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Tuesday, September 10, 2013

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.


Freedom Lover said...

Personally I have no desire to see the current composition of the Dutch government to survive. But if it wants to remain Holland's current ruler it needs to call 2 referendums immediately, & preferably at the same time as they are both EU-related.

Referendum 1 would be specifically about the immigration rule changes due in January 2014 - does Holland want to delay these, or Not? The 2nd referendum would relate to Holland's budget deficit - should Holland immediately reduce it to within EU limits, or Not & instead do so at a less disruptive pace?

What might the consequences be of this approach? Almost certainly, much hostility from Brussels & europhiles in other EU countries. And what if one or both votes are 'Noes'? More hostility. And how should Holland - or any other EU country in a similar situation - react to that? Respond by threatening to veto ALL EU legislation that is still unaffected by Qualified Majority Voting (QMV), & threaten more referendums on any decisions that are affected by QMV if the Dutch parliament or people don't like them. This would really set a cat among the Brussels pigeons - & would be a good model for Britain to follow!

Rik said...

Basically the government should not survive for much longer.
Simply because it is a lame duck of the worst sort. No majority in the first chamber (Senate) combined with disastrous poll results. Nobody will feel the need to help them and suffer the same elcetoral faith with an election that might be very near.

So most likely they will fail somewhere. If not over the budget it will be something attached to it (cuts). They simply donot have support for that.

Which would make things very interesting. As Euro-sceptics are at around half the vote at the moment. And it doesnot seem of the yellow card sort, later to be reversed in a real election. It will likely be something like this and no areas you could see strategic voting in that could save the day for traditional parties.

Rutte seems to have destroyed the comfortable position his party (as the new main right party after the Christian Democrats) had built up in years if not decades in a few months time. He will be history.
Same with Dutch Labour. They were moving all over the place however before as well. Looks like a candidate for getting from a Dutch large party to a midsize one permanently.

Nearly impossible to get a new cabinet without Eurosceptics. And seen Wilders history in the prior government (a failed experiment for Wilders) that will come at a considerable price. Others will have learnt that lesson as well from that.

Holland has a truckload of unbalances in the economy.
Attacking them at the same time is suicide so things should be done properly planned.
The Dutch took the deficit and partially the housing market. The latter for political reasons. Simply was way too much. They got in a recession becuase of that.

A lesson for others imho. France still has its RE bubble and much weaker fundamentals. If they would get their bubble bursting (which might happen with increasing interest rates). Hard to see how they will not be hit and much harder than the Dutch now.
Looks clear that a dip in RE prices of say 20% or more is nearly
impossible to survive (and France probably has a much larger bubble)>

Rik said...

@Freedom Lover
People in the UK seem to forget that other countries look differently at things (like the EU).
Holland is not the UK. Effectively the UK is a one off. It would be hard to see Holland wanting anything else in large majority as a change in the EU. In the UK a lot of people want simply to go out. Different approach.

They might however be a good partner for EU change as proposed by Cameron.

Denis Cooper said...

Rik -

"They might however be a good partner for EU change as proposed by Cameron."

If the Dutch continue to say that they want the EU to be changed, but nonetheless they don't want the EU treaties to be changed, then obviously they will not be a good partner for Cameron as he has presented himself to the UK electorate.

But they could be a good partner for Cameron to try to pull the wool over the eyes of the UK electorate with various sops which do not require change to the EU treaties, just as Wilson did before the 1975 referendum.

Anonymous said...

Holland was supposed to be one of the Eurozone "winners", sharing a similar culture with Germany and Austria. The current recession,indebtedness and unemployment make it look more like Its former colonial master, Spain.
I just spent a week there and was under instruction from my wife not to talk politics. I did not have to. Everyone I met brought up the subject. The EU was public enemy No 1. Small businessmen were the most vociferous despite not being aware of the even worse problems being faced by their club med colleagues. Dutch MSM are a joke. Wilders will do well.