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Wednesday, April 25, 2012

What next for the Netherlands?

The political situation in the Netherlands continues to look uncertain, following the fall of the Dutch government, largely due to EU-imposed austerity targets.

Yesterday the Dutch Parliament debated the crisis (which we live-tweeted) with at times heated exchanges. So what has come out of it and where are we at?
  • Outgoing PM Mark Rutte announced that he would propose 12 September as the election date, despite many parties calling for a June election to allow the new government to get on with business. 
  • There is still disagreement over an absolutely vital issue: how to deal with EU austerity rules. The Dutch government has to present its 2013 budget to the Commission before 30 April, which needs to comply with the EU's 3% deficit limit or, says Rutte, the Netherlands could face a fine of up to €1.2bn (though it would take a lot for that to actually come to pass).
  • Diederik Samsom, the leader of the social democrat PVDA, remains opposed to sticking to the the 3% rules, saying that going beyond that limit (his proposal is 3.6%) is allowed in "exceptional circumstances" - which was immediately denied by PM Rutte.
To put the Dutch economic problems into context, we are talking about a country with a deficit of 4.7% and debt to GDP of 65% (2011 figures), although high household debt and falling house prices are creating some trouble right now. Many countries would love to have this problem (the UK, for one). The problem, of course, is that these figures do not conform to the eurozone orthodoxy of austerity - of which the Dutch have been major cheerleaders, and in many ways the Dutch have made a rod for their own backs here.

In any case, talks are ongoing and a new debate is scheduled for Thursday. Our bet is on the political parties reaching an agreement to send to Brussels before the deadline and that will serve to appease the Commission.

But this runs far deeper than whether the Dutch can pass this year's budget, it raises fundamental questions about whether the country will be able to prodcue stable government in the longer term. Political fragmentation in the Netherlands has been a feature of the last decade. In 2003 the three 'mainstream parties' (PvdA, CDA, VVD) held 114 (76%) of the 150 seats in parliament. In 2010, this was down to 82 (54%). In 2012, who knows?

The one to watch is clearly Geert Wilders and his populist PVV party - if they gain, passing the EU fiscal treaty will be far more difficult in the Netherlands, as will eurozone politics in general. However, interestingly, Wilders is currently polling at the lowest level in two years, at 12.6%. What's also interesting is that the left-wing Socialist Party (SP), which has also been quite critical of the EU in the past, is polling close to 20% (governing VVD at 22% and centre-left PVDA at 16%).

But as we've noted before, the Dutch crisis is an indication of how unsustainable the current eurozone path is, and the tension involved in having key decisions on spending and taxation subject to supranational rules rather than votes in national parliaments.

Yesterday, Bild presented a list of eurozone countries where governments have already collapsed over the euro: the Netherlands, Ireland, Portugal, Italy, Greece, Spain, Slovakia and Slovenia.

The eurozone crisis used to be perceived as the the core versus the indebted periphery. What happened this week in the Netherlands has bent these assumptions.  But the common theme is that voters feel powerless to change the status quo. Whichever mainstream party they vote for, the answer is the same. For as long as this persists, no one should be surprised by the alternatives that people might seek.


Rik said...

There are several issues that did not get attention in main stream media and with the politicians as well.

1. Wilders is simply looking for a model for a populist party. There isnot a properly working one. They donot get enough votes; left out of the government, do not have enough proper candidates and donot know really which issues to focus on.
2. Wilders is simply looking at the best 'populist mix', knowing well that the mix might have to be changed a little sometimes.
3. Anti-EU was simply one of his relatively minor points. Seen what has happened in France and knowing well that Euro-crisis spending will shortly hit the fan(in the way that it will have to lead to austerity/cuts in your own country to pay for the problems in the South.
4. Seen his past. He will most likely make this his point 2 or even 1 on his agenda.
Plus he can well combine it as the EU is usually seen as and acting as pro large scale immigration (of non-Westeners).
5. Wilders is not really doing well in the polls. But elections will first take place 5 months from now and polls are moving all over the place at the moment in Holland (what is rather unusual).
6. Wilders is simply very good as spokesperson for the protest-voter. Even if not in government he is simply representing how 1/3 or so of the population feels and tearing away voters with parties that donot move in his direction.
7. A force to be reckoned with.

