Dutch Prime Minister Mark Rutte told politicians to face up to the country’s economic woes to ensure the Netherlands evades the debt crisis, as opposition lawmakers said there was no need to stick to budget targets.
Rutte, addressing parliament in The Hague one day after he tendered his Cabinet’s resignation to Queen Beatrix, said the need to adopt reforms “hasn’t diminished” after Geert Wilders’s Freedom Party pulled out of budget talks, ending its support for the minority government. A proposal for austerity measures will be sent to parliament tomorrow for debate this week, with new elections “possible” on Sept. 12, he said.
“The problems are too serious” to put off, Rutte told lawmakers today. “The economy is faltering, employment is under pressure and the nation’s debt is growing faster than we can afford. These are the facts and nobody can run away from that.”
Rutte is seeking additional cuts of at least 9.5 billion euros ($12.5 billion) needed to satisfy European deficit limits after Wilders balked at proposed changes to state pensions. Global equities slumped yesterday as Rutte offered to quit, triggering uncertainty over new elections and investor doubts about his country’s ability to retain its AAA credit rating.
Rutte, who was asked to stay on in a caretaker capacity while the Queen considers his resignation offer, faces a 2013 budget shortfall forecast at 4.6 percent of gross domestic product. His government has said it will ready plans on how to pare it to the European Union’s 3 percent limit by April 30.
Opposition lawmakers suggested disregarding the deficit limit for next year. Emile Roemer, leader of the Socialist Party, which polls suggest would double its seats if elections were held now, called current government plans to cut the budget by about 14 billion euros “unachievable and not sensible.”
Wilders told parliament that the 3 percent limit “is not sacred” and that meeting the target in 2015 would suffice.
“We want to bring the government financing in order but over a few years,” Wilders said. “We ourselves need to decide what to do, and not Brussels. I say good-bye to this Cabinet and it’s now up to the voter.”
Opposition Labor Party leader Diederik Samsom told Dutch 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.
Efforts to strengthen the economy, bolster growth and raise tax revenue are more important than cutting the deficit, Charles Kalshoven, an economist at ING Groep NV in Amsterdam, said in an interview. “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 rose for the first time in four days as the nation sold 2 billion euros of debt amid optimism the collapse of its government yesterday won’t derail efforts to implement budget cuts. Two-year Dutch yields dropped the most in almost five months as the government auctioned securities due in 2014 and 2037.
The Dutch two-year yield declined 16 basis points, or 0.16 percentage points, to 0.36 percent at 4:24 p.m. London time after falling as much as 18 basis points, the most since Nov 30. The 15 percent security due in January 2014 rose 0.265, or 2.65 euros per 1,000-euro face amount, to 101.100. The extra yield investors demand to hold the securities instead of similar- maturity German bunds shrank 15 basis points to 64 basis points after closing yesterday at the widest since March 2009.
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 his party’s 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 with state pensions who form the bedrock of his Freedom Party’s support. Rutte said new elections were “an obvious scenario” to resolve the deadlock.
The Netherlands doesn’t need to take drastic action to trim its budget in the face of lower revenues as a result of slower- than-expected economic growth, Xavier Debrun, an International Monetary Fund official, said today in a speech at Bruegel, a Brussels research institution.
“They are not under market pressures; the numbers are not catastrophic,” said Debrun, a deputy division chief at the Washington-based IMF. If “disappointing” growth leads to lower revenues, “don’t go into panic mode to compensate. That wouldn’t be a good idea” for a country like the Netherlands that has borrowing room, he said.
To contact the editor responsible for this story: Tim Quinson at email@example.com