU in general is not going to go away. We noted this in our pre- and post-election analysis of the elections, with the parties of the centre increasingly taking their cues, if not their entire narratives, from the parties on their flanks.

One example of this was Mark Rutte's election promise not to send any more money to Greece. A few weeks ago, at the occasion of the third Greek bailout - or extension of the second - Rutte was forced to admit that he thought it was a real pity "he couldn't entirely keep" his promise, describing it as a "necessary concession".

Some were quick to proclaim the September election as a sign that the Dutch had "voted for Europe", but this was always a simplistic reading of the results and downplayed the potential for future volatility. These results would suggest that Dutch politics remain very unpredictable, and that Wilders and the Socialists are rubbing their hands in the wings.

Too soon to jump to conclusions: the Dutch debate on Europe has only started

As we said in our pre-election briefing, the Dutch elections saw a shift back to the centre, compared to the early signs of the campaign. Granted, a stronger combined majority for the two main parties - centre-right VVD and centre-left PvdA - than many had expected. The Socialist Party stayed on the same number of seats as last time around, while the populist Party for Freedom suffered a pretty heavy defeat (losing nine seats).

Senior Brussels figures were quick to hail the result as a victory for the pragmatic, pro-European centre over the crazy fringe. A victory for further European integration, euroscepticism can't win votes, sort of thing. Some media outlets drew similar conclusions - with some exceptions - claiming the anti-bailout mood in Europe is much over-stated. But is this interpretation right?

There's no doubt that the centre parties mounted a strong comeback, in the face of an increasingly sceptical public on Europe. But to see this election as a victory for the very specific vision of Europe that involves "ever closer union" is spurious. A few points:

First, Geert Wilders is no proxy for unease about where Europe is heading. In almost all aspects of policy Wilders is extreme, and his decision to bring down the last government has undoubtedly worked against his party. The Dutch may not like bailing out other countries, but they do not like reckless politicians either, and some voters considered a vote for him wasted.

As we noted in our pre-election briefing, the centre parties too - particularly VVD - have struck a more euro critical tone of late, perhaps in response to the strong rhetoric coming from Wilders and the Socialist Party. On Europe, the VVD may have crowded out Wilders, particularly by talking tough on bailouts. Regarding Greece, almost exactly repeating Wilders's words, Prime Minister Mark Rutte said, for example, that:

“Enough is enough…An exit may be inevitable, but it will be up to Greece to make that decision…An orderly exit is possible, but not desirable.”

In a comment piece in the FT last year, Rutte was one of the first to call for a clear mechanism to push countries, which do not meet the austerity targets, out of the eurozone – at the time widely acknowledged to be a shot across Greece’s bow. On the EU budget, he has sided with the UK in trying to achieve a real terms payments freeze in the EU's 2014-2020 budget, saying, "If we countries need to cut our budgets, also the European institutions need to do with less."

The Social Democrats, led by Diederik Samsom, played a role in triggering the elections by refusing to support the previous government’s budget dictated by EU deficit rules. It is true, this was their prerogative as the opposition. Nonetheless, they did their fair share of anti-Commission posturing such as:

"[It's about] how the Treaty is being applied…The economy is suffering damage in an unnecessary way because of the demands of the Commission".

And during the election campaign, the party had some other interesting things to say about European integration, such as:

“I’d reserve [Eurobonds] for the moment Europe is away from the abyss. Eurobonds are no rope to drag you out of the abyss. Economies need to converge and public debt needs to stabilise first.”

“I don’t support the blueprint of [EU-federalist D66 leader Alexander] Pechtold with his European government, Finance Minister and Parliament.” 

In the party manifesto, it called for a reduction to both the EU budget and the Dutch contribution to it - not even the UK Tories did that.  

Equally, Europe Minister Ben Knapen, a CDA member - whose party may be needed to achieve a government with majority in both houses of the Dutch parliament - said that "there should be a legal possibility for countries to voluntary or forcefully leave the eurozone. Only then the moral hazard - which is like a hostage - can be dealt with". He also urged to "correct the power the European Commission, which has been enormously growing in recent years."
 