8. This was the most rightwing pro-austerity government possible. Likely the next one will be more left and want to spend more. The polls indicate a move to the left.
9. It will be extremely difficult to get to a majority. Including the very left Socialists and the orthrodox Christians the anti-EU block resp. not acceptable for many mainstream political parties as a partner (a full partner at least)ar probably close to 40% of the votes and seats. Which leaves 60% to get to 51% combined with the fact that there are many historical problems between the main stream parties. Best example the VVD's (most likely the largest party electorate simply for 80-90% is against cooperation with the PvdA (Dutch Labour).

Rik said...

A. The Socialist have probably seen that it is a bad time for them to go into government (from the Wilders example). Influence is marginal (due to the lack of funds it is pre-determined that it is austerity time anyway). You donot want marginal influence due to the circumstances and a lot of negative PR if you are associated with this austerity.
While likely from the sideline you can get a rather similar result without the PR disaster.
B. Seen the percentages it will simply require different majorities to get things done so along the way a new government is likely to bump into both the PVV and the Socialists some time and it will be horsetrading time.

C. It likely will take till somewhere in 2013 to form a government. Elections in month 9 usual formation 3-4 months likely considerably longer because the large part that is unacceptable as a partner, combined with the fact that there are many old issues and of several parties a huge majority simply oppose a coalition together with certain other parties.
D. Doubtful if markets will accept that. Hopefully for the Dutch there will not be too much bad local or European news.

E. Euro-saving is not having constitutional problems (like most likely any larger increase thereof in Germany), because of the weird Dutch constitution in this respect. A normal law is at the end of the day of the same order as the constitution.

F. Wilders has always been a rolmodel for populists all over Europe. Likely a lot of other populist parties will pick the anti-EU issue up. He simply gets international publicity and if it works everybody can easily see it. A lot of these populists are already pretty anti-European anyway. Not only put it in the mix but also increase the percentage anti-EU in it.

G. The Dutch Socialists are basically fishing in the same pond for voters as Wilders. Their electorate is basically as anti-European (you know the undemocratic, neo-liberal jobhunters). The point is simply not as high on their agenda.
H. They are basically left-populists their policies are even more unrealistic than those of Wilders (in my view the relevant characteristic for determining that). Only on the left they are not called populists.
I. Anyway these smaller parties get pro rata seats and there isnot a system like the UK or Germany, that favours larger established parties. 40% protestors means 40% seats in parliament.

J. Wilders made several mistakes lately (unusual for him). I donot really expect him to continue that way. he is simply to clever for that and learns from his mistakes. The fall out of sending home the government was just 1-2 seats.
Having a clear issue to campaign around basically the only way is up for him. Although a lot of unexpected things can happen as we all know.

Peter Boswijk said...

I think this is a pretty good analysis. To add to it:
1. It is pretty difficult to assess the power of the Populist PVV at the moment. But they are declining. For Europe it doesnt matter, because the similar populist SP gets all of the increase.
2. The current Kunduz-coalition agreement (Right-Liberals, Left-Liberals, Greens, Christian Democrats, Christian Evangelicals)is only a ploy for Brussels to show they are able to agree on it. It is not meant to limit the parties in the elections nor bind them after the elections. So it just shows the willingness to act. In the polls this Kunduz-coalition is 4 votes short of a majority.
3. The Centre will be more empty. The Christian Democrats will fall back to 11-15 seats (out of 150). D66 will gain a few. The Evangelical Christians will remain the same. It is unclear whether the Greens will remain in the centre.
4. The Social Democrats are moving to Hollande territory.