Dutch Prime Minister Mark Rutte will try to build support among opposition lawmakers for further austerity measures aimed at shielding the Netherlands from the debt crisis after he pulled the plug on his minority government.
Rutte is due to speak during a debate in parliament in the Hague at 2 p.m. today, less than 24 hours after he tendered his Cabinet’s resignation to Queen Beatrix in a bid to break a budget deadlock over additional cuts of at least 9.5 billion euros ($12.5 billion) needed to satisfy European deficit limits.
Rutte, who ran out of room for maneuver after talks with Geert Wilders’s Freedom Party collapsed over proposed reforms to state pensions, is struggling to win support to dispel investor concerns the Netherlands can regain control of its finances. With the two-year crisis again rippling across Europe, equities slumped globally yesterday as Rutte offered to quit amid uncertainty over the timing of elections and investor doubts about his country’s ability to retain its AAA credit rating.
“Most important is to show financial markets you’re good for the money,” Charles Kalshoven, an economist at ING Groep NV in Amsterdam, said in an interview. Efforts to strengthen the economy, bolster growth and raise tax revenue are more important than cutting the deficit, yet “now it looks like neither is going to happen as there doesn’t seem to be a parliamentary majority willing to cut the deficit below 3 percent.”
Dutch bonds gained today as the nation sold 2 billion euros of debt. Ten-year Dutch bonds snapped three days of losses after an auction of securities due in July 2014 and January 2037. Dutch 10-year yields declined 10 basis points, or 0.1 percentage point, to 2.34 percent at 12:16 p.m. in Amsterdam, after advancing to 2.47 percent, the highest since March 28.
The 2.25 percent security due July 2022 rose 0.495, or 4.95 euros per 1,000-euro face amount, to 98.895. The yield difference between Dutch 10-year bonds and similar-maturity bunds narrowed almost 10 basis points to 66.8 basis points.
The Dutch government said yesterday that the Queen will consider Rutte’s offer and asked that the Cabinet handle current affairs in the meantime. Rutte may propose to parliament today that the government carry on in a caretaker capacity until elections are held, while being charged with presenting a budget for 2013, Wim Voermans, a professor of constitutional and administrative law, said in a televised interview.
The parliamentary debate will focus on what happened during the failed budget negotiations that began March 5 as well as a possible date for the elections and a budget for 2013, said opposition Labor Party leader Diederik Samsom.
Samsom told local news agency ANP today that he no longer opposes elections in September in order to give smaller parties time to prepare. The Dutch electoral council has said that Sept. 5 would be the earliest possible date for a new ballot.
“I’m sure that behind closed doors work is being done to prevent the Netherlands from losing its credit rating, because that would only aggravate problems for the next government,” Andre Krouwel, an associate professor of political science at VU University in Amsterdam, said by phone. Even so, there’s “no way” an accord can be reached before the election, he said.
European stocks rebounded from a three-month low today, with the benchmark Stoxx Europe 600 Index (SXXP) up 0.6 percent as of 12:15 p.m. in Amsterdam. The euro snapped its biggest decline in more than a week and was little changed at $1.3155.
Finance Minister Jan Kees de Jager said that the current administration will have to “find majorities” for the 2013 budget as well as for a “stability program” to submit to the commission in Brussels. “The Netherlands, in every circumstance, will maintain disciplined budgetary policy,” he told reporters in The Hague yesterday.
Uncertainty in the Netherlands, a traditional crisis ally of Germany, adds to the turmoil springing from the debt crisis as it reverberates throughout Europe. In France, presidential election candidates are pushing the European Central Bank to be more pro-growth, a stance at odds with Chancellor Angela Merkel, while in the Czech Republic Prime Minister Petr Necas is seeking to avoid snap elections and push through deficit cuts after the breakup of his coalition.
In the Netherlands, the euro-area’s fifth biggest economy, the 2013 budget shortfall is currently forecast at 4.6 percent of gross domestic product. To pare it to 3 percent as specified by the European Commission, Rutte needs to find at least 9.5 billion euros of extra cuts to submit to Brussels by April 30.
“The package is way too rigorous and it’s bad for the economy,” Emile Roemer, head of the Socialist Party, which would double its seats to 30 according to latest polls, said in broadcast remarks. “We need to have elections and clarity as soon as possible.”
With budget deliberations dragging on for seven weeks, the fate of Rutte’s minority government was thrown into doubt on April 21 when Wilders unexpectedly withdrew its support over efforts to narrow the shortfall. He cited proposed cuts to welfare benefits for the elderly, specifically the impact on the incomes of those retirees who receive state pensions and which form the bedrock of his Freedom Party’s support. That prompted Rutte to cite new elections as “an obvious scenario” to try to resolve the deadlock.
Rutte’s Liberal Party would win 33 of the 150 parliamentary seats if general elections were held now, up from the 31 seats it currently holds, according to a poll of about 4,500 people by researcher Maurice de Hond and No Ties BV.
The second governing party, the Christian Democrats, would fall to 11 seats from 21, while the Freedom Party would drop to 19 from 24. The Socialist Party would double its seats to 30 and Labor would drop to 24 from 30, according to the poll, which was conducted April 21-22. No margin of error was published.
Opposition leaders such as Labor’s Samsom and Alexander Pechtold, the head of the D66 Democrats, both called for an early ballot. The nation last held a general election in June 2010 and the next wasn’t due to be held until 2015.
“I think it can be done before the summer so we can make a new start for the Netherlands,” Samsom told NOS television.
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