If you force 26 EU countries to choose between Berlin and London. 26 will choose Berlin.

The knife in the battle over the next Commission President has just been twisted a little deeper into David Cameron's side.

Both Swedish PM Fredrik Reinfeldt and Dutch PM Mark Rutte today announced that they will not seek to block Jean-Claude Juncker for the top post.

Both countries have huge reservations, (Sweden and Hungary were the only two countries to oppose the idea of Spitzenkandidaten from the get-go), but they apparently don't want to be standing on the wrong side of the fence from Germany.

Speaking in the Dutch Parliament today, Rutte said:

I’m set on [Juncker. He is] in a position to implement important Dutch wishes.

A slight departure, then, from remarks Rutte made previously, that the Spitzenkandidaten process is “not my preference,” and that he wants to initiate a fundamental debate on it “possibly during the Dutch presidency” over the European Council in 2016.

Importantly, Rutte also remarked:

Under no circumstances, will I make agreements over adapting the fiscal rules, or making them more flexible, in order to make the nomination of a candidate possible.

Meanwhile, Reinfeldt told the Swedish Parliament:

If Jean Claude Juncker musters a qualified majority amongst heads of state and governments, and also has the support of the European Parliament, well then, the rules set out in the Lisbon Treaty have been followed and Sweden will also join this majority. 

Though Reinfeldt doesn't actually state how he would act in an outright vote, it probably means he will not vote against Juncker. 

So that only leaves the Hungarian Prime Minister, Viktor Orban, on 'Team Cameron'. Orban said "there is no way" he would vote for Juncker, even before the European Parliamentary election.

Absent changes, Cameron is now a long way off a blocking minority to Juncker in the Council. With Italy trading support for Juncker in exchange for more "flexible" EU fiscal policy, and the Netherlands and Sweden dropping out too, Cameron will lose the vote on Friday. This is the grim reality, even though most EU heads of state are far from convinced about Juncker, and of the Spitzekandidaten process itself.

The top line is that if you pit London against Berlin, and ask other EU member states to choose between them, they won't choose London.

So the trick is to avoid that choice - which in this case was rather difficult. For reasons we've explained numerous times, the likely consequence of repeatedly forcing this choice is that the UK will leave the EU. That most certainly isn't in Berlin's interest either - or Stockholm's, or the Hague's, or Copenhagen's, or Warsaw's...

What happens when four EU leaders get into a rowing boat?

Swedish PM Fredrik Reinfeldt is today hosting David Cameron, Angela Merkel and Dutch PM Mark Rutte, in Harpsund, Sweden - a recreational estate for Swedish PMs throughout the years. The summit apparently features a trip on the "Harpsundsekan" - a worryingly small rowing boat. The tradition involves various world leaders holding on for life and limb in the boat, and was introduced by Tage Erlander, Swedish PM in the 1960s. Nikita Krushchev, Willy Brandt and Kofi Annan have all been in the boat.

Merkel has already had the dubious honour of going on a trip with Reinfeldt in 2008. It should be said that getting four people into any rowing boat is actually a bit of a mission. Given that Rutte is 6'4, Reinfeldt 6'2 and Cameron not a small guy either, this will require some focus.

So what will be discussed?

Well, the summit was decided ages ago and pre-dates the ongoing Juncker row. Initially, the idea was that the leaders of the EU's most competitive economies were going to meet in order to hammer out the priorities for the next European Commission in particular and the EU in general, with a focus on the jobs and growth agenda.

Reinfeldt has said that there won't be any "discussions about personalities" at the summit, but no one really believes that. It'll probably be a mixture of the two. If Cameron can get a better idea of whether Merkel can find a away out of the corner the SPD has pushed her into (a very rare occasion) over Juncker, as well as some reasonably concrete commitments on EU reform, linked to the mandate for the next Commission, he should be happy.

Is it wishful thinking to see this as the "EU reform quad"?  If they could speak with one voice, it would no doubt be a very powerful group which would be hard to ignore. Together with Finland, they are the only EU countries on the World Economic Forum's list of the top 10 most competitive countries in the world. They also account for 41% of the gross contributions to the EU budget (much more if we count net).

The four leaders formed a formidable alliance in February, achieving the first ever cut to the EU's long-term budget. Sweden's Reinfeldt has been very helpful to Cameron on numerous occasions, including shooting down a bunch of proposals for financial regulations. In those EU budget talks, Stockholm deliberately positioned itself further out than London so as not to isolate the Brits. Reinfeldt was also quite helpful after Cameron's "Bloomberg speech" (in contrast to the Swedish Foreign Minister, Carl Bildt). If Juncker is stopped, it'll be in no small part due to Reinfeldt's willingness to stick his head over the parapet, giving Cameron much needed political cover. However, Reinfeldt will probably lose the Swedish elections in September, meaning Cameron will have to negotiate with a centre-left coalition ahead of the potential 2017 referendum.