On the wider point about the Netherlands in Europe - and whether this election will make it more or less assertive - the centre parties may be far more supportive of the status quo in Europe, but they are different on economic and social policy, completely different sides of the political spectrum in fact. Making the coalition work at all will be a huge challenge. Throwing the difficulties of the eurozone crisis into the mix makes the task even harder, while any pressure for greater integration may force the governing parties to be seen as acting tough, under the pressure from opposition parties.

No, the Dutch haven't turned into head-banging eurosceptics. But all of this is to say that the debate about the Netherlands' role in Europe, in the face of further euro integration, may just be kicking off.

What the Dutch elections could mean for Europe and the euro

We have today published our thoughts on what the 12 September Dutch elections are likely to mean for the future politics of the eurozone.

Although the EU-critical left-wing Socialist Party has had a strong election campaign, recent polls have seen a shift back towards the centre with the centre-left Social Democrats (PvdA) overtaking the Socialists (SP) to become the main challengers to Prime Minister Mark Rutte’s VVD party (centre-right).

According to the latest Ipsos politieke barometer (8 September) the VVD and PvdA are neck and neck on 35 seats each. The Socialists (21) and Geert Wilders’ PVV (19) are vying for third place, with the Christian democratic CDA (13), left-liberal D66 (11), the Christian Union (CU) (6) and GreenLeft (4) all expected to figure.




Therefore, the most likely outcome remains a centrist, pragmatic coalition, which clearly is the preferred option in Brussels and Berlin. The Dutch elections are therefore unlikely to radically change the immediate political dynamics of the eurozone crisis. The country is likely to continue to oppose more bailout cash for Greece or any topping up of the eurozone’s bailout funds and remain a steadfast supporter of austerity in the struggling eurozone economies.

In the medium to long term, however, the Netherlands could well be on the path to becoming a more assertive – and far more complicated – EU partner. With future decisions on potential eurozone debt pooling to come and the prospect of more EU powers over national budgets (including the Netherlands’), Dutch public opinion and the more or less EU-critical parties such as the Socialists and Geert Wilders' PVV are likely to shift the country in a more sceptical direction.

The traditional parties of the centre have also increasingly taken on aspects of Wilders’ narrative on Europe. Neither VVD nor the PvdA are uncritically in favour of everything European, with the VVD making several critical interventions: refusing a penny more to Greece, on the need to limit EU powers in some areas and reduce the EU budget. A huge question will be if these two parties will see an electoral advantage in becoming more EU-critical in light of more potential bailouts, a stalling economy and an ever vocal EU-critical fringe.

You can read the whole thing here.
 

While everyone is talking about Greece...

It may sound incredibly obvious, but the eurozone crisis is not only about Greece. Yes, Athens may be facing its "last chance" (Juncker dixit) to save its euro membership. And yes, the diplomatic offensive launched by Greek Prime Minister Antonis Samaras (see picture) to obtain a two-year extension to the EU-IMF adjustment programme clearly deserves attention.

However, while everyone is talking about Greece, quite important (and not necessarily good) news is coming out of other eurozone countries - of which, as usual, we also offer a comprehensive overview in our daily press summary.

In particular:

• According to sources quoted by Reuters, the Spanish government is in talks with its eurozone partners about the eurozone’s temporary bailout fund, the EFSF, buying Spanish bonds – but has made no final decision over whether to request the assistance. Unsurprisingly, the European Commission said that there are no negotiations under way, and a bailout request from Spain is not expected "any time soon". Right...

