Dutch Liberals, Labor Set to Talk as Rutte Urges More Austerity

The Dutch Liberal and Labor parties are set to start negotiations on forming a new Cabinet a week after Sept. 12 elections, with caretaker Prime Minister Mark Rutte setting the tone by urging continued austerity.

“The austerity policy must continue; we’re not there yet,” Rutte, who heads the Liberals, said in an interview in The Hague, where the 2013 budget was presented to Parliament yesterday. “All I can say is that progress has been made and steps have been taken.”

The Liberal and Labor parties, the two strongest groups in Parliament after the elections, should explore forming a coalition without including a third party, according to a formal recommendation yesterday from the chief negotiator, Henk Kamp. Talks still may prove difficult due to policy differences on how to deal with Europe’s debt crisis.

Rutte rules out providing more money for Greece, while Labor leader Diederik Samsom has said he wants to give the country more time to meet its targets for getting its finances into shape. Rutte is in favor of continuing austerity to meet deficit rules, while Samsom says the timescale for budget goals can be eased.

Austerity Deal

The Netherlands’ 2013 budget, featuring about 12 billion euros ($16 billion) in spending cuts, is based on an emergency austerity deal struck after Rutte’s previous government collapsed in April. The deficit will narrow to 2.7 percent of gross domestic product from 3.7 percent in 2012, taking it below the European Union limit of 3 percent for the first time in four years, government planning agency CPB said yesterday.

The Dutch economy, the fifth-largest in the euro area, will probably grow 0.75 percent in 2013 after shrinking 0.5 percent this year, helped by a slight improvement in international trade, according to the agency. The European debt crisis remains an important risk, it said.

The expected recovery assumes that policy makers will succeed in preventing an escalation of the euro-area crisis and won’t shy away from unorthodox measures, CPB said.

“To be better prepared for possible future shocks in the economy, the budget deficit has to come down and reforms to strengthen the economy are needed,” caretaker Finance Minister Jan Kees de Jager said in Parliament when presenting his budget memorandum.

Election Results

The Liberals took 41 of the 150 seats in last week’s vote, up from the 31 in the outgoing Parliament. Labor, which didn’t support the emergency austerity deal, won 38 seats, up from 30. Both party leaders met for the first time on Sept. 17 to explore the possibility of a coalition.

De Jager, whose Christian Democrats lost eight seats in the elections, taking them to 13, told reporters it is unlikely he’ll return as finance minister.

Former Labor Finance Minister Wouter Bos and Kamp, a Liberal and social affairs minister in the outgoing government, will lead the coalition talks if Parliament adopts Kamp’s advice tomorrow.

It has taken an average of almost three months to set up a coalition since World War II. The Rutte Cabinet took 127 days of negotiations following the 2010 election, the third-longest ever. The record was set in 1977 when it took 208 days to form a government.

To contact the reporters on this story: Maud van Gaal in Amsterdam at mvangaal@bloomberg.net; Fred Pals in Amsterdam at fpals@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.