Likewise, Rutte was key in the EU budget talks and the Dutch have very much emerged as the thought leaders on EU reform, not least when it comes to the role of national parliaments in the EU. In fact, the Hague has been more vocal on many occasions than London itself. Encouragingly, EU reformers in the Netherlands did better than expected in the European elections in May.

As for Merkel - well, we've written endlessly on the need for Germany to row behind EU reform. As the debate over Juncker shows, the country is currently embroiled in a hugely complex debate about how Europe should be governed, and what role Germany should play within it. The Juncker episode was Cameron's first real encounter with Germany's grand coalition politics. It won't be easy.

What's clear is that if Cameron is to achieve the sweeping change needed for the UK to stay in the EU, these four countries will have to be able to agree a common position.

Rutte shows Clegg how its done on EU reform

It's good to hear a Dutch speaking liberal party leader forcefully expressing the case for EU reform. Sadly, as we noted earlier, it certainly wasn't Nick Clegg.  

In fact it was the Dutch Prime Minister Mark Rutte, who once again today reaffirmed his credentials as a key proponent of EU reform with a speech to the FDP in Berlin.

As we have also noted before, the Netherlands (both the country and its government) is becoming a bit of a breeding and testing ground for ideas on EU reform. In his speech Rutte said:

"A lot of people in Europe are angry at the EU. Angry at those who sat at the controls in Brussels during recent years. Our common project of peace becomes, if we don't recognise this on time, a project of discontent."

"We won't restore the future and the belief in a functioning Europe with European elections or with European ‘spitzenkandidaten’. The ball is now in the court of national parliaments. Their legitimacy is greater than that of the European Parliament. So they should deal at an earlier stage and also more intensely with decision making in and from Brussels"

"European where necessary, national where possible. Tasks such as healthcare, education and taxation really are things which are for the Netherlands to decide, I think."

"That's why the European Commission should be given four core tasks: to strengthen the single market, to stimulate international trade, to more strictly apply agreements made and to only regulate in Brussels what really must be dealt with at the European level."

"All too often agreements regarding the budget or the democratic rule of law haven't been respected...Europe is more and more being associated with an anonymous, formal and impersonal layer of government where national sovereignty is being replaced by normative rules ‘from Brussels’".

Lots of overlap (at least in tone) with what Chancellor George Osborne and German Finance Minister Wolfgang Schäuble laid out in the FT last week.

There was however one of Rutte's comments lacked credibility:

"Unemployment is the biggest problem of our time. I see it in my circle of friends.  You probably do too..."

Admittedly we’re not familiar with the Dutch Prime Minister's circle of friends but we find it hard to believe many of them are struggling for work...Nevertheless, Clegg could learn a thing or two.

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.

Rutte: Don't blame voters for anti-EU sentiments - blame politicians

Dutch PM Mark Rutte is often seen as a key UK ally who is able to maintain warm relations with both the Liberal and Conservative sides of the coalition. In London today to deliver the Isaiah Berlin lecture he talked about the big challenges facing Europe, making the following key points:

• The EU is greater than the sum of its parts but it is a means to an end - prosperity, security etc - rather than an end in itself.
• As a liberal, he said that he believes that decisions should be made as close as possible to those whom they affect - and therefore the EU should not be involved in areas that can be better handled at the national level such as the minimum wage, pensions, social security and taxation.
• However, where the EU could add more value is in expanding the single market, particularly in services (it was Rutte who first made the suggestion that this could take place under enhanced co-operation, an option we explored in our recent report).
• Commenting on the NSA spying scandal, he said the Dutch government would support the Franco-German initiative to clear up the issue with the Americans to prevent a repeat but added that he opposed any new competences for the EU in this area. He also said that it would be "totally counter-productive" to suspend the US-EU free trade negotiations over this issue, and that he strongly opposed this (Business Secretary Vince Cable who was in the audience appreciated that one).
• He said that he backed David Cameron's 'business task force' report which aims to cut red tape and promote competitiveness and innovation which Europe needs in order to maintain the high standard of living many of its citizens have become accustomed to, and that he supported efforts to demarcate EU competences from national ones, but that he opposed unilateral opt-outs which could damage the single market.
• On the political side, he said that there was widespread disillusionment with the European project among much of the public, but that rather than blaming the voters for opting for fringe parties on the left and right, established parties have to shoulder the blame for creating the political space for them to operate in.
• Finally, he stressed that although he was not opposed to referenda per se, his strong preference would be for any eurozone related changes (banking union, competitiveness contracts) to take place under the existing legal framework as opposed to re-opening the EU treaties which would trigger votes in several countries which would inevitably become in/out votes.