• According to a high-ranking official at the Portuguese Finance Ministry quoted by Jornal de Negócios, Portugal (the 'forgotten man' of the euro crisis) will not be able to meet the EU-mandated deficit target of 4.5% of GDP for this year unless new austerity measures are adopted. The main reason seems to be the sharp fall in tax revenue: -3.6% during the first seven months of the year, as opposed to the 2.6% increase the Portuguese government was betting on for 2012. The alternative, the Portuguese press suggests, would be asking the EU-IMF-ECB Troika to relax the target. Boa sorte with that one, especially since in September we will hit the point where Portugal is within one year of being expected to return to the markets. Remember how the IMF's requirement for a country to be funded for twelve months played out in Greece... 

• A Cypriot government spokesman told reporters yesterday that the island's public deficit at the end of the year will be around 4.5% of GDP – significantly higher than the 3.5% of GDP initially forecast. Clearly not good news, as this will almost certainly increase the EU-IMF bailout Cyprus is currently negotiating. Another headache for the Troika, which is due to visit the island again shortly (although no clear date has been specified yet).

• New figures published by the Irish Central Bank show that €30.5 billion or 27.2% of the €112 billion outstanding in owner-occupier mortgages at banks in Ireland was in arrears or had been restructured at the end of June, up from €29.5 billion (26%) in March. Furthermore, German Finance Minister Wolfgang Schäuble told the Irish Times that he will oppose any debt-relief plan for Ireland that “generates new uncertainty on the financial markets and lose trust, which Ireland is just at the point of winning back.”

Add the German Constitutional Court ruling on the ESM treaty along with the Dutch general elections (with the EU-critic Socialist Party led by Emile Roemer ahead in the polls) into the mix and it really looks like there will be little room for boredom in September.

A Dutch election primer

Emile Roemer, leader of the Dutch Socialist Party

On 12 September, elections will take place in the Netherlands. Due to the country's traditional role as an ally to Germany in monetary affairs, they will be watched with close attention (and by coincidence the German Constitutional Court is due to rule on the ESM Treaty the same day).

What do the opinion polls say?

The latest opinion poll shows that caretaker Prime Minister Mark Rutte’s right-of-centre-liberal VVD party and the EU-critical left-wing Socialist Party would get the most votes, with each obtaining 34 seats in Parliament. Sniffing around third place are four parties: the social democratic PvdA (21), the Christian democratic CDA (16), Geert Wilders' PVV (14) and the left-liberal D66 (13). The Christian Union, which sits with the Tories in the ECR-group in the European Parliament, would get around 7 seats, and GreenLeft 4.

What are the coalition options? 

There are broadly two possibilities:

- Firstly, a centrist coalition might emerge from the VVD, PvdA and CDA. However, the polls suggest this currently falls a few seats short of the necessary majority. This coalition could be expanded to include D66, which would make for a eurofederalist formation, but this might not be convenient in the face of an EU-critical, although disparate, opposition composed of the Socialist Party and Wilders' PVV.  Alternatively, the seats of the moderately EU-critical Christian Union might be sufficient but then the government would only have a narrow majority, if the current poll results materialise.

- A second option, the preferred solution of the Dutch social democrats (PvdA), would be a government with the Socialist Party, CDA, and GreenLeft. This would only narrowly obtain a majority and probably also need the support of D66. While the CDA would need to be convinced, it is questionable whether a government led by what many consider a far-left party is a viable political option in the Netherlands. The Socialist Party started off as a Maoist formation (a bit like the current European Commission President) but has moderated its tone and could now be described as left wing populist. Its current leader, Emile Roemer, who vehemently opposes the fiscal pact, has repeatedly warned that he won't pay any EU fines for breaching budget deficit limits, saying he would "put his body on the line".

Other options are theoretically possible, but unlikely: the divisions between the VVD and Socialists look too deep, while it's unlikely that the VVD would choose a new deal with Geert Wilders, after the previous  Dutch government fell due to Wilders' opposition to austerity. The most likely outcome remains some kind of centrist government, possibly after several months of negotiation (last time around, it took four months to form a government).

What are the campaign themes?

Unavoidably, Europe is high on the list. The last government fell over EU-imposed austerity and it is no surprise that Socialist leader Roemer has raised it as an issue. Roemer has also warned that any transfers of power to the EU would need to be agreed by referendum (in a similar vein the UK's 'referendum lock'). Things have been moving in a more EU-critical direction for a few years now. Only 58% of Dutch voters are currently in favour of EU membership, a stunning drop from 76% in May 2010. Two thirds of Dutch voters want to see less of their cash going to the EU budget. Last, but certainly not least, there is general discontent about the eurozone bailouts, with  at least half of Dutch citizens saying in May that they wanted to see a stop on money being sent to Greece and a majority opposing the eurozone's permanent bailout fund, the ESM.

Another important issue is pensions, following reports that cuts very likely will need to be made. Dutch pension rules are also under threat from upcoming EU initiatives such as Solvency II, which are being fiercely opposed by the Dutch government.  

Economic policy is, as always, high on the agenda. Dutch PM Mark Rutte entered the campaign this week, promising tax cuts in order to reward those who work, in a bid to present his party as the alternative to voters who are scared of the SP and draw left vs. right battle lines.

What's the political context?

Much of what's happening in the Netherlands today is still seen in the light of the murder of Pim Fortuyn in 2002. The Pim Fortuyn List, certainly started to break down the consensus in Dutch politics on issues such as immigration and the EU. Of course, a lot of has happened since: a range of unstable coalition governments, the no-vote in the referendum on the European Constitution in 2005, the rise and influence of Geert Wilders.

The sluggish Dutch economy also appears to have become somewhat decoupled from the German economy. There is particular concern about the housing market.

What will be the consequences for the EU and the euro?

Dutch daily De Volkskrant ran an article earlier this month noting that the current Dutch government has increasingly been playing EU hard-ball behind the scenes, under the headline "European patience with the annoying Dutch is almost up". An EU diplomat was quoted as saying, "the problem is not that the Netherlands is obstructing, the problem is that the Netherlands is almost always obstructing".

Given that around a third or more of the Dutch electorate now seem prepared to vote for more or less EU-critical parties, that isn't going to change anytime soon. Still, it will make a big difference whether the Socialist Party will make it into government or not, and perhaps more symbolically, whether it will become the biggest party in the country. Both remain uncertain.

However, it is clear that the consequences could be far reaching, especially for Chancellor Merkel if one of her most loyal allies starts to make things even more politically fraught at the level of the eurozone.

They may have the cup...

It's election campaign season in the Netherlands, with Dutch voters due to choose their next government on 12 September. Caretaker Prime Minister Mark Rutte's VVD party has come up with a rather original way of planting the eurozone crisis into domestic political debate.

On 29 June, the party published the following campaign poster on its Facebook page:

The two players on the right - Andrea Pirlo of Italy and Xavi Hernández of Spain - need no introduction. However, the slogan on the left is quite interesting, as it says,

They may have the cup, not our creditworthiness.

The picture also had a short description above, saying,

Italy or Spain will become European football champions [as we mentioned, the post is from 29 June, two days before the Euro 2012 final]. Now they also need to become champions in cutting their budgets, because if we get things our way, there will be no arrangement through which they can benefit from our financial discipline while not putting their own things in order. Please like if you agree!

To date, the VVD post has 864 'Likes'.

As the elections get closer, tough rhetoric on the eurozone crisis, such as this, is likely to become a feature as Dutch politicians bid to 'steal' votes from Geert Wilders' far-right, notoriously anti-euro (and anti-EU), PVV.

Today, Dutch magazine Elsevier also reported that, at last week’s meeting of the ‘Future of Europe’ group, organised by German Foreign Minister Guido Westerwelle, Dutch Foreign Minister Uri Rosenthal warned that it was not the time to discuss any further transfer of national powers to the EU, especially in areas such as pensions, labour market and social security.

In light of what we have seen, for instance, in Finland ahead of the latest presidential elections, the picture above is another example of how further fiscal integration and eurozone bailouts are now at the forefront of election campaigns in the Triple-A countries.