All in all then a mixed bag for David Cameron - strong support for his vision of a leaner, business friendly, trade-orientated and more accountable EU, but scepticism towards opening up the EU Treaties which could offer possibilities for more fundamental changes.

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.

Testing the EU's budget discipline

The Netherlands, considered one of the eurozone's fiscal hawks, has become the latest country to test the EU's new instruments for imposing budget discipline (now composed of the Fiscal Compact, Six-pack, Two-pack and European Semester).

The Dutch government yesterday agreed to postpone €4.3 billion in budget cuts for 2014 in a deal with social partners (trade unions, employers groups etc.), counting on economic growth to keep the budget deficit below the EU-mandated ceiling next year. In the autumn, it will reconsider whether to implement the cuts.

The measures for 2014, now postponed, had been promised to EU Economic and Monetary Affairs Commissioner Olli Rehn only last month in return for leniency regarding the Dutch government's 3.3% budget deficit in 2013, which is in breach of EU targets. The country has been in the EU's "excessive deficit procedure" since 2009, and in 2012 the government collapsed over the failure to stick within EU budget limits.

Predictions for the 2014 budget deficit range from 3.4% (The Dutch Bureau for Economic Policy Analysis CPB) to 3.6% (Commission). If the economic growth the Dutch government is hoping for doesn't materialise, the 2014 deficit threatens to be even bigger. The European Commission will reportedly only respond when it gets to see the full package of measures.

Earlier this week, Finance Minister Jeroen Dijsselbloem vowed to respect the EU's 3% budget deficit rule in 2014, so this is being billed by some in the Dutch press as a U-turn by Prime Minister Mark Rutte. Today's headline of the largest Dutch daily, De Telegraaf, reads: "Rutte backs down" (picture) while the newspaper also complains that "important labour market reforms have been watered down and postponed to 2016."

The Dutch economy is currently going through a large-scale correction after a housing boom went bust, partly as a result of the Dutch government's reduction of generous fiscal incentives to buy a house. Last year, Moody's expressed doubts about whether the Netherlands could keep its triple-A rating.

And, in the background, is Geert Wilders' anti-EU PVV party, which is again polling as the country's most popular political party. 

From Amsterdam to Brussels with love?

Events may have conspired to prevent David Cameron from delivering his Europe speech in Amsterdam as originally planned but it has still managed to create political waves in the Netherlands.

It is rare for statements from foreign politicians to be the focus of parliamentary debates but last night the Dutch Parliament held a debate specifically on Cameron's speech. Halbe Zijlstra, the parliamentary faction leader of PM Mark Rutte’s VVD party argued that “Cameron’s speech is a more extensive version of the European chapter of the Dutch coalition agreement.”

The relevant section of the Dutch coalition agreement reads:

"The Netherlands asks the European Commission to inventarise, on the basis of subsidiarity, which policy areas can be transferred to national authorities and will put forward such proposals itself."

Indeed Rutte has himself quipped that what will take Cameron two years (i.e. the FCO's Balance of Competencies Review), will take the Dutch Cabinet 6-7 months. Last week, in a joint letter together with Finance Minister Jeroen Dijsselbloem, Rutte also reiterated the VVD/PvdA coalition’s desire for member states to have the right to opt out of individual EU policies, such as the Schengen zone and the eurozone, or from the EU altogether.

Yesterday, in an effort to apply pressure on the coalition in this area, Sybrand van Haersma Buma, the leader of the centrist Christian Democratic Party (currently in opposition but historically a party of government), claimed that “Europe is indulging too much in all kinds of over-detailed rules”, and put forward his party’s own detailed list of areas in which Brussels should not be involved:

- Nitrates Directive
- Air Quality Directive
- European Soil Framework Directive
- Home Energy Labels
- Freedom of the press
- Occupational Pensions Funds Directive
- Income limit for social housing rent
- Family reunification for immigrants (point system)
- Internet cookies regulations
- Public procurement of small building projects
- Maternity leave
- Ministry of Transport tests
- Female quotas on EU company boards

This is going much further than Cameron, who did not present a ‘shopping list', only mentioning general policy areas such as social and employment law and environmental legislation. Interestingly though, many of the above fall into those two categories. Specifically addressing Cameron's position, Buma said:

"He's right…let's go back to what Europe was originally all about...What I want is for several countries to decide together that [certain] matters can better be regulated domestically. A Europe à la carte isn't a good idea…We must get rid of the idea that if you want less Europe, it means you're against Europe from the start."

This is set to increase the pressure on the VVD-PvdA coalition which will try to agree in the coming months on their own list of policy areas which should be dealt with nationally, and which the government can use as the basis for any negotiations in Brussels. PvdA MP Michiel Servaes reacted by saying that Buma was only “following the line set out earlier by the cabinet", but that Buma's list was "a big leap" which ought to be carefully considered and discussed with other countries.

Meanwhile, on his Elsevier blog, Dutch Professor Afshin Ellian, a well-known political commentator, described Cameron's stance as "a third, more pragmatic way between europhobia and europhilia", while in a letter to NRC Handelsblad, nine prominent Dutch professors and academics argued that in order to bridge the gap between EU centralisation and EU citizens, the Netherlands should also have a referendum on its future in the EU, an option supported by 52% of Dutch citizens according to a recent opinion poll.

As we suggested in our analysis ahead of last September’s Dutch elections, in the medium to long term the Netherlands “could well be on the path to becoming a more assertive – and far more complicated – EU partner.”

Dutch PM and FM reiterate the Netherlands' desire for flexible Europe

The concept of a 'flexible Europe' seems to translate across borders. In a joint letter to the Dutch Parliament, Prime Minister Mark Rutte and Finance Minister Jeroen Dijsselbloem have reiterated the government's position that it wants countries to have the right to opt out of individual EU policies, such as the Schengen zone and the eurozone, or from the EU altogether.

Here are the relevant bits from the letter:

"Following the request by member Schouten to the Finance Minister and the Prime Minister (issue number 2013Z01025) for a letter about the exit from the eurozone, we report as following.  

The cabinet introduced in its coalition agreement that it should be possible under mutual consideration to exit from the community arrangements (Schengen, eurozone, European Union). This requires in the case of the eurozone and Schengen a treaty change as the current EU treaty does not foresee this possibility."

Could the Netherlands provide the beginnings of a coalition for EU reform?

Interestingly, if today's report in the Sun is correct, David Cameron seems to have enlisted Dutch Prime Minister Mark Rutte's support for, at least some, of his EU agenda, due to be spelled out in his widely-anticipated speech in Rutte's homeland in just over a week's time.

The paper reports that Rutte will back Mr Cameron’s "campaign for a repatriation of money and power to EU member states." Now, there isn't much detail to go on here - and the risk is that unrealistic expectations are being raised - but it's not the first time that the Dutch Prime Minister has voiced a desire to start a discussion about slimming down the EU's powers. In an interview with the FT late last year, Rutte said, "What we want to do is have a debate at the level of the 27 [member states] whether Europe is not involved in too many areas which could be done at the national level."

Rutte hasn't yet set out exactly what areas he wants to look at and he is keen to make the case for reform of at the level of 27, rather than a UK-only deal. Also, the nature of the 'grand coalition' between his liberal VVD party and the Dutch PvdA labour party may not allow him to go as far as he might wish. But Rutte is smart enough to know that since the UK cannot be expected to give up its existing opt-outs, the only solution is for the EU to do less.

The VVD's manifesto suggested that:

“The VVD wants a liberal Europe. That means that the European government should be small, economical and efficient. Not more Europe but a Europe which works…The VVD has a lot of criticism towards Brussels bureaucracy: the regulation-obsession, wasting funds and inefficiency.”

On the budget the VVD say:

“Spending needs to be brought back to less than 1% of GNP in order to make the EU more efficient, modern, and effective. In the new EU budget for 2014-2020, the biggest part is still reserved for agriculture and cohesion funds, almost 800 billion euro. The VVD wants to shift this in favour of investment and innovation.”

Indeed the PvdA could also be persuaded by Rutte and Cameron to look at the balance of powers between the EU and national governments, if the following from their website is anything to go by:

"In the new Europe there shouldn’t be all kinds of rules under the pretext of the internal market, but we’re going to regulate things at the proper level. Some things the Netherlands can better deal with itself ."

Some European political figures, such as Gunther Krichbaum, Chairman of the German Bundestag’s European Affairs Committee, have been quick to dismiss any attempt by the UK to "blackmail" the EU and seek, new UK-specific opt-outs. This is, of course, the public German diplomatic position, so no surprise. However, if presented as an effort to reform Europe and make it work better, putting new emphasis on the EU's "subsidiarity" principle (discredited in the UK but which still holds sway in Germany), Mr. Krichbaum and many of his colleagues instantly become far more receptive. This shows that if Cameron is able to pitch his argument in terms of "this works for Europe, but by the way it works for the UK too", he could enlist the support of leaders in other European capitals, but without antagonising the home crowd. Getting the language in the PM's speech on this issue right will be vital. 

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.
 

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.

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.